If you want to get the most bang for your retirement-buck, it’s time to read up on an popular but confusing tax-saving tactic, the Roth IRA conversion.

A Roth IRA conversion allows you to pay income taxes on money you have invested tax-free in a traditional IRA this year instead of when you withdraw the money at retirement. (Because once you convert to a Roth IRA, distributions at retirement are tax-free).

Roth conversions are hot because as of Jan. 1, 2010, the IRS lifted income limitations on converting a traditional IRA to a Roth IRA. Formerly, conversions were only available to investors with a modified adjusted gross income (MAGI) of less than $100,000. Because investors who earn more than a certain amount also cannot contribute to Roth IRAs, a Roth IRA conversion presents a new opportunity to many investors to take advantage of the Roth IRA’s benefits. Additionally, there’s a special rule this year only that allows investors to recognize all of the conversion income in the 2010 tax year or split it equally between the next two tax years (2011 and 2012).

Read This First! Despite all the buzz about Roth conversions, only a relative few investors should use them. If you’re currently eligible to contribute to a Roth IRA or have a Roth 401(k) at work or you can’t contribute to a Roth but are planning on converting and using assets in your traditional IRA to pay income taxes for the conversion, stop. You probably shouldn’t convert and probably don’t need to read this.

Still curious? Okay. Before we examine exactly who should consider an IRA conversion, here’s a quick refresher of IRA basics. Read more…

Jan 18th, 2010 by David Weliver in Investing
Comments (4) --- Add Yours!

Let’s be honest: We make a lot of mistakes with credit cards.

I like to assume that most people don’t start drowning in high-interest credit card debt on purpose. We don’t choose to fork over billions to credit card companies every year because we feel bad that their execs’ planes are getting a little old.

But we do.

As you hopefully know by now, the overarching mistake that leads to all this debt is using credit cards to spend money we don’t have. But again, many people don’t realize this is happening as they swipe their cards. And one dangerous credit card mistake makes this far easier to do. Do you make it?

Do you fool yourself about the value of credit card rewards?

Cash-back and rewards credit cards can put a few hundred extra dollars into savvy spenders’ pockets every year. But the credit card banks don’t offer rewards to pay off customers who will never make the banks money; they offer rewards to bait customers who will pay the banks handsomely. Could that be you? Here are a few reasons it might be: Read more…

Jan 15th, 2010 by Simon Zhen in Credit
Comments (4) --- Add Yours!

It’s nearly that time of year again. The stress. The procrastination. The arithmetic. The missing receipts. That’s right; it’s almost tax time!

Filing taxes and decoding IRS lingo may be some people’s idea of a good time, but for the rest of us, it may make more sense to hire a professional tax preparer or accountant to take care of our 2009 tax returns.

But how do you know if you really need the help of a professional tax preparer? Ask yourself the following questions before deciding to hire a professional to prepare your taxes. Read more…

Jan 12th, 2010 by Carrie from "Carrie...On The Cheap" in Taxes
Comments (3) --- Add Yours!

Gold has been one of the hottest topics in the investing world in recent months, and with good reason. In 2009, investors received a 25 percent return on gold—the biggest absolute annual gain in three decades. Arguably, gold’s nine-year streak of positive returns is even more impressive.

If you’re considering whether to invest in gold, it’s important to understand the close relationship between the value of gold and the value of the dollar.

A Brief History of Gold and the Dollar

To understand how and why gold has had such a historical run-up, a little history lesson on the relationship between gold and the dollar is helpful.

The relationship between the dollar and gold is tied to the concept of tangible assets vs. financial assets. To put it simply, gold has real value, while the dollar is a representation of real value.

In 1944, the Bretton Woods Agreement launched the first system of convertible currencies and fixed exchange rates, requiring participating countries to maintain the value of their currency within a narrow margin against the U.S. dollar, which was fixed at a rate of $35 per gold ounce.

However, in the 1950s and 1960s, the increasing supply of U.S. dollars along with capital outflows aimed at Europe’s postwar recovery put downward pressure on the dollar.

Eventually, a series of dollar devaluations in the early 1970s ended the Bretton Woods system, allowing the dollar to be freely traded and freely sold, beginning the long drawn-out period of the falling dollar. Read more…

Jan 11th, 2010 by Stan in Economy, Investing
Comments (2) --- Add Yours!

When you think of gold, what comes to mind? Eighteen-karat gold jewelry? Gold bricks stacked high in a vault? Sacks of gold coins used for bartering or paying tax collectors in Robin Hood’s days? Or a sensible part of a modern investor’s asset allocation strategy?

Although global economies do not depend upon gold in the way they once did, gold is still an attractive investment. Why is that? And exactly how do you invest in gold?

The Allure of Investing in Gold

Gold can be a sound investment because, unlike currencies and securities, gold is in limited supply. (The gold supply increases as more gold is mined, but very slowly). Thanks to this scarcity, gold serves as a hedge against inflation. An ounce of gold can buy roughly the same amount of goods today as it did 50, 100, even 200 years ago. That’s not the case, of course, with a dollar bill. In fact, the value of gold typically increases as the value of a dollar falls.

