How can I save money by rolling my pension plan or 401K plan payout into an IRA?
By cashing out your pension plan or 401K plan you risk losing up to 50 cents on the dollar, since they are taxable and subject to a 10% penalty if you're under age 59 1/2. You can save money with a direct rollover to your credit union, since the plan administrator sends the funds directly to us on behalf of your IRA, not to you. As a result you're not subject to taxes and penalties.
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Which is a better investment, a regular IRA or a Roth IRA?
It depends. With a regular IRA, you can deduct your annual contribution from your gross income at tax time and avoid paying taxes on the earnings until you retire. With a Roth, you pay the taxes now and put the after-tax cash into the account, where it grows tax-free forever.
Which one is right for you? The annual tax deduction can save you about $560 (cash you wouldn't have if you were contributing to a Roth IRA). So if you're going to spend the $560 tax savings you're much better off with a Roth. But if you invest that $560 a year, you could end up with more from a regular IRA than a Roth - enough extra to make it worth paying taxes on the withdrawals!
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I have some extra money each month, should I add it to my mortgage payments?
If you have a 30 year mortgage for $100,000 at 7.50%, with a monthly payment of approx $700...and you decide to pay an extra $75 each month, you'll save over $35,000 in interest and pay off your loan in about 24 years!
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