Ken Clark

Last week, I was invited to sit down with a wonderful woman who was dealing with some less than wonderful credit card balances. The goal was to help her go on a “credit card diet” so that she’d be out of debt in 12-18 months. I’ll be checking in with her over the coming months to see what kind of progress she’s made.

Kristi Nelson at NBC 5 News in Dallas was kind enough to set the whole thing up and then turn it into a special on their nightly news broadcast.

Enjoy the clip:
http://www.nbcdfw.com/around_town/shopping/Slim-Down-Your-Debt-Go-On-a-Credit-Card-Diet.html

Our college-aged daughter was out visiting us this weekend and brought her W-2 in the hopes of getting her taxes done early. Usually, I just use our TurboTax software to do her simple return. But this year, I’d heard that TurboTax is only letting you do one return per software purchase (without paying an additional fee), and I had no interest in purchasing two copies of the program.

When I went on to the TurboTax website to double-check this rumor (which was initially true, but was changed due to a customer backlash), I noticed they offer a free filing service called TurboTax Freedom. After giving it the quick once over, I decided to give it a try.

My overall impression is that this a great program for qualifying users. It only took me about 15 minutes to prepare and file her simple return (one W-2 and the standard deduction). The interface was simple and intuitive, with plenty of hyperlinks that help define confusing terms and rules.

The Federal E-file function was free and easy to use (it required me to provide either her E-file PIN or AGI from last year). Since her state of residence (California) doesn’t have a free E-file program that works with TurboTax, I paid $9.95 to be able to print her state return and file by mail.

All in all I thought it was a great program - ideal for taxpayers with just one or two W-2’s, who will either use the Standard Deduction or have very few itemized deductions.

To qualify to use the TurboTax Freedom program, a taxpayer must meet just one of the following requirements:

• Have an Adjusted Gross Income (AGI) under $30,000.
• Be active duty military with an Adjusted Gross Income (AGI) under $56,000.
• Qualify for the Earned Income Credit (EIC)

Have you used TurboTax Freedom? I’d love for you to post your experience in the comments section below.

Question from a reader: I’m 51 years old. I am wondering if there is any possibility of my being able to retire within the next year. I have approximately 120,000 in savings (50,000 in an IRA and 70,000 in regular savings/investment account. I don’t owe money for anything except my $400 loan payment on my home, which has about 25 years left on it. Any ideas?

Answer:
The biggest problem is that you are going to live a long time.

Your nest egg of $120k needs to last, so you generally are going to want to avoid drawing on your principal.

A safe rule of thumb for a moderately invested portfolio (50/50 stocks / bonds) is to take about 6% per year in withdrawals.

That would give you about $7,200 or $600 per month.

Since your social security is not due to kick in for a at least a decade, I’m not sure how you can reasonably do it.

To make matters worse, you are below the minimum age for withdrawals on your IRA. There is a way around this (IRS rule 72t… but it will force you take out withdrawals even if you don’t want them), but it may force you to pay some taxes.

My rule of thumb, is that you need 16 times your first year’s living expenses, in the bank, on the day you retire.

If you think you are going to need $20,000 per year to retire, you need to have $320,000 in the bank ($20,000 x 16). That would let you take out 6% comfortably for a long time.

Good luck. Let me know if I can be more help!

Ken Clark
Certified Financial Planner

Disclaimer:
Answers provided are for general educational purposes only, and may exclude other important factors relevant to your unique situation. No reader should act on the information contained in this article without consulting Ken Clark or another financial professional directly.