Roth IRA for College Savings: A Great College Investment Vehicle

Roth IRA for College Savings: A Great College Investment Vehicle

If you qualify, earning less than $95,000 for a single filer or less than $150,000 if filing jointly, you likely know the Roth IRA is a great way to save money for retirement. You receive no tax deductions when you fund your Roth account, but your money earns interest tax-free until you retire. Then, if you have owned the account for at least five years and you have reached age 59-1/2, your earnings are non-taxable when you make withdrawals from your savings.

You may not realize that some key features of the Roth IRA and the particulars of college financial aid awards also make the Roth IRA an attractive way to save for your children’s higher education expenses.

You can withdraw Roth contributions at any time

Since you paid federal tax on your contributions at the time you earned them, you can leave your money in your Roth account, earning interest tax-free. Withdraw your contributions when junior enrolls at the university with no tax or penalty and let the earnings rest until you retire.

If you start when your child is still in diapers, you can accrue a tidy sum. The most a couple can invest in a Roth is $8,000 ($4,000 for each spouse). Over 18 years, that adds up to $144,000. Even saving half of that amount, which is a more likely sum for a family that meets the Roth IRA income limits, results in a hefty $72,000.

Roth earnings can be withdrawn without penalty if used for higher ed

Avoid the 10 percent penalty on early withdrawal of earnings from a Roth IRA by using the money for higher education expenses. Remember: withdrawal of contributions are always tax free, but early withdrawal of earnings are subject to federal taxes. Paying taxes on the earnings seems a fair trade off for all those years of tax-free accrual.

Roth IRA avoids the financial aid radar

The formula for determining a student’s and parents’ ability to pay for college usually doesn’t take retirement savings into account. This is where the Roth IRA out performs other college savings plans like the Coverdell Education Savings Account or state 529 options.

Financial aid concerns also reveal the flaw in using the Roth IRA for college savings–distributions from the IRA can count as unearned income and throw a monkey wrench in the following year’s financial aid assessment. The benefits and drawbacks could balance out in the end, however.

Lower income savers get IRS tax credit for Roth contributions

Joint filers with income less than $50,000 receive a tax credit for contributing to any retirement fund. The lower the income, the greater the credit. But even the smallest credit, 10 percent of your contribution that year, is a good return on your investment.

Save for college and retirement in the same account

The Roth contribution limits are likely to continue to increase in future years. Parking both retirement and college savings in a Roth IRA is a one-stop solution for these important financial goals.

Should You Lease or Buy Your Next Car?

Many people are faced with this question when the time comes to get a new car. By some estimates, leasing vehicles has increased 30% in the past 10 years. Leasing is becoming more popular and can be confusing. Both buying and leasing have their advantages and disadvantages and one should be aware of what those are before making a decision. Leasing a car is appealing to many because you get to drive a new car for lower monthly payments than if you bought (or made payments) on the same car. This is because you are only paying for the three or four years (or however long you lease for) worth of depreciation versus paying for the whole car. For this reason, many people choose to lease a more expensive car than they could afford to buy. Another lure of a lease is that in three or four years you are free to turn the car back in, lease another new car, and never get tired of the car you are driving. Leasing may also be advantageous in some instances due to the fact that the IRS allows for more generous write-offs for lease payments than for loan payments on more expensive cars. Also, you may be able to find a great deal on the interest rate for your lease if a dealer is trying to move certain vehicles. Maybe the money you save in that case each month could be used to pay off debt with a higher interest rate. However, the disadvantage of a lease is that at the end of your lease you have no ownership in the car you have been driving for several years. You can purchase the car at the end of your lease if you have the chunk of money needed to do so (not likely if you chose to lease in the first place). My husband and I leased a vehicle a few years back. When the lease was up we were struck with the fact that we had payed all that money for all those months and were just going to hand the vehicle back to the dealer. Instead, we took out a loan to purchase the vehicle, sold the vehicle for more than the amount of the loan, paid off the loan, and had some money “left over”. A lot of work. Another thing to be aware of is that there are penalties you will pay if you fail to meet the conditions of your lease. For example, many leases have mileage limitations on them and if you exceed those miles (usually somewhere around 15,000 miles/year), you will pay for the extra miles you drove. That could add up if you spend a lot of time on the road. Excessive wear and tear on your leased car can also end up costing you extra money.

