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A general mantra professed by the investment management industry is that it is never too late or too early to begin saving for the future. Even in these tough economic times, this financial imperative should be addressed with some attempt at rearranging budget priorities and setting aside a regular amount from each month’s income for this obvious need. Our government firmly supports this effort and has created a number of programs within its tax code to encourage participation in various savings programs.
Most individuals have learned of these programs through plans offered by their employers in the form of 401(k) savings plans. If you are not covered by one of these plans, then an “Individual Retirement Account”, or “IRA”, can be set up with your banker or broker to provide tax-sheltered benefits going forward on your personal contributions. While most of us are familiar with the notion of an IRA, many consumers are unaware that there are two types of an IRA, the most recent creation being the “Roth IRA”.
The concept of an IRA was created decades ago, but in 1998, a new form was developed, the “Roth IRA”, named after a late senator from our Congress. This special form of a savings account addressed many of the shortcomings of a standard IRA that prevented many consumers from taking advantage of these aspects of the tax code. For example, if you participated in an employer-sponsored plan at work, then you could not have a separate IRA. If you did have a traditional IRA, you also faced excessive tax penalties for early withdrawals, and withdrawing your funds was required after you reached an age of 70 ½.
Here is a brief list of the basis benefits of a Roth IRA:
You may participate in a Roth IRA, even if you are in an employer plan;
You may make withdrawals at any time without the imposition of a tax penalty;
You do not have to make withdrawals after 70 ½, and you may continue to make contributions;
You may convert a standard IRA to a Roth IRA;
Withdrawals are tax free up to the point that your original contributions have been withdrawn. You then pay tax on any “converted” contributions from a standard IRA, but your earnings while under the Roth IRA are tax free, subject to certain rules.
The government never uses taxpayer monies to subsidize a certain program without restrictions, and the same can be said for Roth IRAs. These restrictions, however, are fairly straightforward for the general public. Here is another brief list:
You do not get a tax deduction for your contributions of savings or net working capital ;
In 2011, you may contribute up to $5,000 as long as you or your spouse has qualifying income in excess of that amount for the year;
If you are over the age of 50, your contribution limit increases to $6,000;
If your Adjusted Gross Income exceeds certain levels ($107,000 for single individuals and $169,000 for married couples filing joint returns), then your allowable contributions will be reduced according to IRS table values;
You may convert a standard IRA to a Roth IRA, but there may be conversion taxes to pay. Consult your tax advisor to determine if conversion works for you in the long run.
The real benefits of pursuing a Roth IRA savings strategy are on the distribution side of the equation. Although you give up a tax deduction to make contributions of savings or net working capital, something permitted with a standard IRA, you can make withdrawals of your contributions at any time without the risk of a penalty or the need to report ordinary income in the year of withdrawal. However, the earnings on your contributions are not taxed when earned, nor are they ever taxed as long as at least five years have passed since you set up your Roth IRA and you are over 59 ½ years of age.
Since everyone’s personal finances are different, consult a professional investment advisor or your banker to assess if a Roth IRA is a prudent investment tool for your unique situation.
From time to time, I want to stray from some of the weightier advice and guides to let you in on what I think is a good website that can save you some money. I know some people will drive from gas station to gas station trying to find the cheapest gas, and admittedly, I have done it too. There is a way to make this shopping easier. This website , called Gas Prices, does the trick and it is usually updated frequently. All you have to do is enter your zip code and it will show you a map and flag the various prices for gas at each location. This can save you time (and gas) if you are trying to find the cheapest gas in your area. It’s also fun to just look at all the different prices in your area. I think it’s amazing that there can be as much as $.15 difference within a couple of miles. The website is an MSN site and has other interesting and relevant info as well, such as traffic reports, etc. And no this is not a ‘paid’ endorsement, just passing along what I think is something worthwhile. Have fun saving money on Gas!
Edit: Wrote this in 2008, still works good! Check it out for you neighborhood.
Do you know of a good site that does the same thing? Add it here by leaving it in a comment. That way we all benefit!
Are you thinking of a San Jose real estate to buy this year. The real estate industry is a rather volatile industry and you need to be totally aware of all what is happening before you buy a property. The trend in the pricing of real estate, the demand for a certain property, an inventory of the property and the current market trends, everything needs to be looked into.
When you are planning to buy a San Jose real estate, you may want to consider a lot of factors. There are many changes that may be going on in the real estate market currently. San Jose is doing great business in the real estate industry. The year before this saw the city as having a steep median for a house the price for which has definitely gone down a little this year. Medians provide a more accurate depiction of the pricing for the local housing. This median, however, is not similar to average. You must not mistake it for an average as in real estate market this is the term used instead of average as few high notch houses can raise the number quite significantly.
Between January and May, there was a steep rise n the demand for homes in San Jose real estate industry this year. May was the month that saw the highest demand for property. This was the month when the average number of days in the market fell from 150 to almost 80. The average number of days leveled since then has been calculated at 100 now. The San Jose real estate inventory has the list of property that is up for sale. as the number in the inventory is higher, the number of supply also increase as a result. this allows the industry to set greater prices for the property. There has been a steady rise in the number of homes for sale in San Jose. This rise is seen since the middle of January.
Market conditions in the San Jose real estate industry can be calculated if you consider the median price, the level on the inventory and the days on the market. In addition to this you also need to maintain the current sale rate for a proper estimation. When markets are cold, you can negotiate better prices while in other cases, there can hardly be any negotiation. If you are thinking whether or not this is the right time to buy San Jose real estate then quickly consider these factors and get out in the field.
I have been cruising the internet today and found some very interesting sites for you to look into. Here is a variety of investment ideas that may be important for your strategy. Happy Investments to you!
