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This article gives several good tips to help you save money and plan for an enjoyable retirement. Feel free to leave your comments and thoughts on the subject.

Financial Tips for a Better Future

Taken from the Article Directory Online

In this era of credit crunch, people are going through tough time of their lives, as it is driving people out of their jobs, and causing the businesses to shutdown. People are now using their saved up money, which is consuming their savings, which they have accumulated over the years.

Saving money should be your lifestyle, but not everyone is good at it. There are ways to stretch your money and to save them in the bank accounts. First of all, we have to stop the extravagant spending and should start using our money wisely. If we start from today, we will be able to save a lot, and ultimately it will pay us back in huge dividends. Let us have a look at certain tips which can help us getting grip on our bank balance.

For a start, one must have a planned budget, which must be followed, people do not have such habits, and in this time of credit crunch, it is important to do so. When one sticks to plans, which will eventually lead to better debts payments, and savings for holidays, educational purposes, and for emergencies, and above all for carefree life after retirement.

If you keep track of your spending you would know where your money is going, and when you know where your money goes, you know where you are spending. If you limit the purchase of luxury items, which includes your usual morning coffee, you would definitely save a lot of money by the end of every month. By knowing your spending, you would avoid late or overdraft fees and interest payments on your account. Following this method with your budget will be a dynamic duo!

You can get membership of local area library to have access to movies, and DVDs at much lesser cost as compared to the video rental stores, which will help you a lot in saving. Moreover, you can also borrow books of your interest instead of buying them from bookstores.

Getting rid of the TV cable connection can be very useful in different ways. First, it will be a way to save. Secondly, people think that TV cable is one of the major ways to get cheap entertainment, and to remain informed about the happenings of the outside world. In fact, without cable TV, you can give more time to your family, and can spend holidays with them. Moreover, you can do some constructive household project to keep yourself busy . Thirdly, when there is no cable TV, one will have free mind with respect to its bill payment.

The struggling class of the society is usually the one who cannot pay their bills on time. Late payment of the bill will lead to credit payments, which will keep increasing your debt, this may lead to worsen financial standing then before. Thus, one should pay the bills on time to stay out of trouble.

By limiting the spending on luxury, you would have more money in the pocket at the end of each month. Moderation is what is required in the first place. Do not go for brand names; purchase what looks good on you. Do not waste your money on cigarettes and tobacco stuff. This will not do well but will only damage your health.

A Roth IRA (individual retirement account) is one of the most exiting retirement planning opportunities currently available. Tax-free growth is a Roth IRA’s most important benefit. Roth IRA considerations include:

Who Should Open a Roth IRA

A Roth IRA is particularly attractive to

• those not eligible to receive a 401(k) employer matching contribution
• those able to save more for retirement than the amount that their employer matches

With opportunities for tax-advantaged growth limited, a Roth IRA is a great way to become financially independent by retirement.

How and Where to Open a Roth IRA

You can open a Roth IRA at nearly any bank or brokerage house, either in-person or online. Opening a Roth IRA is a very simple process, typically with help readily available. Often, there are just a few forms for you to complete. Bring your Social Security number with you as well as the Social Security numbers and addresses of any potential beneficiaries of your account.

Earned Income and a Roth IRA

The amount you are permitted to contribute to a Roth IRA is limited to your earned income. Earned income includes wages and self-employment earnings, but does not include interest or dividends. If you are married, your combined contribution limit is restricted to the total of your combined earned income.

Contribution Limits for Roth IRAs

For the year 2008, the most you can contribute to a Roth IRA is $5,000. If you are 50 or over, you may contribute a total of $6,000. If you have earned income, you can contribute to both a traditional IRA and a Roth IRA, but the combination of your contributions cannot exceed $5,000 ($6,000 if 50 or over).

Roth IRA Contribution Deadline

Each Roth IRA contribution relates to a specific calendar year. You can make a contribution from January 1 of that year until the filing deadline of your tax return.

No Tax Deduction for Roth IRA Contributions

No tax deduction is available for a Roth IRA contribution. (Many individuals receive a tax deduction for their traditional IRA contributions, however.)