Education IRAs

Education IRAs

Last month, I briefly explained the difference between the various Individual Retirement Accounts. This time, I have another IRA to tell you about. It is the Education IRA. Education IRAs, for those under age 18, are quite different from other IRAs. For one thing, $500 is the total maximum that can be contributed to an Education IRA. This is in addition to any other IRAs you may have (recall that $2000 is the total that can be contributed to any other IRA or combination of IRAs). A person can also contribute to an Education IRA even if he/she does not have earned income. However, it should be noted that the $500 maximum contribution can be made only if the contributior’s AGI (adjusted gross income) is less than $95,000 for single people or $150,000 for joint filers. Furthermore, the ability to contribute to an Education IRA is completely lost if a single person’s AGI is above $110,000, or $160,000 for joint filers. The contribution is phased out in between those ranges.

As long as the Education IRA’s beneficiary’s higher education expenses (books, supplies, equipment, fees and tuition, and part of room and board if enrolled half time or more) are equal to or more than the Education IRA distribution for the current year, the distributions are tax free. In most cases,a 10% tax is tacked on if the distributions are greater than the qualified expenses. In addition, the beneficiary has 30 days after turning age 30 to use the Education IRA funds.

Obviously, there are other requirements and details which cannot fully be explained here. If you think an Education IRA sounds like something you’d like to invest in, your own research will prove invaluable. Two good places to start are at Kiplinger (http://www.kiplinger.com) and the Motley Fool (http://www.fool.com). Good luck!

Save Some Money at the Grocery Store

Save Some Money at the Grocery Store

When my family began to budget and be more careful with our money after I stopped working, one of the areas we had to hit hard was our weekly grocery bill. It took a little planning and several efforts, but we finally got to the point where we could meet our budget and still have enough food to eat for the week. There are lots of ways to save money at the grocery store, and here are some that worked for us. Each week, I make a menu that includes what we’ll have for dinner each night the next week. This simple step becomes the basis for our grocery list and ensures that we will have exactly what we need and not a bunch of food in the cupboards that I can’t figure out how to put together into a meal (cooking isn’t my strong point). Denise Schofield, in her book Confessions of an Organized Homemaker, goes a step further. She includes “menu selection sheets” in her planning notebook (ie. a Day-Timer planner). These sheets list all of the main dishes she routinely serves for dinner as well as their ingredients. This makes creating a menu, and a grocery list to go along with it, a little easier. I try to include one or two meatless meals and some “cheapie” meals in each week’s menu to help keep us under budget.

Another thing we do before heading out to the store is to check out the food ads for several grocery stores near us. We buy the bulk of our food at a grocery outlet type store (you know, the kind where you bag your own groceries) and then hit one or two other stores for the items on our list that they are having a good sale on. If a store is having a good sale on something not on my list, I may scratch a planned menu item and substitute it with a meal made with the sale item, or I may just purchase the sale item and save it for later use.

Price lists are another good method for finding the best prices at the grocery stores you frequent. With this method, you record the best price you have paid for an item, using grocery store receipts and ads. You can have a separate sheet in your price book for each main category of food you purchase. Take your price book with you to the store and see if you are getting a good deal on an item.

