February e-News

New Study Illustrates Severity of Hunger in RI
Washington Trust Helps with Annual PB Xpress Campaign

A landmark study recently released by the Rhode Island Community Food Bank and Feeding America, the nation's largest domestic hunger-relief organization, depicts the hardships facing clients served through the Food Bank's network of emergency food programs. According to the report, most client households live in poverty and are unable to afford adequate food. In Rhode Island, four out of every ten served are families with children.

The study, commissioned by Feeding America, was produced by Mathematica Policy Research, Inc., a social policy research firm that is nationally recognized as a leader in the field of human services research. Hunger in America 2010 is the first research study to capture the significant connection between the current economic downturn and the increased need for emergency food assistance. Reflecting the high rate of job loss and unemployment, in one-fifth of Rhode Island client households, an adult was laid off during the past year.

"The number of people served each month at emergency food programs in Rhode Island has grown to more than 50,000," states Andrew Schiff, Chief Executive Officer of the Rhode Island Community Food Bank. "It is extremely troubling that so many Rhode Islanders need food assistance. In particular, the number of children served through our network is of enormous concern since hunger takes a tremendous toll on children's learning and health."

At program sites throughout Rhode Island, Food Bank staff members and volunteers conducted interviews with 361 clients as part of the national study. Many of the clients who participated in face-to-face interviews reported having to make difficult choices between food and other basic necessities: 41 percent of client households explained that they have such limited income that they must choose between paying for food and paying their rent or mortgage. Additionally, 43 percent had to decide whether to pay for food or pay their utility bills; 32 percent made choices between food and medicine or health care.

"Many of our neighbors are being faced with impossible choices," comments Schiff. "No one should have to choose between feeding their children and paying the rent. But, the reality is that more and more families can only pay the rent if they receive food assistance. Meanwhile, the charitable response to hunger in Rhode Island is stretched to the limit."

"We must continue outreach for the federal Supplemental Nutrition Assistance Program, identifying eligible families and encouraging enrollment," adds Schiff. According to Hunger in America 2010, Rhode Island's enrollment in SNAP has experienced a large increase over the past few years. In 2009, 57 percent of client households benefited from the program. This is a significant improvement from the last Hunger in America study conducted in 2006 when just 35 percent of client households received these benefits.

As Hunger in America 2010 shows, food banks and emergency food programs provide critical hunger relief, but cannot solve the problem alone. "To meet the basic food needs of the thousands of Rhode Islanders now in financial crisis, we must help them enroll in federal nutrition programs that can provide on-going assistance," explains Schiff. "Since SNAP is a major source of federal revenue for Rhode Island, enrolling every eligible household should be a key part of the state's strategy for economic revival."

For more information about hunger in Rhode Island, and to learn what you can do to help, please visit www.rifoodbank.org

Washington Trust kicks off 10th Annual PB Xpress

During March and April, Washington Trust will be collecting peanut butter for the Rhode Island Community Food Bank. Why peanut butter? It's high in protein, loved by children and adults and expensive for families in need.

Since we began our "PB Xpress" in 2001, Washington Trust has collected 77 tons of peanut butter for the RI Community Food Bank! This year, our tenth drive, we would like to collect 23 tons….that's100 tons in 10 years! We need your help. Click here to find out how you can help!

An IRA Refresher

Your Individual Retirement Account can be part of the foundation of a financially secure retirement. Many experts suggest that your living expenses after retirement average 60% to 75% of your pre-retirement expenses. Social Security will provide some benefits, but your retirement income will primarily depend on your other assets including your company retirement plan and your IRA.

The almost-annual changes to the income tax laws sometimes create confusion about Individual Retirement Accounts (IRAs) causing many people to ignore one of the most powerful tools available to help them secure a solid financial future. Even with all the changes, IRAs can and should be a key part of the foundation of most people's retirement planning efforts.

Here are some of the facts you should know to make fully informed IRA decisions:

• Earnings on funds within an IRA are not subject to income tax as they are earned. Tax deferral allows for the funds to accumulate faster.
• IRAs can serve as the account to receive a distribution from your employer's qualified plan when you change employers or retire. Tax deferral is maintained and you may have additional investment flexibility.
• If you have established IRAs at different institutions over the years, you can consolidate them into one account to make it easier to keep track of your funds. If done properly, there are no income tax consequences to this consolidation.
• Roth IRAs offer an additional benefit - withdrawals of interest made after the 5 year holding period for qualified reasons are tax-free!

