Spousal IRAs complicated, but worth it

NEW YORK (1/29/08)--Calling all marrieds, filing jointly: More generous federal guidelines make it easier than you think to save for retirement (SmartMoney.com Jan. 9).

Be aware of income limits, including a 2008 increase, which are similar to Roth IRA limits (MarketWatch.com Jan. 16). And it doesn't matter whether one or both spouses work--chances are pretty good you can find a scenario below that applies to you so you can bump up savings with deductible individual retirement account (IRA) contributions:

One spouse doesn't work, and neither spouse participates in a qualified retirement plan. Both spouses can make deductible contributions of up to $5,000 ($6,000 if age 50 or older) to traditional IRAs, regardless of adjusted gross income (AGI).

One spouse doesn't work, and the working spouse is covered by a qualified retirement plan. As long as the working spouse has sufficient income to cover the contribution, the nonworking spouse can make a deductible IRA contribution of up to $5,000 for 2008, or $6,000 if age 50 or older as of Dec. 31, 2008. There's a phase-out, though, for couples with AGI between $159,000 and $169,000.

Both spouses work, but neither participates in a qualified retirement plan. In this case, both spouses qualify to make deductible IRA contributions of up to $5,000 ($6,000 if age 50 or older by Dec. 31, 2008) with no cap on AGI. If both contribute the maximum, the couple needs at least $10,000 ($12,000 if both are age 50 or older) of earned income between them.

Both spouses work, and only one participates in a qualified retirement plan. In this case, the spouse who participates can only make deductible IRA contributions for AGI up to $85,000, with phase-out between $85,000 and $105,000. However, in a case where joint income is significantly higher, the nonparticipating spouse has more liberal guidelines, with phase-out between the AGI range of $159,000 and $169,000.

Both spouses work, and both participate in a qualified retirement plan. If the couple's joint AGI is more than $105,000, neither is eligible to make a deductible IRA contribution that year. If joint AGI is $85,000 or less, both can make $5,000 deductible contributions ($10,000 total, or $12,000 if age 50 or older).

Your credit union IRA specialist can help you sort through these variables. For more information, listen to "Using IRAs Effectively Before Age 59 1/2" in Plan It: Retire Ready Toolkit.

Consumer Brief

NEW YORK (1/24/08)--Don't have a hybrid but want to squeeze more miles out of your vehicle's gas tank? Use common sense, says the experts. Avoid those jack-rabbit starts and other aggressive tactics to boost your fuel efficiency by 31%. Avoid unnecessary idling to improve gas mileage by 19%. And stick to the speed limit--or drive slightly below it--to improve fuel efficiency by 12%. If you're not being followed, keep your foot off the brake pedal and coast up to red lights--it takes more fuel to accelerate once you've stopped. Keep tires pumped to the maximum allowable pressure, rid the trunk of excessive weight, and park so you can pull forward rather than wasting gas backing up (http://articles.moneycentral.msn.com)...

Need a student loan? Start filling out forms now

SAN FRANCISCO (1/23/08)--The deadline for filing student-loan application forms may be February or March, depending on the college, but it pays to get organized and gather required documents now (MarketWatch.com Jan. 10).

Here's what students need to fill out the Free Application for Federal Student Aid (FAFSA):

Social Security number;
Driver's license;
Current checking/savings statements;
2007 W-2 forms, plus records of other money earned;
2007 federal income tax return (if married, your spouse's return, too);
Parents' 2007 federal income tax return;
Current mortgage, business, farm, stock, bond, and other investment records; and
For non-U.S. citizens, alien registration or permanent resident card.

To save time, print and fill out the worksheet from the Web, then enter and save data to FAFSA on the Web.

The fastest way to submit your application: File electronically using a personal identification number (PIN) as signature. Read the electronic- signature-process requirements carefully at fafsa.ed.gov. No data gets transmitted until you electronically sign and press the send button.

Once you transmit the application, you can check the status online, make corrections to a processed form and access other information such as your student aid report.

Remember: You don't have to wait until the deadline to file. You can apply as early as possible after Jan. 1 each year. And you'll need to file a FAFSA every school year to receive student financial aid.

courtesy of cuna.org

Cell phones: Cut costs, preserve service

YONKERS, N.Y. (1/22/08)--Most of us can't imagine life without cell phones--practically everyone has one. But, not everyone is happy with cell phone service (Consumer Reports January).

According to the Annual Survey of Cell-Phone Service, conducted by Consumer Reports National Research Center, fewer than half of survey respondents actually were completely or very satisfied with the cell service they receive.