Budgeting With Quicken

Budgeting With Quicken

On the first day of the year, I sat down at my computer and began to put our family budget on the computer. I promised myself I would do that one day and when our new computer came with the necessary software on it, I could find no more excuses. I was a little intimidated but I soon got the hang of it and have come to really like keeping my budget on the computer. If you are considering using budgeting software, read on and maybe your decision will be made a bit easier. As I mentioned, my computer came with the Quicken software. It also came with Microsoft Money. I knew nothing about either one of these programs so I took some time to explore them both. After playing in each program for a while, I decided Quicken seemd a little more like what I was looking for and I liked the way it was set up. The one drawback I found was not having an instruction manual since the software came with the computer. To help with this problem, I began copying the Help Menus as I used them. This way, I could put all of them into a Quicken file and easily refer to them whenever necessary. I also found some articles on using Quicken at www.stretcher.com. You can find all of the articles if you go to the author index and look up Karen Jones. These articles gave me some great ideas for additonal ways to use the Quicken software as well as some tips that I didn’t find in the Help Menus.

Aside from being able to put numbers into the computer and have them “magically” calculated for me, I also like being able to show a transfer of money between my accounts with the click of a button. I am still figuring out all of the features available for tracking investments, but I can tell you that I am looking forward to using the internet and Quicken to instantly update my investments. However, the best part about using budgeting software is being able to create reports that show me where my money has gone and what my monthly/yearly budget looks like.

If you decide to keep your budget on your computer, I must pass on this very important advice. Back-up all of your work! I failed to do this and then had to start all over on our accounts and budget after the hard drive blew up in our computer. Although it was a lesson I learned the hard way, I’m grateful I learned it in February and not in November.

Investing Small Amounts of Money

Most of the people I know, myself included, don’t have thousands of extra dollars hanging around just waiting to be invested. Much of what I have read about investing is aimed at people who have a substantial amount of money to invest. However, limited investing funds should not prevent you from investing. I have come across some great opportunities for investing smaller amounts of money. One valuable resource I have found that is good for both big and small investors is the American Association of Individual Investors. This associaton can help you become informed on topics of your choice and provide you with the help you may need to get started investing. Membership includes numerous benefits, including the AAII Journal, stock reports, and a year-end tax strategy guide. You can find out more about this terrific resource through their website at www.aaii.com.

A great way to purchase stocks with small amounts of money is through Dividend Reinvestment Plans, or DRIPs. You enroll in a plan by first purchasing a single stock in the company you have chosen (many, many companies offer these plans) and then completing the appropriate forms for enrollment. Once you are enrolled, you can make monthly fractional stock purchases with as little as $10, although this amount varies by company. Your dividends, as the name of the plan suggests, will be automatically reinvested for you. After time, your small monthly purchases and your reinvested dividends can add up to a substantial investment. One way to go about becoming enrolled in a plan such as this is through the service provided by Temper of the Times Communications Inc. For a small fee, they will purchase the initial stock for the company you have chosen and complete the paperwork on your behalf to get you into the company’s DRIP. I have used their service and was pleased with the results. It takes 2 or 3 months for the entire process to be completed. You can find out more about this service at the Temper of the Times website, www.moneypaper.com.

Money market funds are another option for investing smaller amounts of money, especially if you are interested in building up your emergency savings fund. A money market fund is a more liquid investment than stocks and earns a better interest rate than the savings account your bank probably offers. Bankrate offers a list of money market funds and compares their different features. You can find them at www.bankrate.com

Teaching Young Children to Manage Money

Teaching Young Children to Manage Money

It’s never too early to begin teaching your children how to manage money responsibly. After all, it is a skill some still struggle to master even as adults. There are some fun things you can do with your preschool-age children to help them become money smart.

One of the obvious things you can do is to give your child an allowance. There are a lot of different opinions about when and how to do this. I think a child is ready for an allowance as soon as she shows an interest in money and how it works. For this reason, my daughter started getting her allowance at about age 3 1/2. I give her one dollar for each year of her life, so she began by getting $3 per week. When she gets her allowance, one-third of it goes into a spending jar (which can be spent immediately), one-third of it goes into a short-term savings jar (to be saved for larger purchases), and one-third of it goes into a long-term savings jar (to be put in the bank). This has worked well and my daughter has been able to see her money add up and plan some of her own purchases. I recently heard this system explained with a giving jar (to be given to charity or other gifts) instead of a long-term savings jar.

