WHAT IS A TRADITIONAL IRA?

By Dr. Scott Brown, Ph.D.

With a traditional Investment Retirement Account (IRA) you pay taxes when you take the money out at retirement in the future. Make sure that this account is really worth opening in your situation because what you put in the account today may be fully deductible, partially deductible or non deductible, depending upon your income and other retirement coverage. If you contributions are not fully deductible then this account is probably not for you.
The traditional (and Roth IRAs) allow you to save $3,000.00 in 2004 and $4,000.00 in 2005. If you are over 50 years old you can save an additional $500.00 as catch-up. You put the maximum amount in if you (or your spouse) are not covered at any time during the tax year by a retirement plan, including a 401(k) account, at work. If you can’t afford to save the maximum then just do the best that you can.
If you are single or a head-of-household taxpayer with annual adjusted gross income (AGI) between $40,000 and $50,000 and are eligible for a company retirement plan, your deduction will be reduced. Deductions are also limited for married couples filing jointly or qualifying widows or widowers who earn from $60,000 to $70,000 per year.
Even if you don’t have a retirement plan at work, your deduction may be limited if your spouse, with whom you file a joint return, has a company pension plan. In this case, your deduction will be reduced if your joint income is between $150,000 and $160,000. No deduction is allowed if your AGI exceeds $160,000. If you have a non-working spouse, he or she can contribute up to $3,000 ($3,500 if 50 or older) to an IRA also as long as the two of you together make at least as much in annual income as you contribute.
As I said before profits and income from investments are not taxed until you retire and begin withdrawing funds. You can pay capital gains taxes on you stock market profits and then withdraw funds, without penalty, after you reach age 59½. If you take out money before then, you usually will face a 10 percent penalty, plus taxes on the withdrawn amount. Under certain circumstances, you can take penalty-free distributions before age 59½. In the year that you will turn 70½ you can no longer make contributions to your account. In fact, at that age you must start withdrawing money from the traditional IRA or face additional penalties.
This account is ideal for individuals in high tax brackets who cannot open or contribute to a Roth IRA and anticipate facing a lower tax bracket upon retirement. In other words, if you earn a lot of money now, pay a lot of taxes, can open a standard Roth IRA, and take the full deduction when you contribute then this account may be good for you. This is especially true if you anticipate low income in your retirement years such that you will also be in a lower tax bracket.

About the author:
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. “The Wallet Doctor”, is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina and a Master in International Management from the prestigious American Graduate School of International Business a.k.a. Thunderbird. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term “Irrational Exuberance.” In 1998 he was shouting out to the world to “get out” of the stock market but now he is shouting to everyone that it is time to “get in!” The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing. He also teaches investing in Spanish and Portuguese. For more information visit Dr. Brown’s site at www.BonanzaBase.comor sign up for his investment tips at www.WalletDoctor.com


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DISCOVER THE RETIREMENT BREAKTHROUGH …THE ROTH IRA!

By Dr. Scott Brown, Ph.D.

If you don’t know what a Roth IRA is then stop everything, print this article and read it carefully as this will certainly be the most valuable information you read this year. This next retirement account is to your net worth what light bulb was to electricity. Let me tell you about this wonderful financial invention called a Roth IRA!
The main difference between the Roth and traditional IRA is that with the Roth you pay taxes first and then make the contribution. This is absolutely fantastic if you make a lot of money in the stock market because you NEVER have to pay even a dime on the capital gains! There are a ton of other advantages to the Roth IRA. Unlike the traditional IRA you can be of any age and still contribute. You can also make a contribution to a Roth IRA at any time for a particular calendar year up until the due date of your tax return for that year. This means that if you want to make a Roth IRA contribution for 2005, you could make it anytime between January 1, 2005 and April 15, 2006. Another nice feature of the Roth IRA is that your spouse will also qualify for a contribution.
There is no tax deduction for Roth IRAs. Contributions are made with money that has already been taxed so there is no immediate tax break. Don’t fool yourself into thinking that this isn’t the best thing since the wheel because when Roth money is taken out, it is a tax-free distribution! This type of IRA is ideal for individuals in a lower tax bracket now, but anticipate being in a higher tax bracket at retirement. In other words, if you are in a blue-collar or white-collar middle class family and are learning and practicing good savings and investment habits than this is your retirement life saver!
It gets even better; you may make contributions at any age, even after you reach 70½. You must have your Roth account open for at least five years before you can take a penalty free distribution of earnings. Distributions of earnings without penalty can be taken after age 59½. If you are a first-time home buyer or become disabled, you can take distributions earlier. You can also withdraw the contributions at any time penalty free as long as you don’t withdraw investment earnings. What many people don’t know who even have Roth is that they can withdraw the contribution for the account without penalty at any time as long as you don’t touch any stock profits.
If you exceed the income limits you can neither contribute to nor roll over other IRA money into a Roth account. If you opened a Roth while you were under the income limits but then later earn more, your Roth account still will earn money tax-free that you can take out later without tax implications, but no new contributions are allowed. Another absolutely incredible feature of the Roth IRA is that it is also judgment proof. If you get sued it can be very hard for the lawyers to get it from you!