Earn Tax-Free Growth from a Roth IRA

The money you contribute to your Roth IRA grows tax-free. You do not have to pay any taxes on the earnings in the account. In fact, you do not even report the income to the IRS. Even in retirement, when you ideally first access your Roth IRA money, you do not owe taxes on the distribution. If you take your Roth IRA money prior to retirement, however, taxes may be due.

Income Limitations and Roth IRAs

Eligibility to contribute to a Roth IRA is restricted by your filing status and modified adjusted gross income. The Roth IRA income limitations change each year.

No Required Distributions from Roth IRAs

Unlike 401(k) plans and traditional IRAs, there is no age at which you must begin to distribute money from your Roth IRA. As a result, Roth IRAs are an excellent tool to pass along wealth to your children or grandchildren.

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Annuities are a product we rarely recommend to our clients at Paragon Wealth Management, even though they are sold extensively by financial salespeople, most of whom do not have fiduciary responsibility.

In our experience, annuities typically only meet the needs of a very small segment of the investing public.

Below are some excerpts from an article on CNNMoney.com. This is an excellent article about why you should not lock yourself into an annuity.

Retirement planning for the laid off

By Walter Updegrave, senior editor
January 7, 2010

(Money Magazine) — Question: I’m 57 and I think there’s a good chance I’ll be laid off this year. If that happens, I’ll have to move my 401(k) balance to an IRA. On the recommendation of a finance professional, many of my former co-workers have transferred their 401(k) savings into annuities. Do you think this is the way to go? – E.Z., Deer Park, N.Y.

Answer: There are lots of “finance professionals” who see annuities as the answer to almost every retirement planning situation. So I’m not surprised that many of your former colleagues ended up owning annuities.

I can’t discern other people’s motivations. So I can’t say whether the advisers who are so quick to flog annuities genuinely believe they’re the best choice or whether annuities’ generous sales commissions are a factor or whether something else makes them so eager to recommend annuities.

But I can tell you that you shouldn’t be too quick to follow your former co-workers’ example.

For starters, although rolling your savings out of your ex-employer’s 401(k) into an IRA in the wake of a layoff or job switch is often the right move, it’s not the only way to go. There are other options you may want to consider depending on your particular circumstances.

And even if you should decide that rolling your 401(k) into an IRA is the right thing to do, it doesn’t necessarily follow that an annuity is the appropriate investment for your IRA stash.

…Immediate annuities aren’t the type that are usually being touted to people who have 401(k) bucks to roll over. More likely, your former co-workers have been steered into variable annuities, and more specifically into variable annuities with a type of rider known as a guaranteed lifetime withdrawal benefit.

On the surface, such annuities look very appealing. They typically guarantee that you can withdraw a certain percentage, usually 4% or more, of your initial account value as long as you live. Some even offer a guaranteed rate of return before you start drawing income. And since your money remains invested in the annuity’s subaccounts, which operate much like mutual funds, there’s a chance your account value, and future income, might grow. Perhaps the biggest allure, though, is that your income won’t be disrupted even if the financial markets get pummeled like they did in 2008 and early 2009.

Not surprisingly, there are drawbacks. The fees can be onerous, which reduces the chances of future hikes in guaranteed income. And these annuities can get pretty complicated, making it easy for investors to misunderstand exactly what is and what isn’t being guaranteed.

My advice: Before you stick your 401(k) dough into an annuity, consider speaking with an adviser whose livelihood doesn’t depend mostly on annuity commissions. That might be a fee-only financial planner or an adviser willing to work with you on an hourly or project basis.

The conversation shouldn’t just be about the pros and cons of annuities. Rather, you and the planner should focus on the best way to handle your 401(k) money given when you want to start drawing retirement income from it and how much you’ll need. In short, you and the adviser should be thinking strategies more than just specific products.

Any number of strategies can work, including ones that involve an annuity or maybe even more than one type of annuity. But you may not hear about these alternatives if you’re dealing with someone dead set on putting you into an annuity.

One final note: There is absolutely no reason to hurry this process. You’re not going to miss out on some great opportunity by methodically sorting through your options. So if and when the time arrives that you must figure out what to do with the money in your 401(k), bide your time. It’s taken you an entire career to build your nest egg. The last thing you want to do is undermine all your effort with a hasty decision.

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