For this reason, gold is a good choice for investors who want to insulate themselves somewhat from the inevitable effects of inflation. And who doesn’t?

But how do you make this happen? Believe it or not, buying gold (even physical gold coins) is doable for the average investor; you simply need to take the time to do it right. Read more…

Jan 11th, 2010 by Guest Writer in Investing
Comments (0) --- Add Yours!

Say you inherit, win, or earn $3,000, $30,000, or even $300,000. Lucky you.

What should you do with a windfall of money?

You may be inclined to spend it; to buy a new ride or take the trip you’ve been longing for. The urge to splurge is normal; people are more likely to spend unanticipated money (i.e., a windfall) than anticipated money, like wages (Arkes, Joyner, et. al., 1994). Unfortunately, spending your windfall—or at least all of it—probably isn’t the best move.

Here’s a prioritized list of arguably the best ways to use a windfall. Your individual situation may dictate deviating from this list slightly, but this is solid foundation for planning how to use unexpected money. (Note: You may decide to split your windfall among a few of these goals; that’s fine.) Read more…

Jan 8th, 2010 by David Weliver in Investing, Saving, Taxes
Comments (6) --- Add Yours!

Four years ago, nearly dozing off in class, I thought to myself: “What if I borrow a million dollars, hide it somewhere then declare bankruptcy?” The idea seemed as diabolically ingenious as a well-planned bank heist. And I actually considered it! Today, of course, I realize how foolish that idea was and that pulling it off would have been nearly impossible.

But can you blame me for dreaming about it? After all, I assumed that anyone would just lend me money (even $1 million) without peeking at my credit history. Was it my fault I didn’t know what “credit” was?

At 18 or 19, I was, like the majority of my generation, completely naïve about even the most basic financial concepts: credit, saving and investing. I’ve become more cash-savvy since. I can’t say the same for all of my peers although, fortunately, the recession may mark the beginning of an era when frugality, financial literacy and saving savoir-faire become as hot as Facebook and iPhones. Read more…

Jan 6th, 2010 by Simon Zhen in Personal Finance
Comments (5) --- Add Yours!

Along with getting in shape, improving one’s personal finances is another popular New Year’s resolution. Every year, millions of Americans vow to get out of debt, save more money, or contribute more to their retirement accounts. Did you make financial resolutions this New Year? If so, read on to find out how to make those resolutions stick.

Be Reasonable

If your annual income is $40,000, it’s not realistic to declare that you’re going to pay off $35,000 in student loans in 2010 unless you’re going to live in your parents’ basement and eat Ramen noodles at every meal. Unattainable goals will only set you up for failure. It’s important to be ambitious, but it’s practical to be rational. If your goal is debt payoff, sit down and hash out the numbers until you come up with a monthly amount that you can pay towards your debt after you’ve set money aside for necessities and bills. Read more…

Jan 5th, 2010 by Carrie from "Carrie...On The Cheap" in Personal Finance
Comments (3) --- Add Yours!

Finding the right stock broker can be overwhelming. There is a glut of brokerage companies out there—both online and full service—and each service claims to be the best. So how, exactly, can you tell which broker is right for you?

As you approach shopping for a new broker, you need to decide which services you want and how much you are willing to pay for them. Plenty of broker ratings and customer satisfaction surveys exist, but high survey scores won’t matter if the broker you choose doesn’t meet your specific needs.

Before you dive into your stock broker search, ask yourself these questions:

• How much do you want to invest?
• What investing strategy will you use?
• What type of products will you invest in?
• How much customer support will you need?

Having these answers will be critical in evaluating potential brokers. Why ask these questions? Let’s look at each one in greater detail. Read more…

Jan 4th, 2010 by Stan in Investing
Comments (2) --- Add Yours!

What better way to celebrate the last day of 2009 than a retrospective? Hence, I give you 15 of the year’s best Money Under 30 articles, subjectively selected for uniqueness; popularity among readers, commenters and re-tweeters; and, of course, my own personal bias. I hope you enjoy them as much today as you did the first time!

• Choose Where You Want to Live, Then Find a Job — In one of the more personal articles I’ve written here, I examine my decision to move to Maine without a “real job”—even in the middle of a recession—and just make it work.

• How to Create a Five-Year Financial Plan — We all know that building financial security doesn’t happen overnight. That said, it’s not very easy to put money away for 40, 20, even 10 years from now. Five years is a different story. That’s why it’s so important to set a “five-year plan”.

• 23 Things Beginners Absolutely Must Know About Saving for Retirement — I’m proud of this post that contains basic but critical information about saving for retirement. This article did really well on social media sites like StumbleUpon, though I was disappointed it didn’t get more comments.

• How to Overcome a Fear of Your Finances — Does the thought of looking at your credit card statements or checking account make you anxious? Have you ever ignored financial mail because you just don’t want to deal with it? You’re not alone. This post offers tips to beat your fear and start taking control of your money.

Read more…

Dec 31st, 2009 by David Weliver in Roundups and Carnivals
Comments (0) --- Add Yours!