Tag Archives: IRA

Business, Finance, Occupation & Industry

Americans More Financially Savvy Post-Recession, Survey Shows

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By The Associated Press

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By MARK JEWELL

BOSTON — The frugality and investing discipline that the 2008 financial crisis imposed on Americans appear to have led to permanent changes in behavior on money matters, according to a survey by the nation’s second largest mutual fund company.

Spendthrift ways are unlikely to again become as pervasive as they were before the crisis, Fidelity Investments concluded Wednesday in releasing results of its “Five Years After” survey of nearly 1,200 investors.

Positive behaviors that appear to be now entrenched include saving more in 401(k) plans, paying down debt and taking greater care to invest wisely.

“These tend to be very sticky decisions, because you begin to budget and spend around a higher savings rate,” said John Sweeney, an executive vice president on retirement and investing with Boston-based Fidelity. “People are taking control of their financial lives, and control breeds confidence.”

Survey participants were interviewed over two weeks in February, nearly five years after the government-brokered rescue sale of Wall Street firm Bear Stearns to JPMorgan Chase & Co. (JPM). That event, in March 2008, is regarded as a tipping point for more the tumultuous upheavals that followed, including the September 2008 collapse of Lehman Brothers, which the government allowed to fail.

Housing prices plunged, unemployment spiked and stocks tumbled more than 50 percent from the market’s October 2007 high to its March 2009 low. It wasn’t until last month that the Dow Jones industrial average (^DJI) returned to its pre-crisis high.

Key survey findings include:

  • Fifty-six percent reported their financial outlooks changed from feeling scared or confused at the beginning of the crisis to confident or prepared five years later.
  • Survey participants estimated their household had lost 34 percent of the value of their total assets, on average, at the low point of the crisis. Thirty-five percent experienced what they considered to be a large drop in income, and 17 percent said at least one head of their household lost a job.
  • Forty-two percent increased the amounts of regular contributions to workplace savings plans such as 401(k)s, or to individual retirement accounts or health-savings accounts.
  • Fifty-five percent said they feel better prepared for retirement than they were before the crisis. However, among the group of survey participants who reported they continue to feel scared, just 34 percent said they’re better prepared for retirement.
  • Forty-nine percent have decreased their amount of personal debt, with 72 percent having less debt now than they did pre-crisis. Just 31 percent of those who indicated they’re still scared reported that they have reduced debt.
  • Forty-two percent have increased the size of the emergency fund they’ve established to meet large unexpected expenses. Among those self-reporting as scared, only 24 percent have a bigger emergency fund than they had pre-crisis.
  • Seventy-eight percent of those saying they’re prepared and confident said the financial actions they’ve taken are permanent …read more
    Source: FULL ARTICLE at DailyFinance
Business, Finance, Occupation & Industry

Why This Smart Investment Gets No Respect

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By Dan Caplinger, The Motley Fool

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Millions of Americans have realized how important it is to save for their own financial future. But when it comes to taking maximum advantage of all the tools at their disposal, most of them ignore a smart investment that can be crucial in getting them to their long-term goals.

A survey last week from financial services firm TIAA-CREF looked at how Americans are using IRAs as part of their overall investing strategies to save for retirement. The results were frightening, as 80% of those surveyed said that they’re not contributing at all to an IRA, up from 76% last year. Even worse, nearly half of the survey’s respondents didn’t even understand what an IRA really is or how it could help them with their retirement savings.

The key elements of a smart investment
To make the most of your limited investment resources, you have to take maximum advantage of the opportunities at your disposal. To make the smartest investments you can, you need to consider several factors:

  • Solid return potential. The best investments deliver outstanding returns to their shareholders because the underlying businesses that generate those returns have solid fundamentals and lucrative growth prospects to keep profits coming in well into the future.
  • High current income. Investments that produce substantial income is extremely valuable right now, because most of the traditional go-to income-producing investments are doing a woefully inadequate job of delivering their usual payout levels. High-yielding stocks and other investments are getting a lot of investor attention and seeing share prices rise as a result.
  • Favorable tax treatment. With Uncle Sam taking a larger portion of your earnings in the form of taxes, taking advantage of the tax benefits that certain investments offer has gotten more valuable in 2013. If current trends are a sign of things to come, higher future tax rates could make tax considerations even more important in judging a smart investment.
  • Good value. Even the best investments won’t produce the returns you need if they’re already too expensive. To maximize your returns, you have to discover good investments before the crowd has already bid their prices up. Otherwise, you’ll miss out on the lion’s share of a stock‘s long-term returns.

It’s a rare investment that meets all four of these criteria. For instance, Chimera Investment and Two Harbors Investment have tapped into the lucrative returns available from leveraged investments in mortgage-backed securities, which they and their peers use to generate massive dividend yields. The same is true of Ares Capital , which helps closely held businesses finance their current operations and future growth and which pays out dividends approaching 9% over the past 12 months. But the payouts from both of those types of investments generally don’t qualify for lower tax rates on qualified dividend income, leaving taxpayers carrying a huge burden.

