A year in the books

Our work as CERTIFIED FINANCIAL PLANNERSTM at USAA is focused on helping you make informed financial decisions. That’s the goal behind our monthly column in the Rapid Fire section of The American Legion Magazine and our “Ask the Financial Expert” feature on legion.org.

If you haven’t checked out our column in the magazine yet, pull those old copies out from under the coffee table and take a look. In the meantime, we thought we’d share some common questions we’ve seen over the last year. The most frequent we saw at “Ask the Financial Expert” were on debt relief, Social Security benefits and retirement.

Question: Is there is any type of assistance to help with debt relief or filing for bankruptcy? We signed up with what was supposed to be a “debt consolidation” company, but instead of paying the money to our creditors they pocketed it.
Answer: When it’s time for you to get some help, get the right kind of help. We suggest finding a counselor affiliated with the National Foundation for Credit Counseling (NFCC). Visit nfcc.org to find a local counselor who can help steer you in the right direction. The counselor is likely to help you look for opportunities to create additional income, build a budget that works and maybe set up a debt management plan. Depending on how much you owe, they may be able to secure lower interest rates (or get the interest waived!) and they will come up with a payment plan for you. One hundred percent of your payment money will go to creditors if you work through an NFCC counselor.

Question: I have put off drawing Social Security in order to raise my monthly amount. How does Social Security affect my retirement check?
Answer: The good news is that receiving Social Security will not impact your military retirement. More good news is that putting off taking Social Security to drive up the monthly benefit is generally a good idea. Applying for Social Security, tapping various investment accounts and minimizing taxes are all part of the art of creating an efficient, effective and lasting income stream. Once you turn on Social Security, you need to be aware that your benefits could be taxed. If you’re filing jointly and half of your total income (Social Security, military retirement, IRA distributions, etc.) exceeds $32,000, then a portion of your Social Security will be included as taxable income. So do the math and work with someone who can maximize your income while minimizing your taxes.

Question: I thought there were no tax deductions for Roth IRA contributions until I saw the IRS Form 8880. Can you take a deduction for a Roth IRA contribution?
Answer: While there is never a tax deduction for making a contribution to a Roth, there is currently a program called the Retirement Savings Contribution Credit, or “Saver’s Credit,” that provides a tax credit for qualified retirement savings. The IRS Form 8880 you were looking at allows you to calculate the applicable credit. Remember, a credit could be more valuable than a tax deduction because it provides a dollar-for-dollar reduction of your taxes and not a reduction of your income. If you qualify, it could be a nice incentive to make your 2011 IRA or Roth IRA contribution before the April 17 deadline. Check out IRS Publication 590 for all the details.

This inaugural year as your financial coaches has been exciting for us. Remember, we’re standing by to help you with your finances. Check in with us at legion.org/usaa the next time you need financial guidance.