The Federal Trade Commission (FTC) advises consumers who order their free annual credit reports online to be sure to correctly spell annualcreditreport.com, or link to it from the FTC’s website to avoid being misdirected to other websites that offer supposedly free reports, but only with the purchase of other products. While consumers may be offered additional products or services while on the authorized website, they are not  required to make a purchase to receive their free annual credit reports.
The FTC has received complaints from consumers who thought they were ordering their free annual credit report online. Some consumers responded to TV ads, email offers, or simply searched online.

This is a great free service to check out your credit history but be aware that you will not get your credit score. If you want your credit score you will have to pay an additional fee of around $8 while you are getting you free credit report.

What could happen to your nest egg

Due to the tax effect, withdrawing funds from a qualified retirement plan is not like taking cash out of your bank account. A 401(k) withdrawal is taxed as ordinary income, and if you’re under age 59½, a 10% penalty usually will be added to the tax. Borrowing from a 401(k) generally is preferable to simply withdrawing the funds, because no tax applies to the loan proceeds.

However, many plans either restrict their participants’ borrowing or don’t allow borrowing at all. Where loans are permitted, they’re individually limited to the lesser of $50,000 or one-half of the borrower’s plan assets. Most 401(k) loans require interest at one or two points above the prime rate, and the loans must be fully repaid within five years, unless the proceeds are applied to a personal residence. The borrower must sign a legally enforceable loan agreement and adhere to the agreement’s terms.

If you leave your job with a 401(k) loan outstanding, you’ll generally have 30 to 90 days to either fully repay the loan or face being taxed (and penalized, if you’re under age 59½) on the outstanding balance. When you repay the loan, you’ll be paying with after-tax dollars, and you’ll be taxed again on those dollars when
you withdraw them upon retirement. And unlike ordinary mortgage interest, the interest paid on a 401(k) loan used to buy or improve a home is not deductible.

Borrowing from a 401(k) is an especially bad idea for funding an ongoing cash need. For example, using the proceeds to offset a hike in your adjustable mortgage payments would only compound the problem. You’d be burdened with an additional loan, the proceeds eventually would run out, and the mortgage payments almost certainly would not go back down.

Finally, borrowing from your 401(k) tends to defeat the purpose of participating in the plan in the first place — to accumulate funds for a comfortable retirement. Removing money from a fund slows its growth, particularly since most people must cut back on current contributions in order to make repayments.

June 16 - Second quarter 2008 individual estimated tax is due

July 31 - 2007 retirement and employee benefit plan returns are due for calendar-year plans

September 15 - Third Quarter 2008 individual estimated tax is due

The contribution limit for the 2008 tax year increased from $4,000 to $5,000. Plus, if you’re age 50 or older, you can add a “catch-up contribution” of $1,000. The contribution deadline for 2008 is April 15, 2009, but you may earn more by contributing earlier.

Finally, a word about the new economic stimulus payments the IRS had been distributing: These rebates aren’t available until you’ve filed your 2007 return, so taxpayers with extensions have to wait. Certain individuals who normally aren’t required to file returns - such as those receiving social security benefits - may follow a simplified filing procedure.

Just remember it is almost never too late to start saving for your retirement

Congress previously approved a one-year deduction for mortgage insurance premiums in 2007. A full deducation was available for taxpayers with and AGI of $100,000 or less. Once income exceeded $100,000, the deducation was phased out.

The new mortgage relief law extends this tax break for three years through 2010. Therefore, you may qualify for a 2008 deducation for amounts paid or accrued this yeat.

The Kiddie Tax

Under the kiddie tax, a childs investment income above a threshold ($1,800 for 2008) is taxed at the top tax  rate of his or her parents. Prior to this year, the kiddie tax applied to children under age 18.

  But now the rules have changed.

Beginning in 2008, the kiddie tax generally applies to your children who are under the age 19 or full-time students under age 24 if they can be claimed as your dependents.

To minimize the tax damage, try to keep investment income of children below or near the $1,800 threshold. For example, you might have a child switch funds into a tax-deferred or tax-free investment vehicles.

The mazimum tax rate on net long-term gains and qualified dividends for taxpayers normally in the 10% or 15% regualr income tax brackets is reduced from 5% to 0% for 2008. Under current law the 0% rate will remain in effect through 2010. This may be a good year to have your children sell securities that have appreciated in value. However, such sales may trigger “kiddie tax” complications.

This tax break isn’t strictly limited to lower-income taxpayers. If you can push your taxable income for 2008 below the cut-off point for the regular 25% tax bracket - perhaps by increasing charitable gifts or 401(k) contributions - your long-term capital gains and dividend income could qualify for the 0% rate

The challenge is that the cost of a college education continues to rise considerably faster than inflation. Four-year private college prices increased 5.9 percent from last year and four-year public colleges increased 6.3 percent from last year. If these increases continue, in 18 years, a college education is expected to cost over $145,000 for Public colleges and over $325,000 for Private colleges.
How to Save?
There are a number of possible ways you could start saving for a college education but the two most popular tax advantaged options are the 529 and Coverdell plans.

