Wednesday, June 27, 2012

Should I take a tax break now or later?

I was thinking a little more about investing in my Roth IRA. Last year I was very motivated to full fund my IRA, but this year I am not nearly as excited. I only make about $20,000 in take home pay a year, so fully funding my IRA would be about 25% of my take home income. It's tough to dump a week's worth of my earnings each month into an account that might lose money or I may never use again (what if I die before I retire?). Another thought I had is now that my husband is making more money that means more taxes. I don't know how successful I was at suggesting he change his tax allowances from a 2 to a 1 because I have a feeling they won't take out enough if he left it at a 2. So I had an idea. I should maybe look into a traditional IRA instead of continuing to fund my Roth. I wouldn't have to invest as much money because I could deduct some of that on my taxes. So if I invested $5,000 in a traditional IRA, our taxes would be about $1,250 less. Putting $3,750 in the IRA doesn't hurt quite as much as $5,000. Yes, I know I'd owe taxes on it when I withdrew it, but honestly I kind of think we could be in a lower tax bracket during retirement than we are now or least it'll be the same as it is now. We won't need as much income if we don't have a mortgage and the expenses of commuting to work every day. So anyway, I thought I'd take a look at seeing if I could open a traditional IRA and saw this:

My husband and I combined made just a bit over the $100K last year, and with this new job our combined income will likely be in the $100,000 to $110,000 range going forward. So at first I thought it looks like the money invested into a traditional IRA would not be tax deductible anyway. According to this post at, it says the tax deduction is phased out if your income is between $90,000 to $110,000 (after $110,000 you wouldn't get any deduction) and your employer offers a retirement account. Well the first thing I wondered is what if your husband is offered a retirement plan at work but you are not?

After some more research, it looks like I might have found the answer at this website because it says "if you are married filing jointly and your spouse is covered at work, then your deduction limits start phasing out at an adjusted gross income of $169,000 and top out at $179,000." So that is good news - it looks like I still eligible for a tax deduction if I start a traditional IRA.

Another thing to concider is just like you need to diverify your investments (stocks, bonds, large cap, small cap etc.) tax diversifation is a good idea too. For me currently I have a small Simple IRA from an old job that will be taxed at retirement, but the majority of my retirement is in the Roth IRA. However, when we look at my husband's retirement accounts it is all in a tax deferred 401(k). So is that enough tax diversifaction?

What are your thoughts on this? Is opening a traditional IRA for the tax deduction now a good idea? I know almost all the financial experts suggest opening a Roth over a traditional. But, I'd rather take that tax deduction now.

Tuesday, June 19, 2012

Good news!

Last month I wrote about how I finally got a raise, well now I have even more good news.  My husband is starting a new job on July 2, and he will be making a more money too!  I figure he will be making about $370 more (after taxes) every month, which is about $4,440 per year!  Plus his profit sharing bonus that usually comes in March will be higher as well!  There are only 2 drawbacks.  One is his current job gave him a cell phone and paid for the plan, and this new job won't.  So now we'll have an extra expense every month which I figure will be between $50 and $80 (I'll have to see the first bill to really know for sure).  Also right now we work for the same company (him full time and me as a temp) so we usually carpool to save on gas.  Now we'll each have to drive separately to work.  But the good news is this new job is closer to home, so it shouldn't cost as much in gas. Hopefully this new job is a good fit for him and he likes it.  Now I just need to find a better job too!

PS: I ended making $88.20 at my sister's garage sale.

Thursday, June 7, 2012

Extra Cash Challenge - May Results

Here are my results for May's extra cash challenge.  But first I need to follow up on a couple posts...

I few weeks ago I had asked what I should do with my extra money from my raise. I received 2 votes - one in the comments and one on my twitter page.  Both votes were in favor of putting the extra money towards the mortgage, so that is the plan!

My sister's garage sale is this weekend.  I had posted how I wanted to sell at least 60 things.  Well I didn't count, but I'm pretty sure I did put at least 60 things in the garage sale.  My sister was over at our house at our house earlier this week for our mom's birthday so she took most of the stuff back with her, and I forgot to take a photo first.  I still have a smaller pile of stuff that she couldn't fit in her car, so I'll be bringing that over on Saturday when I go over there to help out. So this is probably not even a quarter of the stuff...

I know you can't really tell what's all in there, but it's mostly clothes, some art supplies and kitchen stuff.  A few years ago I was trying to make money on Ebay.  I hated the idea of having to go to work after one of my temporary jobs ended, so I wanted to try selling stuff on ebay.  I would shop at garage sales and then resell items on ebay.  Sometimes I'd make a profit and sometimes I wouldn't.  I think if I were to add up the time it took to work on it between shopping, listing, packaging and shipping, I probably only made like a $1 per hour.  I still ocassionally sell stuff on Ebay, but I haven't for a while. Lately I feel like if I can't make at least $3 profit then it's not worth my time.  Now that I have a regular full time job I can't go to the yard sales on Thursday and Friday's like I used to.  By the time Saturday comes all the good stuff is gone.  So anyway, I had ordered several different size boxes and padded envelopes for my "Ebay business", but now they are taking up a lot of space in our closet, so I put some of those in the garage sale. I still kept a few of each size but I have come to the conclusion that I won't be making a living doing Ebay sales - at least not anytime soon.

So as you can guess I didn't make any money from Ebay in the extra cash challenge this month, but here are the rest of my extra earnings.

Part-time job: $19.81
Advertising: $232.91
Amazon: $8.52

Total: $261.24

Last Month: $213.77
Difference from last month: + $47.47

So I had another great month and a new record for ad income!  The only disapointing thing is 96% of that income came from my big blog, and I expect that topic to not get as much traffic in a couple months. But I'll take it while it lasts!  June is looking good so far and I also should have some garage sale earnings to report next month too.