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Retirement

5 hacks to boost your retirement savings

October 28, 2014 By Liz Weston

seniorslaptopMany people have trouble saving anything for retirement. But I hear from a fair number of people who are looking beyond 401(k)s and IRAs for more tax-advantaged ways to save.

Many have maxed out their 401(k)s at work, or had their contributions limited because they’re considered “highly compensated employees.” Some don’t have a workplace plan at all, while others want to save more than IRAs allow. Even catch-up provisions–which allow people 50 and over to contribute an extra $5,500 to 401(k)s and an extra $1,000 to IRAs–aren’t enough for some of these super savers.

So here are options for those who have maxed out and caught up:

Opt for an HSA. Health savings accounts, which are coupled with high-deductible health insurance plans, offer a rare triple tax advantage: contributions are tax deductible, gains grow tax-deferred (and can be rolled over from year to year), and withdrawals are tax free if used for medical expenses. Withdrawals are also tax free in retirement, which makes HSAs a potentially better vehicle for saving than the much-loved Roth IRA. (Some say yes, others no.) Speaking of which:

Consider a back-door Roth contribution. If you make too much money, you can’t contribute directly to a Roth. There is a workaround, according to IRA guru Ed Slott, that takes advantage of the fact that anyone regardless of income can convert a traditional IRA to a Roth. You can read more about the strategy here and the potential drawbacks here.

Start a side business. Small business owners are spoiled for choice when it comes to tax advantaged plans. The options range from SEP IRAs to solo 401(k)s to full-on traditional pensions (and baby, you can save a ton of money in those—as in hundreds of thousands of dollars annually). Talk to a CPA about which plan makes the most sense for you.

Use a 457 plan. These deferred compensation plans are often available to state and local public employees as well as people who work for some nonprofits. Like a 401(k), you’re allowed to contribute pre-tax money. Unlike a 401(k), you don’t get slapped with early withdrawal penalties if you take the money out before age 59 (although you will owe income taxes).

Contribute to a regular brokerage account. There’s no upfront deduction, but investments held at least a year can qualify you for favorable capital gains tax rates. This, by the way, is typically a much better option than variable annuities, which tend to have high costs and limited tax advantages for most people.

Filed Under: Liz's Blog Tagged With: 401(k), 457, back door Roth, deferred compensation, health savings accounts, HSA, IRA, Retirement, retirement savings, Roth IRA

Friday’s need-to-know money news

October 24, 2014 By Liz Weston

Energy_vampireToday’s top story: How to reduce your energy bill by killing off “energy vampires.” Also in the news: Tips on lowering your teen’s car insurance, hazards every student loan borrower should know, and what 2015’s retirement fund contribution limits will be.

This Tool Calculates How much You Pay for “Energy Vampires”
Driving a stake through your energy bill.

6 Tips to Lower the Cost of Your Teen’s Car Insurance
Unfortunately, they won’t lower your blood pressure.

6 Hazards Every Student Loan Borrower Should Beware Of
Don’t set yourself up for failure.

IRS Announces 2015 Retirement Plan Contribution Limits For 401(k)s And More
Find out what changes are in store.

The Best Day to Buy Airline Tickets
Start strategizing for holiday travel.

Filed Under: Liz's Blog Tagged With: car insurance, energy bills, IRS, Retirement, retirement savings, savings tips, travel tips

Thursday’s need-to-know money news

October 16, 2014 By Liz Weston

Zemanta Related Posts ThumbnailToday’s top story: Four questions you need to ask before renewing your health insurance. Also in the news: Retirees share their nest egg regrets, how you may be killing your retirement dreams, and how networking on LinkedIn could cost you a job.

4 questions to ask before renewing health coverage
Preparing for 2015.

Real Retirees Dish: My Biggest Nest Egg Regret
Retirees share their their savings regrets.

5 Ways You’re Killing Your Retirement Dreams
Behaviors that are hurting your financial future.

Could LinkedIn Cost You a Job?
The popular social network can reveal more than you’d like to potential employers.

Should Grandparents Worry About Their Credit?
One word: Yes.

Filed Under: Liz's Blog Tagged With: health insurance, LinkedIn, Retirement, Savings, social networking

Wednesday’s need-to-know money news

October 15, 2014 By Liz Weston

847_interestrates1Today’s top story: The everyday things that are hurting your credit. Also in the news: Whipping your 401(k) into shape, how to cope with low interest rates, and the ten best places to retire on Social Security alone.

5 Everyday Things That Hurt Your Credit
Your furry best friend could be trouble.

How to Whip Your 401(k) Into Shape
Unlocking your 401(k)’s full potential.

4 Strategies for Coping with Low Interest Rates
Counteract low interest rates by avoiding risky investments.

10 Best Places to Retire on Social Security Alone
The locations may surprise you.

8 secrets to building a budget you can live with
Budgeting doesn’t have to be painful.

Filed Under: Liz's Blog Tagged With: 401(k), Credit, Credit Reports, interest rates, Investing, Retirement

Q&A: Roth IRA

October 13, 2014 By Liz Weston

Dear Liz: I have a 401(k) that has a required annual distribution because I am over 71 1/2 years old. Can I use this distribution as qualified income to invest in a Roth IRA? I have no W-2 earnings, although I do have other income sources that are reported on 1099 forms.

Answer: To contribute to a Roth or other individual retirement account, you must have taxable compensation, which the IRS defines as wages, salaries, commissions, tips, bonuses or net income from self-employment. The IRS also includes taxable alimony and separate maintenance payments as compensation for IRA purposes.

So if the money reported on one of those 1099 forms is from self-employment income, then you can contribute to a Roth IRA. If the form is reporting interest and dividends or other income that doesn’t meet the IRS definition of taxable compensation, then you’re out of luck.
If you don’t have income that meets the IRS definition of taxable compensation, but your spouse does, you may still qualify for IRA contributions, provided you file a joint return that meets the required income thresholds.

Filed Under: Investing, Q&A, Retirement Tagged With: 401(k), q&a, Retirement, Roth IRA

Friday’s need-to-know money news

October 10, 2014 By Liz Weston

imagesToday’s top story: How your kids can hurt your credit. Also in the news: How to find the best financing when purchasing a new car, why baby boomers need help paying down their debt, and five banking fees that are actually worth paying.

5 Ways Your Kid Can Hurt Your Credit
Intentionally and unintentionally.

Need a New Car? Here’s How to Find the Best Financing Deal
Don’t forget to skip the “undercarriage package.”

Boomer Retirees Need a Hand Paying Down Debt
How to prioritize payments while saving for retirement.

5 Banking Fees That Are Actually Worth Paying
Some fees have long-term benefits.

How to Prepare for a Mini-Retirement
Making the big retirement picture seem less far away.

Filed Under: Liz's Blog Tagged With: baby boomers, banking fees, car financing, debt, kids and credit, Retirement

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