Even traditional stocks that do enjoy favorable dividend treatment can leave investors suffering. Rural-telecom stocks Windstream and Frontier Communications offer …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

The Perfectly Legal Way to Pay Zero Tax for Generations

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By Dan Caplinger, The Motley Fool

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Most people think of tax shelters as being available only to massive corporations and the ultra-rich. But if you have a job, you have access to a tool that can help you and your family avoid having to pay any taxes on your investment income not just throughout the rest of your life but for your heirs’ lifetimes as well. Best of all, it’s never been easier to take advantage of these benefits. All it takes is opening a Roth IRA.

How you can become like a big corporation
Back in 2011, the Institute on Taxation & Economic Policy collaborated with the Citizens for Tax Justice to create a list of what it called “Corporate Taxpayers & Corporate Tax Dodgers” covering the preceding three years. Noting factors like accelerated depreciation, deductions for stock options, offshore tax shelters, and industry-specific tax breaks, the report identified many companies that not only avoided paying income tax over that three-year period but also got net refunds back from the U.S. Treasury. Corning and Honeywell were among the 30 companies that had negative tax liability from 2008 to 2010, according to the report, while Wells Fargo and AT&T received the largest amounts in what the report called “tax subsidies” — representing the difference between what those companies paid in tax versus what they would have paid under the 35% corporate tax rate. Through perfectly legal means, these companies all managed to hold the IRS at bay.

Roth IRAs don’t involve any of the strategies that corporations use to their advantage, but they’re equally effective. When you open a Roth IRA, you don’t get any upfront tax deduction, which is why so many taxpayers never even think to go beyond the traditional IRAs that they’re more familiar with. When you’re focused on saving taxes now, the traditional IRA delivers a valuable tax deduction you can use on this year’s tax return, while the Roth doesn’t give you any current benefits at all.

But what you get in return for giving up those upfront benefits is so much more valuable. Throughout your lifetime, the income and gains that your Roth IRA investments generate are tax-free. Once you retire, you can take money out of your Roth IRA without paying any tax as well.

But how can you protect your heirs?
Those benefits are great for retirees, but the even more valuable aspect of Roth IRAs is that you can hold onto them forever. Unlike traditional IRAs, which force you to start taking distributions from your retirement account when you reach age 70 1/2, Roth IRAs have no minimum required distributions at any age. If you don’t need the money in your Roth, you can leave it untouched and let those tax-free earnings continue to build.

Even better, you can pass on your Roth IRA to future generations. They will be required to start taking minimum distributions from their inherited accounts. …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

You Have 2 Weeks to Do This and Save Hundreds on Your Taxes

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By Dan Caplinger, The Motley Fool

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The calendar’s about to turn the page, and April 15 will be here before you know it. As we enter crunch time for getting your tax return prepared, you’re running out of time to take advantage of the easiest way to reduce your tax bill: opening an IRA.

Why you must act now
In a pinch, you can always get an extension on filing your taxes. But you can’t extend the April 15 deadline to contribute to an IRA covering the 2012 tax year.

Opening an IRA has both short-term and long-term benefits. With a traditional IRA, many taxpayers can reap immediate tax savings by deducting the amount they contribute from their gross income, up to $5,000 for those younger than age 50 and $6,000 for those 50 or older. That in turn reduces the amount of tax owed. For instance, if you contribute $5,000 to an IRA and you’re in the 25% tax bracket, then you’ll save $1,250 off the tax bill you’ll owe in April.

In addition to the federal tax benefits of opening an IRA, many states that impose income taxes also give you tax benefits for your IRA contribution. That can add even more tax savings.

The real payoff of IRAs
As valuable as that upfront tax deduction is, it pales in comparison with the long-term value of having money in an IRA. One key benefit of IRAs is that as long as you keep your assets within the account, any taxable income — whether it be interest, dividends, or capital gains from sales of investments — is tax-deferred.

That has two main consequences, both of which are favorable. You don’t have to pay tax on the income that your IRA investments generate, so you can focus more on choosing the investments with the best prospects for strong returns without worrying about their potential tax impact. But almost as valuable as the tax savings is the fact that you don’t have to track all that income within your IRA. Burdensome requirements like reporting gains and losses every time you sell an investment, as well as reporting every interest, dividend, and other income payment on an annual basis are unnecessary within an IRA except in some very rare cases.

Quantifying the benefits of tax deferral is harder than calculating the immediate tax savings on an IRA contribution. But by making some estimates, you can get a sense of just how much additional tax you’ll avoid on an annual basis by having your investments within an IRA.

For instance, dividend-producing investments have gotten popular because of their relatively high income in a low-return environment. For the following widely held dividend investments, here’s a look at the potential savings from holding shares in an IRA:

Business, Finance, Occupation & Industry

Wealthy Workers Are Seriously Underestimating Their Retirement Needs

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By Business Insider

Wealthy Workers underestimate

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By MANDI WOODRUFF

A lot of wealthy workers could be missing a vital flaw in their plans for retirement, a new survey shows.

More than 80 percent of workers earning $115,000 say they are prepared for retirement — but they think they’ll only need $66,000 per year to live on, Charles Schwab (SCHW) found.