Another way to help your preschooler learn about money is to let her earn some extra money, perhaps even above and beyond any allowance. Even young children can do this on occassion by performing extra chores or helping to pet sit for a neighbor who is gone, for example. You could even devise a list of extra chores and what each will pay. This money can then be added to your child’s savings jar.

When your child has some money in her possession, the next logical step is to set up a simple budget/savings plan. If you use the savings jar, you can help your child make a list of the things she wants to purchase with her money. Then help her prioritize this list so she can see what she is saving for. You can even cut out a picture of the item and tape it to the savings jar as a visual reminder. As your child sees more things she wants, help her add them to her wish list and reprioritize the list. With young children it is probably a good idea to aim for purchases that can be made after saving for only 3 to 6 weeks, so as not to lose their interest.

Banking and Finance Guide to Trinidad & Tobago: Banking, Business Information on Trinidad and Tobago

Banking and Finance Guide to Trinidad & Tobago: Banking, Business Information on Trinidad and Tobago

Whether it is business travel to Trinidad or a Tobago vacation Trinidad and Tobago has various and numerous financial centers and services to accommodate every traveler. The Trinidad economy is the most durable in the Caribbean driven by the island’s continually blossoming industrial and energy sector and Tobago’s steady tourism industry. From shopping to business startups Trinidad economy makes it simple and possible.

Banking and Finance

Trinidad and Tobago has four banking service centers, which are First Citizens Bank, Republic Bank, Royal Bank of Trinidad & Tobago and Scotiabank. Divisions of all four service centers are conveniently located in the heart of the city of Port-of-Spain while others can be found in other towns and cities on the island. These centers are equipped with fast service ATMs within banks and debit and credit card machines at most stores, restaurants and any business where monetary transactions are conducted.

While the US dollar is the popular currency on the island and can be used at some hotels, restaurants and even sidewalk vendors in place of the local TT$ all financial banking institution do trade other currencies. The other currencies traded are the Canadian dollar, Pound Sterling, Barbados Dollar, Eastern Caribbean Dollar, German Mark, and Euro Dollar. In addition to US currency travelers cheques and international credit cards are accepted nationwide.

Currency exchange is also available at other financial institutions such as Unit Trust Corporation, Fx trader companies and Central Bank of Trinidad and Tobago. Unlike some Latin American/Caribbean countries there is no black market exchange on foreign dollars. US currency can be traded in stores and restaurants at a rate of TT$6 to US$1. The exchange in banks and other financial institutions usually floats at TT$6.18 to US$1. It is always more profitable to exchange currency in the banks. There are also US$ ABM at the Piarco airport and other limited locations that allows the withdrawal of US currency

Finance and Business Investment

Trinidad and Tobago are members of a number of free trade agreements that allows for ease of exporting and importing for businesses. As a result of this no exchange controls and total foreign ownership of companies Trinidad and Tobago has the largest direct foreign investment per capita in the Caribbean. Some of the free trade agreements are Cotonou, The Caribbean Basin Initiative and CARIBCAN.

Tobago’s incentive is on the real estate front whereby non-citizens are allowed to own a maximum of five acres of land for commercial use. Both Trinidad and Tobago are home to foreign hotel chains such as The Hilton Hotel, The Hyatt Regency, The Mariott Hotel and Holiday Inn. Tobago’s lush unaffected landscape and Trinidad aggressive business center make the twin island the perfect business investment opportunity.

Hidden History: Could Massive Banking Failure Be Planned?

Hidden History: Could Massive Banking Failure Be Planned?

