Could a Roth IRA be Better Than a 401(k)?Written by Terry Mitchell
Very few people whom I know are familiar with benefits of Roth IRA. It was named for late Senator William Roth of Rhode Island, who proposed it. It is similar to a traditional IRA except contributions are never tax-deductible. Contributions to traditional IRAs are sometimes deductible or partially deductible, depending on your income and whether or not you have a retirement plan like a 401(k) at work. With Roth IRAs, individuals are limited to incomes of $95,000 ($150,000 for couples) to be eligible for full contribution amounts. However, unlike traditional IRA, you can withdraw your contributions from a Roth IRA at any time, at any age without penalty. Earnings are not taxed if you wait until at least age 59 1/2 to begin withdrawing them and have held your Roth IRA for at least five years. With a Roth IRA, contributions are taxed without any deferment, but they grow tax-free and gains are never taxed (see above). With a 401(k), contributions are tax-deferred, but eventually contributions and gains will be taxed. By time most people retire, earnings from their retirement accounts will far exceed their contributions, due to compounding. With that in mind, one could make case for a Roth IRA possibly being better than a 401(k). Here's an illustration. Let's suppose that over course of 25 years you contributed a total of $75,000 to your 401(k) and your employer kicked in $30,000 during that same period for a total of $105,000. By end of those 25
| | Beat Credit Card Companies at Their Own Game!Written by Daryl Flagg
Have you ever wondered how much money a credit card company makes? Have you ever wondered how much of that comes from late fees? Everyone has and if you haven’t you should because most likely you own a credit card, which means that these late fees has or could directly affect you.As you have probably taken notice, credit card late fees are on rise and have been so for awhile. There is enormous competitive pressure on credit-card interest rates and annual fees, and this has given way to a fee frenzy. For credit card issuers, late fees now represent their third largest revenue stream, (interest revenues and merchant fees rank first and second, respectively). In essence, those who pay late are now covering costs for those credit card users who do not carry a revolving balance and those who file for bankruptcy. So how much are credit card companies making from issuing late fees? Over years we have watched number of late fees charged to consumers jump to record-high levels. Late fees can range from $10 to as much as $40. The average late fee more than doubled since 1996 from $13.28 to $29.84. In fact, many major card issuers are now charging a $35 late fee. Let’s assume that 100,000 people made late payments for a particular month and they were charged a late fee of $30 for doing so. This would add up to $3 million in revenue. As you can see, credit card companies are making a lot of money off of card holders and there is no slow down in sight regarding increase in late fees. Credit card companies are making a killing off late fees they issue to their customers and they don’t mind doing it because their ultimate goal is to make money. They are like any other for-profit business in that they sell a product or service for revenue. In case of credit card companies, product happens to be credit. These companies aren’t just some “thing” sucking up as much money as they can. These “things” are run by man. And wherever man is involved, greed also becomes involved. These people are just like you and me. They may have a family to support, bills to pay, etc. Most people don’t work just for pure enjoyment, but for money, a source of income. And more income we achieve easier and better our lives become, supposedly.
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