Sure, it’s possible to survive on $66,000 a year — plenty of people would be glad to earn half that much in a year — but chances are high-earners won’t be prepared for that kind of lifestyle change, let alone unexpected costs that could come up down the road.

Most experts agree consumers should plan on at least saving enough of a nest egg to maintain their current lifestyle in retirement. Otherwise, the only answer is to find ways to minimize costs and trim household budgets.

That starts with figuring out what age you plan to retire, and these days, workers are planning on working well past the typical 65th-birthday benchmark.

Couple that with the fact that we’re living longer than ever as well, and retirees could wind up spending 15 to 20 years living off just their nest egg alone.

The biggest hurdle retirees will almost certainly face is the rising cost of health care.

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“Even with Medicare benefits, a 65-year-old couple could need nearly $400,000 to cover out-of-pocket health care costs during retirement, according to research by the Employee Benefit Research Institute,” noted Carrie Schwab-Pomerantz, Charles Schwab senior vice president. “The bottom line for everyone is that health care costs need to be carefully factored into retirement plans.”

No one can predict whether they’ll need long-term medical care in the future, but there are steps people should take now to mitigate those issues as early as possible.

First, review your retirement goals with your spouse or partner and think about running it over with a financial advisor. Fee-only financial planners have a fiduciary duty to work in the best interest of clients, and you won’t have to worry about commissions or other hidden fees that could sneak up on you.

Just half of Americans said they’re saving through a retirement plan like a 401(k) or IRA, according to a recent survey by the EBRI. While not everyone might be able to max out a retirement plan contribution each year, even contributing a small portion of each paycheck to a retirement account could be a big difference in the long run.

“Especially for those looking to catch up on savings, we recommend maximizing contributions in a 401(k) at least up to the employer match, considering other tax-advantaged retirement accounts such as an IRA, and finding ways to automate savings,” Schwab-Pomerantz says.

Permalink | <a target=_blank href="http://www.dailyfinance.com/forward/20497312/" title="Send …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

My Old Boss Kicked Me Out of My 401(k)! What Now?

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By Dan Caplinger

401K (Cassandra Hubbart, AOL)

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Cassandra Hubbart, AOL

Using a 401(k) or other employer-sponsored retirement plan is one of the best ways you can set aside money for your old age. But as many workers who’ve moved on from past jobs have recently discovered, employers don’t want to keep footing the bill for their former employees’ retirement savings. So they’re kicking those accounts to the curb.

What’s Happening?
Until 2005, employers routinely cashed out small 401(k) plan accounts when workers quit. Previous law allowed them to sell 401(k) assets and send checks to workers who had less than $5,000 in their accounts, forcing the recipients to figure out on their own how to roll over those amounts into IRAs to avoid the extensive taxes and penalties that would otherwise apply.

Current law, however, only allows that option for workers with less than $1,000 in their accounts. For those with between $1,000 and $5,000, employers have to go to the trouble of setting up an IRA for their former employees.

That’s enough of a hassle that many employers didn’t bother doing it. But as administrative costs of managing 401(k)s have risen, forcibly pushing former workers into IRAs has gotten more popular.

Why Is That Bad?
In general, rolling over an old 401(k) to an IRA can be the smartest move you can make. That’s because it gives you access to a wider range of investment options that are often less expensive. It also helps you avoid the tax hit of just depositing old 401(k) money into your regular bank account.

But for those with tiny account balances, those low-cost options are a lot harder to find. Without the clout that a large 401(k) plan brings, you won’t get the same lucrative deals that many major employers can get, including low-cost institutional mutual funds and other favorable investments.

Two Ways to Deal With Being Dumped
If your former employer boots you out of your 401(k), realize that you have options.

If the IRA that your former employer sets up for you isn’t what you want, you have the right to transfer that money to the provider of your choice. That way, you can pick a lower-cost IRA that meets your needs.

Alternatively, if you have a 401(k) account with your current employer, you can roll the IRA money into that account. That strategy works best if you like your current plan’s investment options better than what you have access to elsewhere.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Don't Touch That Pile of Cash in Your 401(k)!

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By Dan Caplinger, The Motley Fool

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In this edition of our Motley Fool Conversations series, Fool personal finance expert Dayana Yochim and retirement-planning analyst Dan Caplinger discuss the challenges of keeping disciplined with your retirement savings. Many investors cash out of their 401(k) plans when they change jobs, taking the opportunity to get a much-needed quick financial windfall. But as Dan notes, the consequences of giving in to temptation can be huge down the road.

As Dan points out, some employers even force you to take money out of 401(k) plans after you change jobs if your balance falls below a certain level. But as Dayana notes, keeping track of old 401(k)s is important, and Dayana and Dan go on to discuss various choices that you have for handling that money efficiently.

Dan suggests that the best solution for most people is to do an IRA rollover, which shifts cash directly from the old 401(k) account into a self-directed retirement account. That way, you can avoid IRS taxes and penalties and choose good low-cost investment options rather than being locked into the menu of higher-cost investments that most 401(k)s use. He explains how the process is simple, with your financial provider taking care of most of the details to keep your money working hard for you.

