6 Ways to Save
Get the Most Bang for Your Buck in 2010
Nationally, experts aren’t talking so much about an economic “recovery” as they are an economic “reset” that will chart the course for years to come.
In 2010, however, we’ve still got a few economic bumps to endure, particularly in California where budget deficits seem to inexorably lead to new taxes. Couple that with predictions of more new taxes from the federal government and the temptation is to just grab your money and bury it in the backyard. Fortunately, the experts have some better advice. Here are six ways to save this year:
1. Review your investment portfolio. The “new normal” will require new thinking on investing; factor that into your risk tolerance. Also, the current tax cap of 15 percent on capital gains may sunset in 2010, meaning those taxes could increase in 2011. You’ll want to evaluate your portfolios in light of that. “Tax-free municipal bonds are one of several options worth checking out,” says Russel Phelps, certified financial planner with Ameriprise. “You can get up to triple the return of bank savings and CDs without the taxes.”
2. Take advantage of your lower property value. In the current economy where local governments are desperate for money, your property tax may not yet have been lowered to reflect its current value. “Be prudent; look at the local property tax base to see if you should request a reassessment to reduce your property taxes,” says Sherif Boctor, CPA with Professional Solutions Group. “It’s incumbent upon you to ensure you get what you’re entitled to.”
3. Catch up on your 401K. Everyone with an employer-sponsored retirement plan should maximize contributions; that’s nothing new. If you’re 50 or older, however, there’s extra incentive. “Catch-up provisions in the federal tax law allow you to contribute an extra $5,500 to your 401k over and above the $16,500 cap that applies to everyone else,” says Claudia Cypher, senior vice president of investments with Wells Fargo Advisors. “Even better, you can contribute this extra amount every year after age 50.”
4. Convert to a Roth. It used to be that only people with annual incomes below $100,000 could take advantage of the tax-free growth benefits of a Roth IRA. Starting in 2010, however, that ceiling has been eliminated and anyone, regardless of income, can benefit from these advantages.
5. Refinance. Experts are still using words like “lower than I’ve ever seen” to describe today’s mortgage rates. “If your credit’s good, shop around for a better rate,” says Linda Geery, CPA and tax partner with Gilbert Associates. “You can shave years and thousands of dollars off your current mortgage.”
6. Increase your deductibles. Upping your insurance deductibles on everything from your car to your home should immediately lower your monthly premiums. That’s more money for the savings plan.
Finally, it always pays to talk with a qualified tax or financial professional. It’s the best insurance against mistakes that might cost you money or put you on the wrong side of the law.