529 - A 529 plan is a state sponsored, tax advantaged savings plan. While the specifics of the plans vary by state, they generally allow for the education savings to grow federal and state tax free. 529 plans generally have high contribution limits and can be used for a variety of educational expenses in addition to tuition such as housing or books. While the plans are state sponsored they are almost always run by large financial institutions and the investment choices are sometimes limited to a specific set of investment choices offered by the state. For example, the California “ScholarShare” College Savings Plan, is managed by Fidelity Investments and offers a maximum of 24 different investment options. The “ScholarShare” College Savings Plan allows contributions up to $60,000 ($120,000 per married couple) per beneficiary in a single year.
Shop around for the best state plan - you are not limited investing in your state of residence. Be sure to investigate the amount of “load” or management fees that are charged by the financial institutions for each state plan. High fees can significantly reduce your college nest egg.
Coverdell Savings Account - A Coverdell Education Savings Account (formerly an Educational IRA) offers many of the same tax advantages of a 529 plan with some important differences. A few of the differences include: a significantly lower contribution limit ($2,000 per year per child) and significantly greater flexibility of type of investment vehicles (e.g. stocks, bonds, mutual funds, etc..)
When should I start saving?
Staring down that big future tuition number can be daunting but the most powerful effect you can take advantage of is the power of compounding.  The two factors that affect compounding are time and rate of return. Start saving as soon as possible and find an investment vehicle that maximizes your return for a reasonable amount of risk. A $10,000 investment in U.S. Government Bonds today will be worth $24,700 in 20 years. Not a bad return and certainly a low risk choice but the return pales in comparison to higher return alternatives.

If the same money was instead invested in a broad market index mutual fund and if that fund returns something close to the long term historical average for equity indexes then that $10,000 would be worth over $46,000. Of course, investing in mutual funds is more risky than government bonds, and there are no guarantees, but a long term investment horizon can help mitigate any short term market fluctuations.

In summary, there are many good tax-deferred ways to save for your child’s education and you should start saving as soon as you can – even a little can go a long way with compounding. There are also a number of resources on the web to check out such as:

• collegesavings.org - Good information on 529 plans including what types of plans are available by state
• savingforcollege.com- Good general overviews of college saving information
• collegeboard.com – The SAT guys and a great source of statistical information

Since Traditional IRA is an approach taken with an employer sponsored plan, it allows the employee/investor to invest more money over the life of the IRA. This is what makes the plan more lucrative in actual practice even though Roth IRA may have sounded more impressive initially. Here is an interesting example I found.

If an investor/employee invests for 30 years for an 8% return in Traditional IRA, he will accumulate approximately $300,000 if he has been investing $200/month. On the other hand, if we assume a 20% tax, the Roth investment will be $160/month (after tax) which will accumulate to approximately $240,000.

Obviously, one will still need to pay taxes on the Traditional IRA. Normally, for retired people, the tax bracket reduces from 20% to 10 % (since they have already paid their mortgages, have less income, and other such factors). Hence, after withdrawal, the money from Traditional IRA will be approximately $270,000. This is almost $30,000 more than Roth IRA.

It is for this reason that most experts advise to contribute to a Traditional IRA. Even though it is based on many assumptions, it usually turns out to be the better financial choice. Since these assumptions may not be true for everyone, it really depends on every individual’s situation.

1. IRS was known as the Bureau of Internal Revenue when it first came into existence. In the 1950’s the name was changed to the Internal Revenue Service.

2. The initial income tax was only 3% tax on individuals making over $800. Today the top tax bracket consists of a 35% tax.

3. The IRS was created by President Abraham Lincoln during the Civil War to help pay for the military expenses.

4. In order for the IRS to print the necessary forms and documents over 300,000 trees are cut down every year.

5. The IRS collected $2.2 trillion in 2006, with $1.2 trillion coming from just federal income taxes.

6. Prior to the introduction of the Taxpayer Bill of Rights in 1998, the burden of proof was put entirely on taxpayers, meaning taxpayers had to prove themselves innocent.

7. The IRS sends out an average 8 billion page of paper every tax season. If all the pieces of paper were laid out end-to-end, it would wrap around the earth 28 times.

8. Over 229 million income tax returns were filed with the IRS in 2006.

9. The federal government spends $200 billion per year on federal tax compliance, which is more money than it takes to produce all of the cars in the United States.

10. The IRS employs over 114,000 people. That’s over double as many as the CIA and five times more than the FBI.

11. The United States tax systems is widely known for being confusing and difficult to understand. Therefore, over 60% of taxpayers seek professional help preparing their tax returns.

12. The average family pays over 38% of their total income to the IRS, which is more than the average family spends on food, clothing, and shelter combined.

13. The IRS has a whistleblowers program designed to help catch tax evaders. In 2005 they paid over $27 million to informants that resulted in nearly $350 million in revenue.

14. The federal government spends about $10 billion per year to pay the IRS’s 114,000 employees.

15. Tax Day, the date when tax returns must be filed with the IRS usually lands on April 15th. However, if the 15th is a weekend or holiday, Tax Day is moved to the next business day.

1. Deposit – This is a simple numbers game. Two people sharing the burden is much easier than one person bearing all the burden. Also, the bigger deposit you put on a mortgage, the more money you can borrow.

2. Borrow more money – This is in conjunction with the above reason. With two or more incomes, the lenders are willing to offer more money which can be used to buy a bigger house.

3. Joint Ownership – One feels much more comfortable sharing the financial responsibility towards a big mortgaged sum.

4. Investing In Property – When you buy a house, not only are you buying a place to live, but also you are investing for your future. Buying a property can be an investments with great benefits over a period of time.

On the flip side however, since a joint mortgage is drawn in the names of two people or more, each person will have equal responsibility and liability. Hence, it’s always advisable to draw out a legal agreement to cover for any kind of possible eventuality.