In 1982 G. Edward Griffin interviewed an ailing Norman Dodd, who among his many qualifications, had served as a banking expert during the Great Depression, and would later be hired to investigate US educational trusts. A man of distinguished education, his testimony unlocks many secrets governing the unseen dealings of certain influential factions within the US market.

Mr. Dodd gave an impressive account of the hidden history involved in the American banking system that proved to be shocking. Once again we are informed by credible sources that things are not as they seem, and history might prove to be quite different had the public not been deceived.

Thanks to the whistle blowers, who inform us and investigative journalists such as Mr. Griffin, we are privileged to get an insight into the true events that influenced history. There are many threats ongoing to the Republic of the United States of America. Thomas Jefferson warned us long ago to remain ever vigilant.

In 1929 contrary to assurances made by the Federal Reserve that the American monetary system would be more stabile, a financial disaster began. As the earth shaking implications of bank failures and investor’s fortunes evaporating thanks to massive stock value collapses, Norman Dodd served as a junior banking officer.

Curiously, Dodd found himself confronted by important figures in his banking organization, who asked him for his opinion about that had just happened. Mr. Dodd, although intimidated by his lack of experience to make such a comment on the situation, finally replied that there was something that his superiors did not know about banking, and that they better find out.

A Deadly Flaw In The System ?

After his candid comment, Dodd was asked to undertake a research expedition to find out just what it was that indeed, his employers did not know about banking. Dodd would have to take a leave of his present duties in order to pursue an investigation that would take 2 ½ years for him to conclude.

At a meeting with his superiors at the New York bank where he worked, he later presented his findings as to just what events had led to the financial chaos of the time. Mr. Dodd time and again had been confronted by the reality of unsound banking practices and the fallacy of fractional banking that used extended credit and debt as a tool to of claiming equity when, in fact, there was no liquidity( cash assets) in the vaults at all.

A Telling Admission

Norman was informed by his superiors at Morgan Bank, the most prominent men in the industry, that the American banking system would never operate on sound principles again. The United States in the aftermath of World War I had been encumbered in institutionalized conflicts of interest that could never be resolved. It took a year for Dodd to wrap his mind around the startling revelations he had been exposed to. It was then that he decided to resign.

Unable To Rationalize A Mystery

Resignation did not seem to be in the cards for Norman Dodd at that moment, as the President of the Bank, Mr. Cochran informed him that the directors of Morgan Bank had been so impressed with Norman Dodd’s report that they could not forget about it. Therefore, Dodd was offered an opportunity to reorganize the banking operation. Norman was anxious to jump at the chance at age 33, he considered it to be a prime prospect.

However, after being assigned to the task for the next 6 weeks, that nothing changed, and every time he enquired further, Dodd was placated and told to go to play tennis and golf on his time off, and look forward to receiving a better salary as a vice president in the near future as well as a generous pension as time wore on.

For a year he sat with his feet on his desk (figuratively speaking), and then decided he could not accept it. Norman Dodd had other ideas. He could not continue to passively occupy his position when he could not agree with the way the country was being run.

Blacklisted

Once again he resigned, and this time for good. However, seeking employment in another banking institution proved futile. Norman Dodd found that he had been black listed and could not find another job in the entire country. For the first time since his graduation from Yale University, He found himself out of a job as a result of sticking to his principles.

The Truth May Set You Free But It May Also Complicate Your Life

It seems that sometimes an individual who makes a conscientious effort to remain a patriot to the righteous cause of his country finds adversity instead of acceptance. Norman Dodd would be relegated to finding work among various investment institutions as a consultant and fund manager as time went on. Inevitably his path would cross that of other like minded individuals who disapproved of the unseen changes being forced upon the US.

Once again though, Mr. Dodd would be presented with a chance to exercise his influence in exposing, yet another missing puzzle in the fog of suppressed history.

We will discuss that next time. Has this story been told before? Yes. And it needs to be told again and again until all Americans young and old know the truth!