Another cell phone gripe: the bill. Consumer Reports offers tips to curb the cost:

Watch your minutes. If you go over the limit in minutes, you'll pay big bucks. For those times when you know you'll exceed your limit, ask your provider to temporarily increase your minutes. If you don't, you could wind up paying overage charges as high as 45 cents a minute.

Use the plan to your advantage. Check plan details for free calls to other plan customers as well as free calling to certain numbers you choose.

Compare packages. When shopping for the best deal, don't focus on voice minutes alone. Check prices for texting, instant messaging (IM), or sending photos if you'll use those services.

Control kids' cell phone use. When you add someone to your plan, be aware of your minutes and theirs as well. Define rules of cell phone use with your kids. Consider options that let you control the numbers your kids can call, text or IM.

Purchase prepaid minutes. If you find you're left with a lot of unused minutes each month, consider a prepaid cell phone. You generally pay for the phone, but you can prepay for a designated amount of minutes. Prepaid phones work well for people who want a phone for emergencies only or for those who won't use a lot of minutes. Be careful though--prepaid minutes can expire.

Whether you're a talker or an IMer, understand the details of your plan. For more information, read "OMG, It's an IM Lingo Guide for Parents," in Home & Family Finance Resource Center.

courtesy of cuna.org

Consumer brief

SEATTLE (1/17/08)--If reading the fine print isn't hard enough, try deciphering clauses like this one found on some airline tickets: "NONREF/CHGFEEPLUSFAREDIF/CXL BY FLT TIME OR NONVALUE." Translation: Make a change to your ticket after the first leg of your trip, and you'll lose the ticket and be forced to purchase a new one. If you're like most travelers, you don't pay attention to restrictions like this until you need to make a change. By that time, it's too late--for you and your wallet (http://seattletimes.nwsource.com)...

Your parents' attitude about money affects you

SAN DIEGO (1/16/08)--How your parents handled money has a lot to do with how you deal with your own finances, according to Ginita Wall, CPA and co-founder of the Women's Institute for Financial Education (wife.org).

Wall cites some not-so-healthy attitudes about money you might be passing on to your own children:

• Money is love. If parents use money as a way of expressing love (such as extravagant gift-giving or overly generous allowances) rather than using actions and words, children make a connection between money and love. Wall's advice is to try to treat money as a commodity, like food in your refrigerator. Some will be used today, some saved for later. Just because it's there doesn't mean you have to use it all at once.
• It's not "polite" to talk about money. This is a message many people, especially women, heard growing up. Kids need to be educated about the value of money, including how to save and invest. Make money a topic of family conversation--form a family investment club, or research and invest in stocks that are kid-friendly.
• Money translates to control. Did you grow up in a family where money was controlled by your parents and you had little to say about how and where it was spent? Or did one parent use money to control the other? Children react to what they see their parents do and say. If you alternate between spending on them and saying "we can't afford it," they'll get a mixed message they don't understand. Wall recommends setting aside some money each month to spend on your children and giving them the opportunity to figure out how it should be spent. They'll become savvy consumers who know how to weigh the cost and benefit of future purchases.
• Money is a form of reward. If you use money to reward good behavior, kids may not grow up feeling self-fulfilled. They'll look for the person who will reward them with money so they can feel self worth. They will reward or punish themselves by spending or not spending ... and that can create spending disorders and unmanageable debt. Rather, teach children that money is neither good nor evil. Set a savings target, and make the rest available to spend. Good money management takes discipline, but also provides pleasure. Money itself should not be a goal.

For more information, read, "Credit/Debit Cards, Checking Accounts, Teach Teenagers to Handle Money" in Home & Family Finance Resource Center.

courtesy of cuna.org

Health club memberships: Get fit, be smart

YONKERS, N.Y. (1/15/08)--Like many individuals, you vowed to lose those 10 extra pounds this year. But before agreeing to drop big bucks along with those pounds, don't be swayed to join the first health club you visit (Consumer Reports February 2008).