The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool’s free report “3 Stocks That Will Help You Retire Rich” names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

The article Don’t Touch That Pile of Cash in Your 401(k)! originally appeared on Fool.com.

Fool contributor Dan Caplinger and personal finance expert Dayana Yochim appreciate your comments. You can follow Dan on Twitter @DanCaplinger. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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Business, Finance, Occupation & Industry

The Early Tax Deadline You Can't Afford to Miss

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By Dan Caplinger

IRA tax deadline retirement savings

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Alamy

For millions of taxpayers, the April 15 deadline to file your 2012 return already looms large. But for a select group of retirement savers, there’s a deadline coming even sooner — and missing it could cost you a huge amount of money.

That select group includes those who have money in traditional IRAs and 401(k) accounts and who turned age 70&frac12; during 2012.

Under what’s known as the required minimum distribution or RMD rules, you have until April 1 of the following year to make your first required withdrawal. In subsequent years, you need to take money out of your account by Dec. 31 to cover that year’s RMD.

What If You Don’t Need the Money?
The laws governing RMDs aren’t really based on need. Rather, they reflect the idea that IRAs and 401(k)s were made to encourage retirement savings rather than as a tax shelter for money to eventually go to heirs. The RMD rules make sure that retirees have to withdraw — and include in taxable income — part of their retirement accounts every year.

The only exception to the RMD rule governs 401(k)s. If you’re still working, you don’t have to take 401(k) RMDs until you retire. IRAs, though, don’t have that exception, so even if you’re still working, you have to take a withdrawal from your IRAs.

How Much Do You Need to Take Out?
Calculating the amount of your RMD is somewhat complicated, although the IRS provides help with worksheets and tables. The basic idea, though, is that you must take withdrawals based on your life expectancy.

So for instance, if you were still age 70 at the end of 2012, you would take your IRA balance as of the end of 2011 and then divide it by your life expectancy of 27.4 years. The resulting dollar amount would be your RMD for the 2012 tax year, which you’d need to take out by April 1.

What About Roth IRAs?
Unlike traditional IRAs, Roth IRAs aren’t subject to the RMD rules. As a result, you never have to withdraw from a Roth IRA if you don’t want to.

What Happens If You Don’t Take Your RMD?
The penalties that the IRS imposes for failing to take a required minimum distribution are harsh. The IRS calculates how much you should have withdrawn and then charges a 50 percent excise tax as a penalty.

Get more information about required minimum distributions from this link to the IRS website.

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Source: FULL ARTICLE at DailyFinance

News, Politics, Government

Car bomb defused near Northern Ireland border

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British Army experts defused a car bomb Saturday that had been abandoned on a rural roadside in Northern Ireland, a threat that is raising concerns about the region’s hosting of the G8 summit later this year.

The Police Service of Northern Ireland said the car contained a beer keg packed with about 60 kilograms (130 pounds) of homemade explosives. Metal kegs often have been used in the construction of Irish Republican Army-style bombs because they are easily portable and produce showers of shrapnel when detonated.

Police District Commander Pauline Shields said detectives suspected that an IRA splinter group planned to blast the nearby police base in the County Fermanagh border town of Lisnaskea, but may have been forced by a police patrol to abandon the bomb short of its target.

It would be the third foiled IRA attack on police installations this month, following two attempted mortar attacks on police stations in Northern Ireland‘s two major cities, Londonderry on March 3 and Belfast on March 15.

The car bomb was left before dawn Friday on a bridge near the Fermanagh village of Derrylin 4 miles (6 kilometers) from Northern Ireland‘s border with the Republic of Ireland.

Police shut the main road connecting the Fermanagh town of Enniskillen with the Irish capital, Dublin, and evacuated several homes for two days as bomb disposal technicians worked slowly in heavy snow and mindful that the bomb could have been placed to lure soldiers and police into the area for an ambush.

Troublingly for Northern Ireland‘s security and political chiefs, the bomb was left just 13 miles (18 kilometers) down the road from the planned venue for the June 17-18 summit of the world’s Group of Eight leaders, including U.S. President Barack Obama and Russian President Vladimir Putin.

British Prime Minister David Cameron, who also is to attend the summit, picked Northern Ireland as host to showcase the British region’s broadly successful peace process — a triumph undercut, in part, by the unrelenting violence of IRA die-hards rooted in the province’s Irish Catholic minority.

“Those responsible (for the car bomb) have neither mandate nor legitimacy. They are totally out of touch with what the vast majority of people in Northern Ireland want,” said Cameron’s senior official in Northern Ireland, Secretary of State Theresa Villiers.

The long-dominant …read more
Source: FULL ARTICLE at Fox World News

Business, Finance, Occupation & Industry

Last-Minute Tax Tips to Save You Money

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By Dan Caplinger, The Motley Fool

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With just a few weeks left before 2012 tax returns are due, millions of taxpayers are scrambling to get their taxes done. But even as time starts running out, it’s not too late to take advantage of some last-minute tax tips that will help you make the last part of tax season a bit less stressful — and potentially save you some money in the process.