About the author:
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. “The Wallet Doctor”, is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina and a Master in International Management from the prestigious American Graduate School of International Business a.k.a. Thunderbird. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term “Irrational Exuberance.” In 1998 he was shouting out to the world to “get out” of the stock market but now he is shouting to everyone that it is time to “get in!” The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing. He also teaches investing in Spanish and Portuguese. For more information visit Dr. Brown’s site at www.BonanzaBase.comor sign up for his investment tips at www.WalletDoctor.com


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EVEN A NEWBORN BABY CAN OPEN A ROTH IRA!

By Dr. Scott Brown, Ph.D.

The Roth is kind of weird until you get used to it in terms of how much you can put in (contribute) each year depending on how much you earn (compensation). Because of this you really have two limits, one dealing with your compensation and the other dealing with your contribution. Let me explain.
The first contribution limit has to do with compensation, in other words you have to be making some money somewhere. As mentioned, you must have some form of compensation to qualify to make a contribution, but there is also an income limit that says whether or not you can put money in; make a contribution. If your adjusted gross income exceeds these limits, you are no longer eligible to contribute to a Roth IRA. In 2004, the adjusted gross income limits were:
• If your tax filing status is “Married Filing Jointly” - $160,000
• If your tax filing status is “Married Filing Separately” (and you live with your spouse) - $100,000
• If your tax filing status is “Single”, “Head of Household” or “Married Filing Separately” (and you did not live with your spouse during the year) - $110,000
Now, here is a little known totally legal secret that is worth your time reading this article. When I taught investment at the University of South Carolina I gave 10% credit of the course grade for the simple act of opening a Roth IRA. I was amazed when a few students would not open one because their parents had told them it was illegal to if they did not have a job. I told them that they were going nowhere fast if they could not think creatively enough to just go mow a lawn somewhere for ten bucks and put it into the account. I made it clear to them that wealthy people become so by taking action nut just thinking about taking action!
The best application of this concept I ever learned was a real estate investor that wanted to open a Roth for his newborn son. The problem of proving that a newborn makes money in a job is a tough one even for my noodle but this fellow came up with a great idea. He took a photo of the baby and put it on the business card with the words; “Help my dad finance my education by buying a home from him…he is the best dad in the whole world!” Then he paid the baby, get this…modeling fees! He put those fees straight into the account and filed a return for the baby with the IRS. I love that story! Talk about creative that is the kind of person that will go far in business. This is also the only newborn I have heard of with a tax free stock portfolio from earnings off his own job!
The second Roth IRA contribution limit has to do with how much you can contribute to your account. Below outlines the contribution limits established for the next several years:
• 2004 - $3,000 ($3,500 if you are age 50 and above)
• 2005 - $4,000 ($4,500 if you are age 50 and above)
• 2006 - $4,000 ($5,000 if you are age 50 and above)
• 2007 - $4,000 ($5,000 if you are age 50 and above)
• 2008 - $5,000 ($6,000 if you are age 50 and above)
If you need more information about Roth IRAs, you should consult a tax professional such as a Certified Public Accountant or Certified Financial Planner. You can also get more information directly if you take a look at IRS publication 590 - Individual Retirement Arrangements. Using a Roth is the very best trading account to use while investing in the stock market.