You can make the most of a health-club membership by doing the following according to the Federal Trade Commission and Consumer Reports:

• Know the history. Find out if others have complained about the fitness center you want to join by contacting your local consumer protection office, state attorney general, or Better Business Bureau. You'll also find out if your state has laws regulating health-club memberships.
• Put on your inspector's hat. Visit the facility around the same time that you'll generally be using it. Is it overcrowded? Is it clean? Is it open during convenient times?
• Scrutinize that contract. Don't let fitness center employees con you into signing up right away based on a deal that's about to expire. Most clubs have some leeway on how long offers are good. Take the contract home and review it. There are two key details to look for:

1. Make sure everything the salesperson offered is written in the contract. Know details as far as rate hikes, transferring memberships, and what will happen if you need to cancel your membership because of a move; and
2. Know payment details. When calculating total costs, don't forget about finance charges and annual percentage rates--if there are any. Break down the monthly payment to find out what you're paying weekly—and even monthly.

• Check out options on type of club to join. You might find you like all the extras the big-name facilities offer, or you might decide a community center or work-place gym is all you need.
• Inquire about free trials and ask about membership discounts. If you're a senior citizen or a student you may be eligible for a discounted rate.
• Use your membership to your advantage. If possible, use the facility during off-peak hours and sign up with a personal trainer. Leave personal valuable items at home. For health safety, use the alcohol spray or wipes most facilities provide, wash hands frequently, and don't share towels with others.

For more tips on smart financial choices, visit the "Consumer Protection" section in Home & Family Finance Resource Center.

courtesy of cuna.org

Filing too early could be hazardous to your refund

WASHINGTON (1/14/08)--The Internal Revenue Service (IRS) has put us on notice: Filing any of five specific forms for tax year 2007 could result in a delayed refund if you don't pay attention this year (The Washington Post Dec. 28).

The reason behind the warning actually is good news for the estimated 20 million families who would have faced the notorious Alternative Minimum Tax (AMT) and an extra $2,000 tax hit on average. Congress applied a patch to the AMT late last year, allowing those potentially affected to claim credits they otherwise would have been denied.

That's the good news. The bad news is that early filers need to sit tight until around mid-February because the timing of the AMT patch came too late for the IRS to amend some tax forms. That means the booklets you receive in the mail in the next few weeks were printed before Congress made the change.

It's recommended you wait until Feb. 11 to send in your tax return--to give the IRS time to finish reprogramming its computers--if you plan to file any of the following forms which weren't updated in time:

• Form 8863: Education Credits;
• Form 5695: Residential Energy Credits;
• Schedule 2, Form 1040A: Child and Dependent Care Expenses for Form 1040A Filers;
• Form 8396: Mortgage Interest Credit; and
• Form 8859: District of Columbia First-Time Homebuyer Credit.

In addition, consider these tips when filing your 2007 tax return:

• If the child- and dependent-care credit is the only one of the five credits you'll claim, avoid the wait by filing the longer IRS Form 1040. The AMT changes affect this credit only when it's claimed on Form 1040A (USA Today Jan. 7).
• For e-filers who try to file before Feb. 11, if your return contains one of the five credits, the IRS will reject it. Most major preparers, though, will allow you to prepare your return in advance and then the company will e-file it when the IRS starts accepting returns.
• If you're sending in a paper return and you're eligible for one of the five credits, download updated forms at irs.gov, or call the IRS at 800-829-3676.
• The fastest--and safest--way to receive your refund is to file electronically and have the refund direct-deposited. Electronic filers can expect to receive refunds in 10 to 14 days (Dailypress.com Dec. 28). Even if you have to wait until Feb. 11 to file, you should get your refund by the end of February. But if you use snail mail, expect to receive your refund in closer to six weeks.
• Taxpayers with adjusted gross income of $54,000 or less can take advantage of the IRS Free File program, available Jan. 11. Make sure you connect to a software provider through the IRS website at irs.gov.

For anyone who counts on a fat refund check each year, now is a good time to re-evaluate your withholding. Stop giving Uncle Sam an interest-free loan. Adjust your withholding so less money is withheld from your paycheck. There are several withholding calculators on the Web, including Kiplinger.com/tools/withholding and irs.gov.

For more information, read "Stay Up-to-Date to Claim Deductions, Credits for College Costs" in Home & Family Finance Resource Center.

courtesy of cuna.org

Consumer brief

NEW YORK (1/10/08)--If you took out a mortgage or refinanced in 2007, don't forget to deduct your private-mortgage-insurance (PMI) payments on your taxes, if you're eligible. Typically, you pay PMI if the equity in your house is less than 20% of the home's value. If your adjusted gross income (AGI) is $100,000 or less, you're eligible to deduct PMI payments on your taxes. Deductions are phased out up to AGI of $109,000. Congress recently extended the tax break to 2010 and it applies to your primary residence and one other residence, but not to rentals (http://www.wsj.com Dec. 27)...