Last-Minute Tax Tip 1: Want a bigger refund? Open a traditional IRA.
By being smart about tax planning, there are many things you can do to reduce your tax bill. Unfortunately, most of those strategies require that you take action before the end of the calendar year. So although it’s smart to look at things like timing when you pay deductible expenses in order to maximize tax savings or harvesting tax losses to reduce your tax bill for 2013, it’s too late to use those strategies to get an immediate payoff on your 2012 return.

But the tax laws do give you one great way to save on the return you’re preparing right now. By contributing to a traditional IRA on or before the April 15 deadline, you may be able to deduct as much as $5,000 from your taxable income on your 2012 return. If you’re 50 or older, you can contribute an extra $1,000 on top of that. Those deductions could save you hundreds or even thousands of dollars.

If you open an IRA and want the deduction on your 2012 tax return, be sure to tell your financial provider that you’re making a 2012 contribution. Otherwise, it may get reported to the IRS as a 2013 contribution, leading to unnecessary complications.

Last-Minute Tax Tip 2: Have high-deductible health insurance? Put money in a health savings account.
Another last-minute tax break available for some taxpayers is the deduction for contributing to a health savings account. If you were covered by a qualifying high-deductible health plan — a policy with a minimum deductible of $1,200 for single coverage or $2,400 for family coverage — then you can contribute up to $3,100 to an HSA for your individual policy or $6,250 for a family policy. Learn more about HSAs from the IRS website here.

Last-Minute Tax Tip 3: Can’t pay your taxes? File anyway.
Many people figure that if they don’t have the money to pay their taxes, there’s no point in bothering to file their return. But if you don’t file, the IRS will charge you much larger penalties than if you file but don’t pay.

Specifically, the penalty for not filing a return is 5% of the amount of tax due for every month that you’re late in filing. But if you file and don’t pay, the penalty is far smaller: just 0.5% of your outstanding tax bill for every month. In other words, if you file, you can save 90% on penalties even if you can’t pay. So …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

5 Stock Ideas for Young Investors Today

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By Kevin Chen, The Motley Fool

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So you’re a young investor who’s paid off your debt. You’ve set up your emergency fund, and you’re maxing out your retirement contributions through your 401(k) and IRA.

That’s great!

But now you want a bigger return. You’re looking to buy and hold, and you’re not sure where to start. While you might be tempted to find the next “hot” biotech company, there’s a more surefire way to secure an early, secure retirement.

Here are five stock ideas that could help you get tehre.

1. Invest in and learn from the best: Berkshire Hathaway
Investing in Berkshire Hathaway may not seem like “stock-picking,” but becoming a great investor takes time and effort. So in getting your feet wet, perhaps the best you can do is to learn from the best — Warren Buffett.

With a market cap of more than $250 billion, Berkshire Hathaway may scare young investors who think the company can’t grow as quickly as it did in the past. What’s more, Buffett is 82, and, understandably, he won’t be at the helm to beat the market forever.

However, much of the company’s value comes from the business it owns outright, such as See’s Candis. And the portfolio of big-brand enduring businesses — in conjunction with long-term investments in stalwarts such as Coca-Cola — that Buffett has compiled over the years has beaten the S&P 500 composite index over the long term. That may continue to for some time.  

2. Invest in and learn from what may become the best: Markel
Markel is similar to Berkshire Hathaway in that the company has an insurance business and uses much of the capital it generates to buy other, unrelated companies. But Markel is smaller. It has a market cap of just under $5 billion, which means it can move into smaller companies with potentially better returns than a behemoth like Berkshire can invest in.

Despite the 2008 downturn, Markel’s stock has returned around 130% over the past 10 years. For comparison, the S&P returned only 74%

Though the company trades at only a slight discount to Berkshire’s price-to-book multiple, Markel investors will also get Chief Investment Officer Thomas Gayner — and he’s only 51 years old. That means young investors could see continued, market-beating performance for decades to come.

3. Invest in what you know: Starbucks
Given America’s love of coffee, I can think of no better investment than the company that has become synonymous with the dark, caffeinated drink: Starbucks .

Riskier than the first two ideas, Starbucks is still probably less risky than the latest “it” company your best friend told you about — if only because you’re a coffee drinker and can differentiate the delicious from the mediocre. And that’s the point. You understand the product. The best investors invest in what they know, what they have a “circle of competence” in.

That being said, Starbucks isn’t cheap. Currently, the company trades at a P/E of more than 30. …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

TurboTax Offers Last Minute Tax Tips to Save Time and Money

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By Business Wirevia The Motley Fool

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TurboTax Offers Last Minute Tax Tips to Save Time and Money

SAN DIEGO–(BUSINESS WIRE)– With less than four weeks left until the April 15 tax deadline, Intuit TurboTax® (Nasdaq: INTU), America’s most popular tax preparation brand, combining the No. 1 rated, best-selling online tax service and access to credentialed tax experts, offers taxpayers some simple tax tips to save time and keep more of their hard-earned money.

Go online: Taxpayers can avoid long lines and the hassle of making an appointment by going online to prepare their tax return. TurboTax offers the convenience of filing anytime, anywhere and can save taxpayers an average of $100 or more over the leading tax store. In addition, only TurboTax lets taxpayers ask tax questions exclusively to CPAs, EAs and tax attorneys, while they file their taxes, free. With TurboTax, taxpayers can file up until the eleventh hour on April 15 and get IRS confirmation that their return has been accepted.