The southeast portion of the US was one of the first regions to recover after the real estate crisis. This is good news for owners of Atlanta investment property, as they quickly saw minimal gains. Atlanta remains a popular location, which means there are locations to buy and rent out for every pocketbook.
Forex investing has gotten a bad rap over the years, but the truth is that investing in the forex markets is a legitimate way to strengthen your portfolio. Knowing that there are inherent risks involved with any type of investment is the key to realizing that due diligence should be executed when researching any potential opportunity.
Forex investments can be risky, but also very lucrative. Critical skills are needed to profit in this highly competitive investment landscape, but these skills can be acquired through education, training and practice trading utilizing virtual (demo) accounts from the right broker. There is money on the table for those who can follow a system, control their emotions and practice good money management methods.
Costa Rica has more expatriates than any other country in Central America and investors have been purchasing Costa Rica real estate for decades. It’s not hard to understand why. Costa Rica is a beautiful country with a rich biodiversity, benefit laden retirement program, stable democratic government and a growing economy.
If you were told that you could get free money in the form of a real estate grant that you would never have to pay back, what would you say? Nothing is free these days but if you are looking for a down payment on your mortgage, help towards the closing costs for your home purchase, or money to refurbish your home and then you could qualify for a real estate grant.
The stock market can be a daunting place for a beginner investor. There are so many types of stocks, bonds and other instruments to trade – where does one start? Here’s an idea: try exchange traded funds. ETFs are like a mutual fund because they are a fund of companies in one instrument, however they are traded like stocks on the exchange. So these funds can be a great place to start – with options like financial ETFs, foreign currency ETFS, commodity ETFs, derivative ETFs to name a few. As always, do your research on your ETFs of choice before investing in any given sector.
So you want to be a real estate investor? Have you been thinking about buying investment property for a long time? Have you read all the books and watched all the infomercials, but just didn’t know where to start? Here are some quick steps to get you started toward your investment property dreams.
To add new investment ideas to your portfolio, take some time to learn to invest money in vehicles you haven’t tried before. Consider investments in global index or commodity ETFs, currencies, corporate bonds or real estate. Try tracking these investments with an online virtual trading account until you feel like you have a handle on how these investments work, and add these to your portfolio to improve diversification.
There are times where a penny stock investment can make you a profit and then there are times you will lose your investment. Research is the key to helping you reach your goal and there is no substitute for it. Take your time and do it right.
If you are experiencing significant financial turmoil, you may have wondered whether you should declare yourself bankrupt. At Claiming Bankruptcy, we provide you with all the information you need to make an informed decision, allowing you to get on with your life.
That’s all for this month. Hope you enjoyed the Roundup!
Early retirement is a possibility for you. You are 60, so IRA penalties no longer apply, but you have to be careful about recognizing income since it may reduce your social security benefit if you decide to take an early distribution, not to mention tax impacts. You have also begun to dabble in foreign exchange trading and notice that you have a knack for generating profitable trades. Is there anyway to shield this new stream of income from recognition for both social security and tax authorities in a legitimate way?
The answer to your query is “Yes”! It is possible to set up an Individual Retirement Account (IRA), either a self-directed or Roth IRA, for trading currencies. The law permits this day-trading investment activity in currencies, as opposed to restrictions that are placed on stocks. Since the rules are complex, you may need to consult your tax adviser and then your forex broker before embarking on any account transfer or deposit strategy to ensure that everything is done to suit your individual tax and income situation.
A separate forex trading IRA must be opened first, and then either funds must be transferred to it from another IRA or new deposits made. There are limitations on new deposits. Once set up, the earnings are sheltered from tax and income recognition. Self-directed IRA’s have age limitations associated with them. No new contributions may be deposited after age 70 ½, and Required Minimum Distributions, or RMD’s, must also begin at that age. Roth IRA’s have neither of these restrictions.
If you already have an IRA, then a transfer can be arranged tax-free to your new forex trading IRA, but only if the transfer comes from a similar type of IRA. In other words, a traditional IRA, where all funds must be recognized as ordinary income when withdrawn, may only be transferred to another traditional IRA. Deposits in a Roth IRA are not taxable when withdrawn, subject to certain penalty qualifying rules, and may be transferred with no tax effects to another Roth IRA. Once again, your broker will advise you on how to perform this set up correctly.
There is one more option to consider. A new law for 2010 removes the income restrictions related to transfers from a traditional IRA account to a Roth IRA. The transfer has to be recognized for tax purposes, but it would allow for the funding of a Roth IRA devoted specifically to Forex trading if one was not allowed beforehand. In this case, you must be anticipating that the funds will remain in the Roth IRA for a minimum of five years, but the income tax on the transfer would be dealt with currently. This treatment may be an advantage by preventing reductions to early social security benefits or if you expect tax rates to increase in the near term. The law also allows the transfer income to be spread over two years.
Foreign exchange trading has become a very popular investment activity over the past decade. In many cases the rates of return can be highly volatile and unpredictable. Sheltering these current income streams from current taxation becomes highly advisable if a suitable method can be arranged. The “multiplier” effect of earnings piling up without tax considerations is appealing to everyone. Individual Retirement Accounts, especially the Roth IRA version, are appropriate for the task. Since there may be other factors that could determine which options are most suitable to meet your financial needs, be sure to consult your tax professional and your broker before making any decisions.
Prepared by: Tom Cleveland, June 2, 2010
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About Mack
Sometimes counting your change is a great money maker. A play on words - how YOU change is what counts. Helping you make wise financial decisions and helping you keep more of the money you make is what this site is about.
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