About the author:
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. “The Wallet Doctor”, is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina and a Master in International Management from the prestigious American Graduate School of International Business a.k.a. Thunderbird. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term “Irrational Exuberance.” In 1998 he was shouting out to the world to “get out” of the stock market but now he is shouting to everyone that it is time to “get in!” The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing. He also teaches investing in Spanish and Portuguese. For more information visit Dr. Brown’s site at www.BonanzaBase.comor sign up for his investment tips at www.WalletDoctor.com


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IRRESPONSIBLE LENDING FROM THE CREDIT INDUSTRY

By Matthew Parkinson

WHY WON’T THE GOVERNMENT STOP IRRESPONSIBLE LENDING FROM THE CREDIT INDUSTRY?

It is not uncommon for credit card companies to offer credit limits of £10,000, £15,000 or even as much as £25,000 – allowing you to effectively walk into a car dealership and buy a brand new car by signing on the dotted line and then driving away!

To whom do they offer these limits?
ü Anyone earning more then £100,000 per year?
ü Company Directors?
ü Solicitors?
ü Members of Parliament?

No.

They are offering these limits to retired widows, low-income families and single parents working 16 hours per week. People who have no ability whatsoever to repay such huge sums of money.

Hard to believe isn’t it? But Payplan, a free debt management company who deals with thousands of individuals with debt problems each week, have come across many unbelievable cases of “irresponsible lending” over the last few years and the problem appears to be getting worse. There are now more than 300 different credit cards on offer in the UK – all competing for your business.

They will use attractive offers to get you to sign up, such as cash back, 0% interest on balance transfers and purchases, loyalty points etc – All designed to make you spend more on your cards so that you then pay them interest out of your hard-earned cash.

These offers are often deliberately confusing and complex in the hope that customers will fall foul and not qualify, resulting in interest being charged.

“Britain's personal debt is increasing by £1 million every four minutes.”


Gone are the days where borrowing money involved making an appointment with your bank manager and turning up in your best Sunday suit to make a good impression then politely explaining why you needed the money.

But it isn’t just the new credit card companies that are doing this – the high street banks are guilty of overloading their customers with credit facilities too.

The former “Big 5 Banks” are probably most guilty of this; once a customer runs up a large overdraft they are quick to offer a consolidation loan, which may also incorporate any credit card debts. While this seems like a good financial move, many customers find that the interest rates charged by the banks are extremely high and the temptation of overdrafts and credit cards still remain.

Should the credit cards, store cards, catalogues and overdrafts start to creep up once again, the banks may intervene a second time and allow a large unsecured personal loan of up to £25,000 to clear some or all of the debts.

This only causes further problems and does not allow the customers a realistic opportunity to resolve the problems – they really need budgeting advice, and LESS credit facilities.

Once these large loans have been taken then it means that all the customers “eggs are in one basket” – this stops the customer from seeking professional help as there is only one creditor to negotiate with and they will require all the monthly surplus.

SO WHY DO THE BANKS LEND SUCH HUGE SUMS WITHOUT ENSURING THAT CUSTOMERS CAN REPAY?

We can only speculate but there could be several reasons:

1. Banks and credit card companies could take insurance against the risk that their customers become insolvent. Credit insurance premiums generally cost between 0.3 - 0.7% of annual turnover – a small price to pay for a guarantee against irresponsible lending!
2. It may be that companies have calculated just how much extra interest can be earned from customers if they provide them with such high credit limits. By overcommiting customers they know that extra interest and charges will be added.
3. In light of recent comments from HSBC and Barclays who have been blaming “bad debtors” for their drop in share price – it could simply be a diversionary tactic!



WHY WON’T THE GOVERNMENT INTERVENE?

The wheels are in motion to make creditors more accountable for irresponsible lending, (Lloyds TSB have been in trouble recently for unsecured lending of up to £100,000!) but there is little rush from Gordon Brown’s Office as the UK’s economy continues to hit growth projections aided by massive consumer spending.

“Household final consumption expenditure is the largest single component of the expenditure measure of GDP, accounting for about 50% of spending.”

In other words, the more money spent by the UK population, the higher the GDP (Gross Domestic Product) and this means more money is pumped into the economy.


If you feel that you have lost control of your credit card and loan repayments or that you have borrowed more than you can pay back, then give Payplan a quick call on 0800 716 239 or visit the website for further details www.payplan.com

Payplan are a free debt advice agency, who are able to provide a personal solution to anyone experiencing debt problems.