Don’t leave money on the table: In the rush to file, taxpayers shouldn’t miss out on opportunities to reduce their tax bill. Taxpayers have until April 15 to contribute to an IRA and get a deduction on their 2012 tax return. And don’t overlook charitable contributions made throughout the year on itemized returns. Donated clothing, household goods, and even miles driven for charity can add up to tax savings.

E-file with direct deposit: E-filing with direct deposit is easy, secure and the fastest way to get a refund. The IRS expects to issue nine out of ten refunds in less than 21 days.

Need more time? Don’t panic. Taxpayers can get an extra six months to file a tax extension, until Oct. 15, 2013. However, a tax extension is not an extension to pay. Taxpayers still need to send the IRS a payment for taxes owed, within 90 percent accuracy, to avoid late penalties. To file a federal tax extension for free, go to TurboTax.com.


About TurboTax

Intuit TurboTax is America’s most popular tax preparation brand, combining the No. 1 rated, best-selling online tax service and access to credentialed …read more
Source: FULL ARTICLE at DailyFinance

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Some Hefty Dividend Payers to Consider

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By Selena Maranjian, The Motley Fool

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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some big dividend payers to your portfolio, the Global X SuperDividend ETF could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Global X ETF‘s expense ratio — its annual fee — is 0.58%. It recently yielded close to 7%, a considerable payout.

This ETF is too young to have a meaningful track record to assess. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why dividends?
The power of dividend investing is often underappreciated. They can be powerful portfolio supporters, providing income even during market downturns. Consider parking them in an IRA, too, to postpone or avoid taxes on dividends.

More than a handful of dividend payers had strong performances over the past year. Diversified REIT Starwood Property Trust surged 44%, for example. It specializes in commercial mortgages and debt, and recently posted a surprisingly good earnings report. The company has been boosting its volume, originating and purchasing more than $1 billion in debt in its recent fourth quarter. It yields 6.2%.

Mortgage REIT Chimera Investment gained 25% and yields a whopping 11.3%. It has been profiting by taking on more risk than many of its brethren, but it generated a lot of concern in the investment community due to accounting irregularities and its not filing reports on time. My colleague John Maxfield has reviewed some just-released information and finds issues of “competence and not integrity,” which doesn’t exactly inspire confidence. Some have wondered whether Annaly Capital Management might fold Chimera into itself, as it already owns a chunk of the company.

Other companies didn’t do as well last year, but could see their fortunes change in the coming years. Pitney Bowes shed 6% — and yields 9.5%. While you may just think of it as a postage-meter business threatened by the growth of digital communications, the company actually has other less-threatened and higher-margin businesses, such as providing geocoding software to Facebook and others. It posted estimate-topping quarterly results in January and its single-digit P/E ratio is enticing, but it does carry some risks and considerable debt, and its hefty dividend may end up reduced. The stock is heavily shorted as well.

Penn West Petroleum sank 40%, and yields 9.4%. While that might make your heart beat fast, know that the company is paying out about three times more than its earning per share. Penn West, which drills for both oil and gas, has been …read more
Source: FULL ARTICLE at DailyFinance

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5 Ideas for What to Do With $5,000 Today

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By Dan Caplinger, The Motley Fool

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With the stock market near all-time highs, investing may seem easier than ever. But fear of buying at a high can paralyze you with fear. As the season of big tax refunds bestows some windfalls on many fortunate people, I’ve come up with five ideas on how you can put $5,000 to work today.

1. Pay down debt.
Paying off debt may not seem like investing, but often, it’s the best investment you can make. Consider: If you carry a balance on a credit card charging 18% interest, paying it down is like earning 18% on your money — tax-free. It’s impossible to find a better deal than that.

Paying down lower-rate debt doesn’t give you the same payoff, so you might be better off keeping the debt and investing instead. But the higher the interest rate on your loans, the smarter it is to get them paid off as soon as you can.

2. Open an IRA.
The best way to move forward with your finances is to take advantage of the tax benefits of retirement accounts. With $5,000, you’ll be able to max out an IRA for the 2012 tax year — which you can still do through April 15. If you’ve already contributed to an IRA for 2012, you can get most of the way to the higher $5,500 limit on 2013 IRAs.

With two types of IRAs to choose from, your individual situation will dictate whether it’s smarter to go with a Roth IRA or a traditional IRA. The plain-vanilla IRA gives you an up-front deduction for your contribution, which on $5,000 can save you anywhere from $500 to nearly $2,000 in taxes — a reduction that can apply to the tax return due this April if you treat your deposit as a 2012 contribution. By contrast, the Roth IRA won’t give you an up-front deduction, but unlike a traditional IRA, the Roth offers tax-free withdrawals of contributions and the income they generate when you reach retirement.

3. Look at low-cost commission-free ETFs.
Index-tracking ETFs are among the most efficient, lowest-cost options for investors. However, paying commissions to buy and sell ETFs can take a big bite out of a modest investment.