Government websites breeding ground for ID theft

WASHINGTON (1/9/08)--From the girl next door to famous football stars and politicians, finding their Social Security numbers (SSNs)--if you wanted to--isn't hard (Washingtonpost.com Jan. 2).

Criminal and civil cases and land records, available on government websites, often include SSNs. And charging a fee for access to some sites isn't stopping criminals from obtaining the coveted numbers.

Federal courts have banned SSNs from appearing on public documents since 2001, and some states have passed laws or created rules keeping types of personal information from being filed with courts or government agencies. But that doesn't take care of records filed before the laws and rules took effect.

The Federal Trade Commission, Washington, D.C., estimates that 8.3 million Americans were identity theft victims in 2005, the most recent data available.

Though you can't control what's available in public documents, you can take steps to safeguard your identity, according to the Credit Union National Association's Center for Personal Finance:

• Only give out your SSN when necessary, and only carry your Social Security card in your wallet if you'll use it that day.
• Know whom you're dealing with in person, on the phone, or over the Internet. If you're not certain of the reputation, don't give personal information.
• Be suspicious of anyone calling or e-mailing you and asking for personal information. Your financial institution already has this information on file.
• Don't disclose your SSN on checks, as club membership numbers, or as general information.
• Order a free credit report once a year from each of the "big three" credit reporting agencies (Experian, Equifax, and TransUnion) by visiting annualcreditreport.com or calling 877-322-8228 toll free.
• Cross-cut shred papers that you no longer need and that contain personal information.

courtesy of cuna.org

To shred, or not to shred--and when

YONKERS, N.Y. (1/8/08)—If getting rid of clutter and unnecessary paperwork is tops on your list of things to do this month, make sure you know what you can--and can't--shred, and when it's safe to do it (Consumer Reports Money Adviser January).

• Bills. Keep receipts for large purchases, and shred the rest after payment clears your credit union, and after the return or refund period expires.
• Credit card receipts. Keep them for one year in case you need to return defective goods, then shred them.
• Credit card statements. If they contain tax-related expenses, keep the statements for seven years in case you're audited by the Internal Revenue Service. Otherwise, keep them for one year and then shred them.
• Credit union monthly statements. Keep monthly statements that contain tax-related expenses for seven years. Otherwise, keep them for one year and then shred them.
• Investment account statements. Keep year-end statements for seven years, but you can shred monthly or quarterly statements as new ones arrive.
• Retirement statements. Keep year-end statements for your 401(k), individual retirement accounts (IRAs), and Keogh plans until you retire or close the account, and keep Form 8606 if you've made nondeductible IRA contributions. Shred quarterly statements after you receive your annual summary and verify that everything is correct.
• Pay check stubs. Shred the stubs after you receive your annual W-2 and verify that the information is accurate. Keep the last paycheck stub of the year.
• Tax records. Keep a copy of all 1040 tax forms permanently. Remember: The IRS has three years to audit your return, but if you underreport your gross income by 25% or more, the IRS has six years to challenge it. And if you file a fraudulent return or don't file one at all, the IRS can go after you at any time.

One final tip: Cut down on the amount of paper that flows into your home. Register with the Direct Marketing Association at the-dma.org, and opt out of preapproved credit card applications at optoutprescreen.com; you'll see a dramatic decrease in the number of preapproved credit card offers and other direct mail pieces that fill your mailbox.

courtesy of cuna.org

Resolve to tackle one financial chore in 2008

MADISON, Wis. (1/7/08)--Does your list of financial New Year's resolutions look at lot like last year's? The solution: Pick just one item to accomplish--particularly one you've been meaning to do for a few years--and you'll be better off in 2008 than you were in 2007 (Credit Union National Association Center for Personal Finance).

For most individuals, the list seems daunting. For example, you know you need to:

• Get financial records organized;
• Develop a workable spending plan;
• Calculate net worth;
• Update--or create--a will;
• Designate a power of attorney;
• Complete health-care directives;
• Decide on a guardian for minor children;
• Review current insurance coverage; and
• Inventory personal belongings.

But according to savingadvice.com (Dec. 27), it's not as important which chore you choose first as it is to accomplish one so you're inspired to keep making progress.
And while you're at it, resolve to increase personal savings this year. You may choose to deposit that year-end bonus in a higher-yield share certificate, or set up automatic transfer to savings from each paycheck. Or, establish an IRA (individual retirement account) at the credit union; by contributing a set amount each month and taking advantage of dollar cost averaging, you're in a better position to ride out the highs and lows of the volatile marketplace.

