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WHEN SHOULD YOU BEGIN TAKING SOCIAL SECURITY PAYMENTS?
Choosing when to retire and start drawing Social Security benefits is an important decision, and one that is unique to each individual, according to
the North Carolina Association of CPAs. You can begin taking payments as
early as age 62, based on Social Security regulations, but when you retire will have an effect on the amount of the payment you receive.

HOW PAYMENTS ARE CALCULATED
Your Social Security benefit payments are based on your work history. In short, the more money you have earned over your career, the higher your benefits
will be.

As we noted, though, the age when you retire will also have an impact. Although you are allowed to begin collecting payments at age 62, you will not yet have earned full benefits. That means that your payments will always be about 25% less than they would have been if you had waited until full retirement age. However, early retirees will face benefit forfeitures for working while receiving benefits. If you continue to work to age 70 and beyond, you will receive more than the full benefit amount when you finally do decide to retire. Remember, too, that anyone born in 1938 or later will no longer receive full benefits if they retire at 65, which for many years was considered the official retirement age. Depending on the year when you were born, you may have to wait as late as age 67 to retire with full benefits.

AN INFORMED CHOICE
So, when’s the best time to retire? If you are a healthy person who enjoys working, it’s probably best to continue doing so as long as possible without drawing on Social Security. Sometimes, the decision to continue working might be less about choice and more about the necessity to work. If you are in poor health, it may be best to take your payments as soon as possible. (You can apply for Social Security disability benefits at any age if you are no longer able to work.) However, if you have a large retirement nest egg and don’t need the maximum Social Security benefit, you can always choose an early retirement. Whatever choice you make, don’t forget to sign up for Medicare health care coverage when you become eligible for it at age 65.

YOUR REPORT CARD
Every year, you receive a Social Security Statement that details your own earnings history and offers estimates of what your payments will be if you retire at different ages. It also discusses the disability benefits you can expect if you are severely disabled and describes the survivor’s benefits that eligible family members will receive if you die. This statement is a great tool to use as part of your overall retirement plan. You’ll find more information at the Social Security Web Site.

ONE PART OF THE PLAN
Your Social Security payments will likely replace about 40% of your pre-retirement income, according to the Social Security administration. The government also estimates that you will be able to live during retirement on about 70% to 80% of your previous income, although some advisers believe you may realistically need 100% of your pre-retirement income. This depends on your retirement lifestyle. That means that your Social Security checks will not be enough to provide you with a comfortable retirement. In addition to any pension payments you may receive from your former employer, you should also plan to have sufficient personal savings and investments to cover your costs.

If you have questions about the best time to begin drawing Social Security payments—-or about other retirement planning issues—-be sure to consult Barbara H. Fulp & Company, PLLC. We can help you find the answers to your family’s financial questions.

Donating Property Can Provide Tax Relief
Cash isn’t the only way you can help your favorite charity. Many organizations accept gifts of used clothing, household items, and cars, as well as stocks, mutual funds, collectibles, and works of art. In addition to helping out the charity, making a gift of property often means you can qualify for a tax deduction, reports the North Carolina Association of CPAs.

Generally, when you contribute property (anything other than money or publicly traded securities) to a qualified charitable organization, you may deduct the item’s fair market value. But there are new rules for some types of donated property, so it’s important that you understand the details.

Clothing and household ITEMS must be in good condition
When you donate clothing and household items, such as appliances, furniture, linens, and similar items, you generally may deduct the fair market value of the goods. But under a provision of the Pension Protection Act, passed in 2006, contributions of these items after August 17, 2006 must be in good used condition or better to qualify for a deduction. That means there’s no deduction for that microwave oven that no longer works or the shirt with holes in the sleeves.

To substantiate your deduction in the event you are audited, you might want to take photographs or film the items. You might also ask the organization for a receipt that attests to the fact that the items you donated were in good used condition.

One exception to this rule: you can take a deduction for a contribution of a single item of clothing or household item that is valued at $500 or more and include a qualified appraisal of it with your return.

GIFTS OF APPRECIATED SECURITIES
Donating appreciated stocks is a great way to help your favorite charity and get a deduction in return. When you donate stocks or mutual fund shares you have held for more than one year, generally you may deduct the stocks’ current fair market value. Additionally, you avoid paying capital gains taxes on the appreciated value.

Special rules apply to property valued at more than $500
If you donate non-cash property that is valued at more than $500, you need to report to the IRS how and when you acquired the property and your cost basis. You must file Form 8283, Noncash Charitable Contributions, for all donations of property valued at more than $500.

It’s a good idea to ask the recipient to provide you with documentation specifying how the property will be used. If the property you donate is used by the organization to carry out its work or is given to a needy individual, you may deduct its full market value. An example would be a car that you donate which is used to deliver meals to shut-ins. On the other hand, if the car is sold by the charity, your deduction is limited to the vehicle’s sale price.

NEW RECAPTURE RULE APPLIES TO GIFTS OF $5000+
Donations of tangible property valued at more than $5,000 generally require a written appraisal from a qualified appraiser who must also sign Form 8283, Section B, Part III. The organization accepting the donation is required to provide written confirmation of any value that the donor received in exchange.

There is also a new reporting rule in effect for donations of art (or other appreciated tangible personal property) made after September 1, 2006. A deduction claimed for fair market value may be recaptured if a charity sells the property within three years.

CONSULT WITH A CPA
The rules governing charitable donations are more complicated then ever. A CPA can help you structure your donation to provide the best tax benefit and can also provide guidance on substantiating your deductions.