Thanks to deals with brokerage companies, though, you can invest in certain ETFs at no commission. For instance, Fidelity’s recent agreement with iShares opened up a host of new commission-free ETFs for Fidelity customers, including the income-rich iShares S&P U.S. Preferred Stock ETF , which offers the higher dividend yields that preferred shares give investors compared to their common-stock counterparts. Combined with existing offerings that include the dividend ETF iShares DJ Select Dividend and the general bond-index tracker iShares Core Total U.S. Bond Market , it’s easy to put together a diversified yet customized portfolio, with $5,000 spread across several different ETFs.

Many other brokerage companies offer similar commission-free ETF deals, so check with your broker or look at a …read more
Source: FULL ARTICLE at DailyFinance

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The Last-Minute Tax Move That Could Be Worth $100,000

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By Chuck Saletta

Filing taxes online

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Alamy

The 2012 tax filing deadline is less than a month away and if you haven’t filed yet, don’t worry — you’re not alone. H&R Block (HRB) estimates that on average, Americans are about two weeks behind last year’s filing pace, with about 60 million yet to file as of the beginning of March.

A big part of the delay is driven by the last-minute tax law changes and new reporting requirements that were so complex that even the IRS was forced to delay its typical starting date for accepting returns.

If you’ve got all the paperwork and are just dreading the effort or the bill you might have to pay, here’s something that might motivate you to get moving: There’s a last-minute tax move you can make for 2012 that could potentially be worth over $100,000.

The move that can be worth so much? It’s simple: Fund your IRA for 2012.

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And exactly how do we come up with the tasty $100,000 carrot to get you to act? Like this: The money you contribute to an IRA (traditional or Roth) grows tax deferred. And if the IRA you fund is a Roth IRA, that growth may even end up being completely tax free.

People under age 50 can contribute up to $5,000 for 2012. If that $5,000 contribution compounds at 8 percent annually for the next 40 years, your savvy tax move you make in the next month winds up being worth $108,623.

That’s not a bad haul for a one-time investment, but you’ve got to get moving.

While the IRS will automatically let you extend the deadline to file your 2012 taxes , the window slams shut on 2012 IRA contributions after April 15. In short, filing extensions do not apply to IRA contributions.

What If You Don’t?

Of course, there’s nothing forcing you to contribute to your IRA. If you can’t come up with the cash or otherwise choose to not contribute, that’s fine. But understand what you miss out on:

  • Tax-deferred compounding: You can still invest money outside of your IRA, but you’ll likely owe taxes on dividends and capital gains on the returns that money makes, even years before you need to spend it.
  • Creditor protection: Many states shield some or all of your IRA assets from creditors, protecting that money from being seized to satisfy most common debts. Money in an ordinary brokerage account does not enjoy that kind of protection.
  • College financial aid: Money held in an IRA is not counted as an asset for calculating a family’s expected financial contribution when calculating federal financial aid for college. Investments in ordinary brokerage accounts reduce the amount of aid a student can receive, whether those investments are held by the student or that student’s parents.
  • Penalty enforced retirement focus: With few exceptions, tapping your …read more
    Source: FULL ARTICLE at DailyFinance
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8 Tax Mistakes You Can't Afford to Make

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By Dan Caplinger, The Motley Fool

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As the April 15 tax-filing deadline approaches, you’re running out of time to get your taxes done. But smart tax planning doesn’t start in April. To truly get on top of your taxes, you need to always be thinking ahead. As you prepare your 2012 return, don’t forget about changes you can do right now to make your 2013 tax situation a lot better.

The best way to make taxes a lot less painful is to avoid making unnecessary mistakes. Below, we’ll look at eight things taxpayers commonly do wrong that can cost them thousands of dollars in extra taxes.

Recommendation: Pay less in taxes by using the many special tax-favored accounts that the IRS allows.

  • IRAs, 401(k) plans, and other employer-sponsored retirement accounts.
  • 529 plans and Coverdell Education Savings Accounts, which offer tax-free growth when proceeds are used for approved expenses.
  • Health savings accounts and flexible spending accounts provide tax benefits for your medical spending.

Bottom line: Not using these accounts is like handing over free money to Uncle Sam.

Recommendation: When possible, opt for longer holding periods, since the capital gains rate you pay depends on how long you held the investment.

  • Hold an investment less than a year, and you’ll pay your ordinary rate of as much as 39.6% this year.
  • Hold it more than a year, and the maximum is 20%, with many taxpayers paying lower rates of 15% or even 0%.

Bottom line: Long-term investing can be rewarding.

Recommendation: You must have enough tax withheld from your paycheck to cover most of your tax liability when you file your return.

  • If you don’t withhold enough, you’ll pay penalties and interest on what you should have paid in estimated taxes.

Bottom line: It’s too late to fix for the 2012 tax year, but be sure to look up Form 1040-ES to make sure you’re in good shape this year.

Recommendation: If you have tax-favored accounts, make sure you use them wisely.

  • High-income bonds, as well as real estate investment trusts Annaly Capital and American Capital Agency produce income that’s typically taxed at high ordinary-income rates, and so they often do best in IRAs rather than taxable accounts.
  • By contrast, a low- or no-dividend stock that you buy and hold for decades may actually cost you more in taxes in an IRA than a taxable account.