IRAs were established to be long-term retirement planning accounts. As such, the IRS imposes a penalty tax of an additional 10% if funds are distributed before reaching age 59 ½. There are a few exceptions to this rule, including a first time home purchase.

The rules covering the conversion of traditional IRAs to Roth IRAs were changed for 2010 and later years. As a result, most individuals can now make the conversion. The advantages of converting can be significant but there will be a current tax liability. Be sure to consult with a qualified advisor for an evaluation.

Roth vs. Traditional IRA

Almost every individual with earned income can contribute to either a traditional IRA or Roth IRA. When comparing traditional and Roth IRAs, the trade-off is usually whether the loss of deductibility on current contributions with a traditional IRA is worth the benefit of never having to pay income tax on distributions from a Roth IRA. Roth IRAs also provide more distribution flexibility. For many, the Roth IRA can result in superior long-term benefits.

• Traditional IRAs provide tax deferred earnings, income replacement for retirement, and in some cases, tax deductibility.
• Roth IRAs are nondeductible accounts that feature tax-free withdrawals for certain distribution reasons after a 5 year holding period.

Which IRA is Right for You?

*Does not include Social Security, pension or annuity income, disability income or income from interest and/or dividends.

IRAs for Teens

Few teenagers think much about retirement, but funding an Individual Retirement Account may be one of the best financial steps they will ever take. The reasons are simple - taxes and time.

IRAs can be established by individuals of any age. The only requirement is that they have earned income equal to or exceeding the amount they contribute to an IRA. Contributions to traditional IRAs can be tax deductible, but most teens have low enough incomes that much of their income is not subject to tax; or if it is, the tax rates are low. Roth IRAs are especially attractive for younger individuals because they offer the potential to accumulate funds that, if handled properly, will never be subject to income taxation.

The Basic Rules for Roth IRAs

• Contribution Limits - For the taxable year of 2009, you can contribute up to $5,000 to a Roth IRA. You must have wages (or other earned income) equal to or greater than your contribution.
• Deductibility - Contributions to a Roth IRA are not deductible.
• Earnings within the Roth IRA - Earnings on the funds within the Roth IRA are not subject to income tax. This enables your funds to grow faster than they would in a taxable account.
• Distributions from a Roth IRA - The significant advantage of a Roth IRA compared to a regular IRA is that distributions from the Roth IRA are not subject to tax provided you meet certain rules. Generally, if you take distributions after reaching age 59 ½, they are tax free. In addition, there are some rules that allow for distributions earlier if the funds are used for first home purchases or qualified education expenses.

Putting Time on Your Side
The longer the funds remain in a Roth IRA, the larger the balance can become. For younger individuals, this can be very significant. Consider these scenarios:

Let us assume that Sue has a part-time job for her last two high school years and contributes $3,000 in those two years. If she earns 8%, when she reaches age 60, her Roth IRA would have grown to over $180,000. Now let us assume that she continues to work part time while going to college for four years. In this case, Sue would have accumulated almost $465,000 at age 60.

These large accumulations are possible because the money compounds for such a long period of time. As with most income tax issues, the actual rules can be complex. You may want to consult with your tax advisor for more details.

Putting This to Work
It is easy to establish a Roth IRA. Just visit your financial institution. You may even want to consider giving the child money for their contribution. Just remember that the individual must have wages at least equal to the contribution.

What a wonderful way for a young person to start on the road to financial security and to start a saving pattern that will provide returns for the rest of his or her life.

Please consult with a qualified tax advisor.

Is a Reverse Mortgage right for you, or your family member?

As people retire, they want to be financially secure and independent. For many, a reverse mortgage is an effective way to achieve these goals. With a reverse mortgage, homeowners can turn the value of their home into cash without having to move or repay a loan each month. They can receive the cash as a single lump sum, as a regular monthly advance, or as a credit line. No matter how the loan is paid out, homeowners do not have to pay anything back until they die, sell their home, or permanently move out. Click here to find out more!

RI HOME SHOW DISCOUNT

Visit Washington Trust's booth #807 at the RI Home Show March 11-14, 2010 at the Rhode Island Convention Center, Providence. Click Here for a Special Discount Ticket Coupon!

Show Hours: March 11-14, 2010
Thursday - 2:00 pm to 9:00 pm
Friday - 2:00 pm to 9:00 pm
Saturday - 10:00 am to 9:00 pm
Sunday - 10:00 am to 6:00 pm

Your March "Think Local" Coupons