Savism - The Art Of Saving

Digg This

Furl

StumbleUpon

Roth IRA Basics and Benefits

2007-06-16T14:07:00.000-07:00

The Roth IRA is one of the smartest saving and retirement planning tools available to investors. Unlike the traditional IRA or 401K, contributions to the Roth IRA are not tax deductible, but the benefit of the Roth IRA is the ability to make withdrawals tax-free when you retire.

Other Roth IRA Benefits
• Contributions can be taken out at any time without taxes or penalties.
• Under special circumstances (Qualified Distributions), withdrawals of earnings (capital gains, interest, and dividends) are penalty and tax free.
• Contributions may be made after age 70 ½ as long as you have earned income.
• Since you have already paid taxes up front, there are no minimum distribution requirements after age of 70 ½.
• At death, funds remaining in your Roth IRA will go to designated beneficiaries (they will be subject to a minimum distribution requirement). This provision makes Roth IRA a great estate planning tool.

What Are Qualified Distributions?

To be tax-free and penalty free, a distribution of earnings must meet two tests:
1. Withdrawals are taken after the 5-year holding period, and
2. One of the following requirements applies.
The distribution is:
• Made on or after you reach age 59 ½,
• Made because you are disabled,
• Made to a beneficiary or to your estate after your death, or
• For the first-time home buyer (up to a $10,000 lifetime limit per person, $20,000 for couples).

Eligibility

You may be eligible to make a regular contribution to a Roth IRA even if you participate in your employer-sponsored retirement plan. The most common way of establishing a Roth IRA is by making cash contributions. In order to be able to contribute up to $5,000 per year to a Roth IRA for 2007-2008 ($6,000 if you are 50 or older) you will need to fulfill both requirements:
1) Your adjusted gross income has to be less than $99,000 if you are single or $156,000 if married filing jointly. The amount you can contribute is reduced gradually and then completely eliminated when your modified adjusted gross income exceeds $114,000 for single, or $166,000 if married filing jointly.
2) You or your spouse must have compensation or alimony income in excess of the amount contributed.

Another way of funding Roth IRA is by converting your traditional IRA. The only requirement is that your modified adjusted gross income is less than $100,000. Please note that the amount converted will be added to your income and taxed at the prevailing rate.

Here is the good news

1) The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) will eliminated the $100,000 modified adjusted gross income (AGI) limit effective 2010.
2) Under TIPRA, income from a 2010 conversion of a traditional IRA to a Roth IRA is included in the taxpayer’s income over a two-year period, beginning in 2011.

This will provide numerous planning strategies, so contact your financial advisors and start planning early.

Please consult your tax, legal, or investment advisor when making financial decisions. For additional information please visit http://www.irs.gov/pub/irs-pdf/p590.pdf

Spread The Word

Digg This

Furl

StumbleUpon

Ways to Lower My Bills

2007-05-02T17:11:00.000-07:00

Ways to Lower My Bills

In order to reduce expenses and save money, it is vital to know where your money is spent. That is why the best way to lower bills is to create a budget and stick to it.

Creating a Budget:

- The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend.

- Start by listing your income from all sources – like salary, wages, social security, pension/retirement, interest on accounts, child support/alimony, real estate rent, investment dividends, unemployment and other take home income.

- Then, list your “fixed” expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums.

- Next, list the expenses that vary — like entertainment, recreation, and clothing.

- Write down all your expenses, even those that seem insignificant. It is a helpful way to track your spending habits, identify necessary expenses, and prioritize the rest.

- The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.

Remember: The key to effective money management is to spend less than you make.

You can download a free budget worksheet at Microsoft.

Your public library and bookstores have information about personal finance, budgeting and money management techniques. In addition, computer software programs can be useful tools for developing and maintaining a budget, balancing your checkbook, and creating plans to save money and pay down your debt.

Spread The Word

Digg This

Furl

StumbleUpon

Make the most out of your 401(k)

2007-04-18T20:04:00.000-07:00

This year (2007) you can contribute up to $15,500 to your employers’ 401(k) plan. If you are older than 50 add an extra $5,000 in catch-up contributions for a total of $20,500. If you are eligible to participate and your employer offers matching contributions there is really is no reason for you to say “no” to this free money. This is probably one of the best ways to achieve your desired retirement income.

Benefits of 401(k) participation:

It’s easy & helps lower your taxes
You decide how much you want so save. Your contributions are automatically deducted from your paycheck before federal and state income taxes are calculated. This reduces your taxable income by the amount of your contribution and saves you tax dollars.

Your money grows faster
Your contributions and company match may grow further through investments in stocks, mutual funds, and money market funds. The important point is that this is tax-deferred growth. Taxes are paid when you withdraw the money at retirement; usually at a much lower tax rate.

Rollover option
When you change jobs you have an option to rollover your vested 401(k) balance into an IRA or a new 401(k) plan. Do not cash it out or take possession of that money. Instead, use a direct rollover and your current company will send your check to the new IRA or 401(k) trustee.

Flexibility
Most 401(k) plans have hardship withdrawals and a first time home buyer provision.

Visit your employer's human resources department and learn everything you can about 401(k) plan offered. Your financial advisors should be willing to give you advice as well. Start as early as your can. Time (number of years investing), compounding interest, and persistency all work in your favor.

Spread The Word

del.icio.us it Digg This Furl Reddit
StumbleUpon Google Bookmarks Technorati

Saving Energy = Saving Money

2007-04-15T11:15:00.000-07:00

An easy way to save money is to conserve energy.
Not only is it good for your wallet, it’s also good for the environment.

Look for the ENERGY STAR logo.

ENERGY STAR is a government-backed symbol for energy efficiency. It is a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy helping us all save money and protect the environment through energy efficient products and practices.

Appliances

When buying an appliance, remember that it has two price tags: what you pay to take it home and what you pay for the energy and water it uses. ENERGY STAR qualified appliances use 10–50% less energy and water than standard models. The money you save on your utility bills can more than make up for the cost of a more expensive but more efficient ENERGY STAR appliance.

Compact Fluorescent Light Bulbs

When replacing lightbulbs, you should also look for the ENERGY STAR qualified compact fluorescent light bulbs [CFLs]. These light bulbs fit into a standard incandescent socket and use 2/3 less energy than a standard incandescent and last much longer. This translates into a savings of $30.00 or more in energy costs over each bulb’s lifetime.

For more information about ENERGY STAR visit www.energystar.gov.

Spread The Word

Digg This

Furl

StumbleUpon