For more information, read "New Year 2008: New Challenge—And Members Are the Experts" and "Experts' Picks: Home-Inventory Software" in Home & Family Finance Resource Center.

coutesy of cuna.org

Consumer Brief

NEW YORK (1/3/08)--A CNNMoney.com online poll of 5,000 individuals, conducted in November 2007, sought to pin down the top financial goals for 2008. The poll revealed that 33% of respondents resolve to pay down debt, 23% resolve to save for retirement, 11% resolve to build an emergency fund and 11% resolve to buy real estate. However, only one of three respondents feels confident about achieving the top financial resolution, and slightly more than half question whether they'll have the money to achieve their goal. If you want to increase your chances of keeping your New Year's resolution and reaching your financial goals, automate it. Set up an automatic transfer now--at the start of the year--from checking to savings, and then sit back and enjoy steady progress toward your 2008 financial goals and resolutions (Money January)...

Are you investing too much in company stock?

McLEAN, Va., (1/2/08)--No doubt you've heard this before: Don't put all your eggs in one basket. But despite the lessons learned from the Enron fiasco, six years later employees still are investing too much in company stock (USA Today Dec. 14).

No matter what company you work for, you never know what's in store. If the company closes its doors, you'll lose your job. But you don't want to lose your entire retirement portfolio as well. Still, Hewitt Associates, a human resources consulting firm in Lincolnshire, Ill., indicates that, on average, employees have almost 22% of their 401(k) assets invested in employer stock. More disconcerting is that one of five employees has at least half the retirement assets invested in the company.

Besides not putting too much into company stock, About.com suggests these tactics so you get the most out of your 401(k) plan:

• Watch out for fees. The U.S. Employee Benefits Security Administration estimates that for someone with 35 years until retirement and a 401(k) plan valued at $25,000, fees can make a big difference. If the investments in such an account return 7% annually and fees are 0.5% of all plan assets, that 401(k) plan will grow to $227,000 by the time the recipient hits retirement age. But what if the 401(k) plan fees are 1.75% instead of 0.5%? Then the retirement landscape isn't so bright. Instead of $227,000, the plan participant would only earn $150,000. The 1.25 percentage point difference in fees cuts more than $77,000 (34%) of the 401(k)'s account balance at retirement. Ask your human resources department what your plan's fees are.
• Diversify. Spreading your money over a variety of high-quality investments rather than putting it all in one place will help smooth out the ups and downs of the market. "Diversifying is the best way people can make money investing," says Chad Winklepeck, an investment representative with Edward Jones in Oregon, Wis.
• Contribute and max it out. If you don't contribute to your employer's 401(k) plan, you're basically giving up free money. For one, there are substantial tax benefits to contributing. Also, some employers will match employee contributions up to a certain percentage.

For more information about calculating end results of your plan, read "401(k) Fees: Know What You're Paying, What You're Getting" in Home & Family Finance Resource Center.

courtesy of cuna.org

Foreign travelers and purchasers could see refund

YONKERS, N.Y. (12/31/07)--If you used a credit card when you traveled overseas, or used the Internet to make an overseas purchase in the past 10 years, you might be eligible for a refund for exchange fees that you paid (ConsumerReports.org Dec. 10).

More than 20 million people who used a Diners Club, Visa or MasterCard for travel or purchase between Feb. 1, 1996, and Nov. 8, 2006, will receive notices from a New York court about the refunds.

The refunds are part of a class-action lawsuit claiming the card companies and seven issuing banks overcharged customers for currency exchange rates.

If you're eligible for the refund, you have three options, according to USA Today (Dec. 13):

1. Easy refund of $25--If you traveled outside the U.S. for less than one week or made foreign transactions of less than $2,500 using the cards.
2. 1% of estimated transactions--If you traveled outside the U.S. for more than a week or had foreign transactions totaling more than $2,500.
3. 1% to 3% of annual estimated foreign transactions--If you can supply year-by-year information and traveled extensively overseas or made a lot of overseas transactions.

Refund amounts ultimately will depend on the amount of people who file. You have until Feb. 14 to object or opt out of the proposed settlement. If you don't opt out, you'll automatically be covered by the settlement terms, which include giving up your right to pursue future claims against the company.

For more information, visit ccfsettlement.com/ or call 800-945-9890.
Also, more information is included in "Arbitration Clause Denies You Your Day in Court" in Home & Family Finance Resource Center.

courtesy of cuna.org