Bottom line: Position your investments to make the most of available tax savings.

Recommendation: Be smart about harvesting tax losses, timing deductible expenses, or deferring taxable income.

  • Late last year, many taxpayers did their best to pull income into 2012 and leave deductions for 2013 in order to capture lower 2012 tax rates and reduce their 2013 tax liability.

Bottom line: With taxes, timing is key.

Recommendation: Be sure to consider special tax rules for certain investments

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It's Not Too Late to Start Saving for Retirement

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By CNNMoney

retirement savings by age worker

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Q. I’m in my late 40s, single, and have no idea of how to prepare for retirement. My employer offers health insurance, but no retirement plan. I don’t want to have to rely just on Social Security. Please help. — Maria, Ohio

A. The fact that you’re getting a late start makes retirement planning more of a challenge. The lack of a 401(k) or similar plan at your job doesn’t help either.

But let’s look on the bright side. You know that you’ve got to start doing something and you seem ready to begin. You also have a good 20 or so years to build a nest egg. So if you get started now — and I mean pronto — you can still dramatically improve your retirement prospects and avoid ending up dependent on Social Security alone after your retire.

Your first move: Open an IRA at a mutual fund company and fund it for the 2012 tax year. That’s right, if you contribute to an IRA before the tax filing deadline of April 15th, you can stipulate that the money count toward the 2012 tax year. The maximum contribution for 2012 is $5,000. (People 50 and older can make an additional $1,000 catch-up contribution). If you can’t sock away the max, do as much as you can.

Unless you think you’ll face a higher tax rate in retirement than you do now — doubtful in your case given that you’re getting a late start with saving — you’re probably better off doing a traditional IRA and taking the tax deduction rather than doing a Roth IRA and foregoing the deduction in return for tax-free distributions down the road.

But don’t get hung up on this issue. What’s most important is that you fund some type of IRA account before April 15th. Besides, you always have the option of converting all or a portion of a traditional IRA to a Roth IRA later on.

Similarly, don’t obsess about how to invest your IRA funds. If you don’t already have a plan for how to build a diversified portfolio, I suggest you just invest in a target-date retirement fund offered by one of the fund companies on our MONEY 70 list of recommended funds. That will give you a fully diversified portfolio of stocks and bonds that will become more conservative as you age.

Once you’ve funded your IRA for 2012, start contributing to your IRA for the 2013 tax year as soon as possible. The maximum for 2013 is $5,500 (plus $1,000 for anyone 50 and older). Getting an early start on your 2013 contribution will not only give your money more time to grow. It will also reduce the chance that you’ll forget to contribute altogether or, if you put it off until the last minute, that you may not have the necessary dough.

Continue feeding your IRA annually and you can end up with …read more
Source: FULL ARTICLE at DailyFinance

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New Study Finds Women Likely to End Up Poor Than Men

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By Michele Lerner

Women make less money than men and have poorer job choices

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When it comes to saving and spending, the news is not good for women.

SaveUp.com, an online financial rewards program for saving and paying down debt, recently analyzed a representative sample of more than 20,000 of their users’ savings and debt balances. The results reveal a sobering reality: Women are more likely than men to be poor during their lifetimes.

If you’re surprised, you wouldn’t be alone — the women who took the survey are right there with you. When asked which gender they think is better at saving, more than 73 percent of women said females were.

The SaveUp U.S. Consumer Savings and Debt Report, released on Tuesday, finds that the average man has account balances that add up to nearly twice the size of the amount of money women have saved:

Men Women
Avg. 401k $50,632 $39,320
Avg. IRA $8,456 $4,916
Avg. Taxable Investment $72,390 $55,668
Avg. Certificate of Deposit $30,374 $7,459
Avg. Money Market Investment $11,157 $13,225

Source: SaveUp.com

Not only are men saving more in general, but they are saving more aggressively for retirement-related goals.

Men in the survey have 28.8 percent more than women in their 401(k)s and 72 percent more in their IRAs. The only type of account in which women average a higher balance than men is in a money market account — a conservative, low-growth investment.

What’s Behind the Savings Gap?

The simple answer to the question is “income disparity.” According to the American Council on Education, depending on their race and where they live, women make between $0.57 and $0.77 for every dollar men make. This not only makes it harder for women to save than men, but their retirement contributions through their employer will be substantially lower.

Another thing that may be holding women back is student loan debt. Women with student loans in the SaveUp study carried somewhat more debt from higher education than men who had student loans ($41,405 versus $39,104 for men).

Even in planning for the future, women shortchange their goals. When SaveUp asked women to put a dollar figure on the amount they were trying to save for retirement, the median was $200,000 compared to the men’s median goal of $400,000.

Closing the Gap

One area of money management where women are doing better is in managing what SaveUp calls “non-asset building debt,” which includes credit card debt, car loans and lines of credit.

According to the study, the average debt-bearing woman owes $34,645 versus $42,842 owed by the average debt-bearing man. …read more
Source: FULL ARTICLE at DailyFinance