Investing Tips
When it comes to Investing, we've been there, done that, now serving 142 tips in 21 categories ranging from About Exchange Traded Funds to Your Portfolio.
Ask For a Direct Rollover
When you leave your job, you can either leave the money you've contributed to the 401(k) with the company, or you can ask to have it transferred to an IRA with an IRA rollover. If you choose to transfer it, be sure to specify that you want a "direct IRA rollover." With a direct rollover, you won't be charged early withdrawal fees. Make sure you get a written explanation of your IRA rollover for tax purposes. Even though your rollover doesn't count as income, you must report it on your taxes.
How to Invest IRA Money
When you open an individual retirement account (IRA), you will have to decide how to invest the money. Unlike with an employer sponsored retirement plan, you'll have unlimited choices as to where to put your money. Don't be overwhelmed. Most people are best off putting their IRA investments in an index fund that tracks the S&P 500. When you invest in S&P 500 index funds, you'll be guaranteed to get an average market return, which is much higher than a return you can get with bonds or even most other mutual funds.
IRA Contribution Limits
It is currently possible to contribute up to $4000 per year in an IRA account. Those over the age of 50 are allowed to make additional contributions. These limits are constantly being changed, so look forward to saving even more in the near future. Check www.irs.gov for IRA information that can tell you specifically about changing contribution limits. Save as much as you can in your IRA account to avoid paying taxes and to fund your retirement.
Roth IRA vs. IRA
Tax info IRA: Contributions to a traditional IRA are tax deductible as long as you meet certain income requirements. Just like with a 401(k) you won't be taxed on the money in your IRA until you take it out of the account. Contributions to a Roth IRA, on the other hand, are made with post-tax dollars and grow tax free. A Roth IRA benefits people who are in a higher tax bracket when they retire. It's impossible to predict this with certainty, but most people should fall into this category. When in doubt, choose the Roth IRA.
IRA Contributions for Last Year
Procrastinators take heart! You can make the previous year's contribution to an individual retirement account (IRA) up until tax day on the current year. Paying your IRA contribution "late" doesn't affect your contribution limit for the current year.
Avoid 12b-1 Mutual Fund Fees
A 12b-1 distribution fee with a mutual fund is the fee you contribute to the mutual fund's advertising campaign. Not all mutual funds charge 12b-1 fees. Mutual funds that do charge 12b-1 fees don't perform any better than those that don't, so look for a fund that doesn't charge this fee. You can find this important bit of mutual fund information in the mutual fund prospectus.
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| Patricia Walters-Fischer |
