•An individual retirement account in which an individual can contribute up to $5,500 annually in 2014 which is tax-deferred meaning it is taxed when you take the money out of the IRA
•Eligibility and amounts depend on the contributors income level and whether they have other retirement plans.
•Must be younger than 70½, have earned income or be the spouse of someone with earned income
•Maximum contribution is $5,500 per year ($6,500 if over age 50 due to $1,000 catch up provision)
•The contribution is tax deductible and earnings grow tax-deferred
•May deduct the full $5,500 contribution on your income tax return if you are not in an employer sponsored plan
•When can withdrawals be made?
•After 59½ for any purpose
•Prior to 59½ withdrawals are subject to federal penalties (10%) and ordinary income taxes unless money is used for:
•Qualified education expenses, First time home purchase (up to $10,000), Death or disability, Annuity payments, or Medical expenses > than 7.5% of AGI
•These still require the payment of taxes on withdrawals though
•Federal law requires that you begin withdrawals by April 1st of the year after you reach 70½
•Unlike 401(k) plans which are offered by for-profit companies, 403(b) plans are only available to employees of tax-exempt organizations.
•These are usually either schools, hospitals or religious groups. The names simply refer to the section of the tax code that outlines these plans.
•For the most part, the two types of plans work the same way. But there are other subtle differences. For example, 403(b) plans will sometimes offer more limited investments choices than corporate plans, which might consist of annuity contracts and mutual funds.
•403b plans generally do not have employer contributions like 401k's
•You can contribute a maximum of $16,500 in 2010 if you are younger than 50 years old. If you are 50 or older, you can make an additional catch-up contribution of as much as $5,500, for a total of up to $22,000.
+) Leases usually have lower monthly payments. When you lease you're paying for the difference in value of the car now versus the value at the end of the lease.
(+) Leases have fewer repair costs. Since your car is new, it will be under warranty over the life of the lease. If you own a car, your warranty will eventually end.
(+) Leasing also provides an alternative when buying a car is not an option. Most banks will not lend more than $30,000 for a car loan. If you are planning to acquire a car worth more than that, leasing may be your only option.
(-) You always have a car payment
(-) Leases have higher insurance premiums. Since you don't own the car, the leasing company gets to call the shots when it comes to insurance. They usually require more than the minimum state standards.
(-) Leases have restrictions. leases come with strict mileage limitations, usually 12,000 to 15,000 miles per year. If you exceed the total allowed miles by the time you return the vehicle, you'll be assessed a penalty -- which could be as stiff as 25 cents per mile. However, if you know or suspect that you'll be putting on additional miles, you can usually purchase extra miles in advance at a discounted rate.
(-)Leased vehicles must be returned in excellent condition, without dents, deep scratches, window cracks, or torn upholstery, and with all accessories in working order. Otherwise, you'll be assessed "excessive wear and tear" fees at the end of the lease period, and these can be steep.
(-) Lease payments never end. If you lease a car and then lease again, your payments never end. When you buy a car, you'll eventually pay it off.
A place of your own.
•Owning a home is an opportunity to settle down and gain a sense of belonging in a community.
•It can give you a sense of personal satisfaction to have a home of your own to share and enjoy with family and friends.
An investment in your future.
•The value of your home can increase over time, making your investment grow.
•As you pay down your mortgage loan over the years, you can build ownership interest, called equity, which can offer financial flexibility under the right circumstances.
•Your home is also a legacy, financial or otherwise, for the next generation.
Manage your housing payments.
•In some cases, monthly mortgage payments may be lower than rental payments.
•Many home loans, or mortgages, are fixed-rate. This means the amount you pay stays the same month after month, which can help you plan your spending.
•Most homeowners receive tax breaks, because interest paid on a home mortgage and real estate taxes are almost always tax deductible.
•Consult your tax advisor regarding the deductibility of interest.
•Homeownership is a large, long-term financial responsibility.
•If you don't want to commit to a mortgage, taxes, insurance, utilities, and maintenance—or if your future income is uncertain—owning a home may not be practical at this time.
More difficult to move.
•If you think you may need to move in the near future, buying a home may not be practical because selling it could take time.
•If you buy a home and then have to move, you could end up paying for the home you already own, plus the added expense of a new home.
Upkeep of the home.
•You'll be responsible for all utility bills, home repairs, and maintenance, some of which can be costly.
•You'll also be responsible for property taxes and homeowners insurance, costs that often increase over time.
Increased value not guaranteed.
•While most homes increase in value over time, it is possible that your home could lose some of its value.
•You could lose money if you sell it for less than what you paid for it.
•Even if values in your area remain steady or increase, if you don't keep your property well maintained, it could decrease in value.
•Aim to limit your "must-have" expenses to 50% of that after-tax figure.
•"Must-haves" include all the basic expenditures you really need to make each month: outlays for housing, utilities, transportation, food, insurance, child care, tuition and minimum loan payments.
•If you can delay a purchase for a few months with no serious consequences -- for example, clothing or dining out -- it's not a must-have. If you're contractually obligated to pay something (a credit card minimum, child support or a cell phone bill), it's a must-have, at least for now.
•Your "wants" can consume 30% of your after-tax pay.
•Vacations, gifts, entertainment, clothes, eating out and other expenses are all "wants.".
•Savings and debt repayment make up the final 20% of your budget.
•To achieve financial independence and minimize the chances of disaster, you need to get rid of consumer debt, save for retirement and build your emergency fund. Any loan payments you make above the minimum belong in this category, as do contributions to your retirement and emergency funds.