About the author:
I have been working as a Debt Advisor in the UK for the last 5 years, assisting families who have been overwhelmed with debt.


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THE TRUTH ABOUT REAL ESTATE INVESTING…IS IT RIGHT FOR YOU?

By Dr. Scott Brown, Ph.D.

You have probably been hearing, seeing and reading that real estate investing is the best thing since sliced bread. There are many late night cable television infomercials spewing out sales pitches for courses that teach you how to buy residential real estate no money down or for next to nothing. Furthermore, polished pitch men on the advertisement emphasize that it is so easy that anybody can do it. They smugly show you that it is simple as they pencil out on the back of a napkin how you will supposedly make a fortune in real estate. Then these real estate investment course promoters show “actual” interviews of people who have reportedly made gobs of money with the course system.
Although it is true that fortunes can be made in real estate it is actually more likely that it will be the guru owner of the real estate course than you! The reason is that real estate investing is a lot harder than most people realize. When you buy, rent, and sell real estate as opposed to stocks you are dealing directly with people and there is not organized exchange to keep things standardized. Don’t forget that courts see it as their duty to protect the shelter of families even if they are non paying renters who are total deadbeats. Another problem is that many contractors who do odd fix up jobs for real estate rehabbers are drifters with as many personal and financial problems as bad tenants. They damage houses and are down the street as soon as they get a little cash out of the hapless real estate investor.
It also takes many years to learn how to properly assess value in a town or neighborhood and get the required experience in real estate closings to not have the big profits you initially think you see in a deal leak out. The key point is that real estate investing is a business. Like any other business it requires constant dedication and education. If you work full time it means losing your free time to your rentals and rehabs. If a property doesn’t sell or if the tenant doesn’t pay you will have to lose part of your salary to cover the mortgage. You should enjoy your regular full time job because you selected it. If you prefer cookouts and trips to the beach over collecting rent and repairing your residential real estate investment then the stock market is a better place for you. If you are interested in real estate investing I have a list of reliable real estate investing courses as well on my website!

About the author:
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. “The Wallet Doctor”, is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina and a Master in International Management from the prestigious American Graduate School of International Business a.k.a. Thunderbird. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term “Irrational Exuberance.” In 1998 he was shouting out to the world to “get out” of the stock market but now he is shouting to everyone that it is time to “get in!” The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing. He also teaches investing in Spanish and Portuguese. For more information visit Dr. Brown’s site at www.BonanzaBase.comor sign up for his investment tips at www.WalletDoctor.com


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DISCOVER THE FOUNDATION OF RETIRING WEALTHY…THE IRA!

By Dr. Scott Brown, Ph.D.

Let me tell you about some legal ways to avoid getting taxed on profits from the stock market. You can make a lot of money now with the stock market as low as it is at this time as I teach you in my home study course. The very best way is to buy and sell your stock through Individual Retirement Accounts (IRAs). IRAs can help you legally avoid taxes and add a fantastic boost to your retirement plans. The IRA was originally developed in 1974 for people not covered by a company pension plan. "The individual retirement account legislation allowed the average person a chance to put money into a tax-advantaged account," according to Bruce Grace, a Chartered Financial Analyst and Assistant Professor of Finance at Morehead State University.
This is a huge benefit to individuals, regardless of whether they have company-established pension plans or not. "The Roth IRA may be an even a better deal for those who think they will be in a higher tax bracket at retirement," Grace added. I personally go a step further and mean it when I tell you that “the Roth Ira is literally the best thing since sliced bread” and I guarantee you is “neater than peanut butter”. It may seem a little confusing because since the original enactment of IRA legislation, several types of IRAs have been developed with a variety of characteristics that can meet your investment and retirement needs.
The most common forms of the IRA are as follows. The traditional IRA gives you a tax deduction on all of your contributions to the account during your working years and taxes what you take out of the account in your retirement. The Roth IRA does not give you a tax deduction during your working years but you pay no taxes on withdrawals while you are retired. The 401(K) is an IRA that your employer may or may not offer instead of a pension where, unfortunately, you are generally restricted to investing in mutual funds. The Roth 401(k) is very new and is much better than the standard 401(k) but the jury is out as to whether corporate insiders will adopt it for their employees. The SIMPLE and SEP IRAs are very nice supplemental tax shelters for small business owners and family businesses. Finally, the Education IRA gives you a way to save for a child’s college studies.

About the author:
ABOUT THE AUTHOR: Dr. Scott Brown, Ph.D., a.k.a. “The Wallet Doctor”, is a successful futures trader, real estate investor, and stock investor. Dr. Brown holds a Ph.D. in finance from the University of South Carolina and a Master in International Management from the prestigious American Graduate School of International Business a.k.a. Thunderbird. His 1998 articles in Technical Analysis of Stocks and Commodities were prophetic in predicting an impending stock market crash. He has helped many people become profitable investors teaching them to look out over many years to spot stocks that are low and primed for rise in the new bull market. His second article met with approval by Dr. Bob Shiller of Yale University. Dr. Shiller is the economist that Alan Greenspan most highly regards who coined the term “Irrational Exuberance.” In 1998 he was shouting out to the world to “get out” of the stock market but now he is shouting to everyone that it is time to “get in!” The Wallet Doctor is not only sought after for investment advice and coaching in stock investing but also in futures trading and real estate investing. He also teaches investing in Spanish and Portuguese. For more information visit Dr. Brown’s site at www.BonanzaBase.comor sign up for his investment tips at www.WalletDoctor.com


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How Check 21 affects you

By John Thomson



The Check 21 Law is the new federal law for financial institutions and has taken effect last October 28, 2004.

Before the Check 21 law was enacted, your paper check had to be physically transported from where the check was paid out before it could be deposited to the financial institution. Now, even if it has always been prudent for you to keep money in your account to pay for the checks you’ve issued, this law makes it imperative.

Here are some of the other effects The Check 21 Law will have on you and fellow consumers.

You will no longer receive the original paper checks you issued, as your bank won’t have these.

The probabilities of your checks clearing sooner have increased. If you don’t have funds to cover this amount, your check will bounce. So don’t make out a check when your checking account has insufficient funds, you’ll be severely penalized.

On the minus side is, you will not be able to access the funds you’ve issued a check for, as the new law doesn’t include shorter check hold times.

Because of the shorter time in process the checks, your banks will be able to save money in processing your checks, but they are not required under the law to share these savings with you.

For each kind of copy, your check will have different rights attached with it. For instance, Check 21 has created a new paper copy of an electronic image of a check and is called the "substitute check." This substitute check can be a legal equivalent of the original check, and right attached to this, is that only a substitute check triggers your right to recredit of disputed funds.

The regular copy of a check does not have this same kind of protection. If you ask for a copy of a check, your bank can send you an ordinary copy instead of this special kind of copy which triggers legal rights and protections unless you specifically ask for the substitute check.

A second bank other than your issuing bank can have your original check and under this law, has the right to decide if it will keep or destroy your check. Before enactment of Check 21, your own bank could decide how long they should keep your original checks, if you didn't get these back together with your monthly statements. Under Check 21, the bank of the person you wrote the check to may decide when to destroy your check.

Under the Check 21 law, you can have funds of up to $2,500 recredited to the your account in 10 business days if the check is paid twice, paid for the wrong amount, or otherwise paid in error. However, a gray area exists, does this new right apply when a paper substitute check is used in the processing of the check but is not returned to the consumer? The regulations apply this recredit right only to the consumer who was provided with a substitute check. If the check was electronically processed by all the banks it was routed through, and the consumer was not provided with a substitute check, then the check remains under state check law.

If you want to safeguard your rights, you can request for a return of “substitute checks" you issued together with your monthly checking account statements. One possible difficulty lies in the amount you may pay in getting these checks back, change banks if these are too high!

In essence, what the Check 21 federal law has done is shorten the gap financial institutions take in processing checks. This new law has enabled financial institutions to scan paper checks and to send images of these same checks for electronic processing. This law is an efficient and faster way to process check payments.

If you need information that is more detailed about your rights on the Check 21 law, access the Federal Reserve Bank website and request for these materials:
Consumer Guide to Check 21 & Substitute Checks and what you should know about your checks.



About the author:
John Thomson is webmaster at http://www.business-personal-checks.comwhere check information is a click away. Easily find the checks for you at http://www.business-personal-checks.com


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