When you invest or save your money, there are a number of different places where you can put it including traditional savings accounts. You can also click here for more options to save.

As you make your choice regarding where to put your cash, you may have a number of different concerns about how much interest, if any, your money will earn and what fees you will be charged.

In many cases, you will also have concerns about whether it is possible to get your money out of your investment or to withdraw it if you need to.

When you put your money into an ISA or into a savings account, the purpose of putting the money there is to save it. This generally means that you aren’t supposed to be taking money out on a regular basis. If you are looking for easy access to your money and the ability to withdraw cash an unlimited number of times, you would be better suited to selecting a checking account.

However, while you aren’t supposed to be withdrawing money from savings accounts on a regular basis, this does not mean that it is impossible to do so in every case.

The Rules for Your Account

The rules for taking money out of an ISA or out of any type of savings account will vary depending on the type of account you have and on the rules from the specific bank or lending institution where your account is held. It is, therefore, important to check the policy in the location where your money is invested or being held.

As a general rule, you will find that in most cases, you are strongly discouraged from withdrawing funds, even if you are not outright prohibited from doing so.

Discouraging Withdrawals

One of the main ways that withdrawals are discouraged, even when permitted, is by charging a fee for withdrawal. When you take money out of a savings account, it is common to face these fees, which can vary. Other accounts will impose a minimum balance limit and charge fees if you dip below it, which is also a contributing factor in discouraging you from taking money out.

When it comes to ISAs, regular withdrawals are also discouraged by the fact that there is a limit on the money that can be deposited. This limit does not go up or change if you take money out. This means when you do withdraw your funds from the account, you are giving up the opportunity to have your money stored within it and this opportunity can result in a loss of money that you otherwise would have had.

If you intend to withdraw money from your ISA or from any type of savings account, you should first find out what the rules are. If there are limits or restrictions, or if you will be charged high fees, it might be preferable to consider finding alternate sources of cash whenever possible and leaving your invested money safe and sound where it is.

While you can continue to contribute to your Roth IRA even while you are not living in the US, the rules and penalties will be somewhat different. First, you will only be able to maintain your Roth IRA for as long as you are are a US citizen. If at anytime you decide to apply for citizenship in another country, you will need to cash out your Roth IRA. Depending on where you decide to live, you may be able to withdraw and convert your Roth IRA into a foreign equivalent investment account.

Those that dual citizenship in the US and in another country will need to consult with a financial adviser in their home country. Even if you are able to cash out a portion of your Roth IRA in the United States with no penalties, it is possible that you will be responsible for paying taxes in your current country of residence.

For instance, Roth IRAs can be used by first time homeowners if they purchase property after their accounts are established. However, if you are living in the UK any withdrawal from your Roth IRA will be taxed as if it were a pension. This is true whether you are buying a property for personal or investment purposes. You can use a buy to let mortgages calculator in order to see if purchasing a rental property will yield enough profit to justify withdrawing from your Roth IRA early while residing in the UK.

Although there are some exceptions, living abroad while contributing to a Roth IRA can be the most effective way of maxing out your contributions each year. Those that plan to move to another country for a year or more for job related purposes are able to get the maximum benefit.  If your annual salary is $91,500 or less, you will not be taxed in the US. US citizens living abroad with their spouses get to write off a total of $183,000 per year before being held liable for any federal taxes. Of course, you may also be responsible for paying taxes in whatever country you are living in, so it is important to do your research before making a move.

US residents with marketable job skills or a college education can gain financial stability by looking for employment in countries with low taxation rates. First, you will need to establish your Roth IRA and be in a position to contribute the maximum amount each year. You can use online calculator mortgage rates to see how the housing market is fairing back home, then make a withdrawal from your Roth IRA to pay down your mortgage note.

Unless you plan on giving up your US citizenship prior to your Roth IRA maturing, the tax benefits that come from working and living abroad are unparalleled. You can establish a Roth IRA for yourself, your children and your spouse, avoid penalties and create a stable future for your entire family. Unlike traditional college and retirement funds, your Roth IRA can be used for just about any purpose after it has matured. If you have been offered a position in a foreign country, find out how you can make the most of your finances before you make a final decision.

With the economy being what it is, it’s crucial for everyone to have a budget. But like new year resolutions, budgets are often forgotten a few days after they are made – and soon enough we are again overspending.

This time I will stick to it. How many times have that penned through? What most people don’t realize is sticking to your budget is more about changing habits than strengthening your willpower.

The good news is plenty of psychological studies have been done on the subject of changing habits. Here are some lessons we can learn from them:

Willpower is a Limited Resource

Discipline alone will not make you stick to your budget. If it will, everyone would have no problem sticking to their budget. The reason why discipline doesn’t work is because willpower is a limited resource. Studies have shown that while a hungry man may resist a bowl of freshly-baked cookies, his performance on other willpower related tasks – like doing his job – would suffer.

Yet how many of us linger in the shopping centers, promising that we are only “window shopping”? Window shopping may not cost you the money, but it does cost you willpower when you spot something you like. And sooner or later, you’ll snap and buy it “just that one time”. If it’s not that original thing you like, it’s that other thing down the aisle.

And before you know it, you’re heading home, guilty of the new purchase.

Control Your Environment

So instead of controlling yourself, why not control your environment?

Avoiding shopping centers and other temptations would be the first thing to do. Studies have shown that it’s literally “out of sight, out of mind”. That also applies to how much you eat, by the way.

And that is why advertisers spend millions to get in front of their customers! Consistent reminders work to get people to buy more!

But perhaps most important is you don’t draw too much excess cash. Studies have shown that we are more likely to spend – and spend more – if it is easy to do so. By drawing excess cash, you’re more likely to spend on “little things” like a cup of coffee, or snacks.

While spending on these things are not necessarily a bad thing (not if you can afford it), they can bring you out of your budget if you’re conscious of what you’re spending!

And if you have trouble controlling your spending, use a debit card instead and put limited funds into that account… which brings us to the next point:

Automate Your Finances

The best way to control your finances is to automate. Let no human emotion interfere so your manage your cash like a machine.

Every month, automatically divide your salary into several accounts. Some employers allows this and I recommend you take them up! Defaults matter when it comes to your behavior. One study found that just by automatically enrolling employees into 401K by default, contributions increase from 40% to almost 100%.

In other words, most people are not consciously thinking about 401K. If the box was ticked, they just left it there. If it weren’t ticked, they also left it as it is. This “default” behavior is especially problematic is cases like subscriptions. How many magazine or gym subscriptions that you left as they are just because it’s too difficult to cancel? Companies do that intentionally – if you want to cancel, you have to call them up, or worse, speak to a salesman in person, in the name of “security”, of course.

If your employer doesn’t have the option to automatically deposit to different accounts, do it yourself! Open several accounts with your bank (make sure it’s free), and make dividing your salary the first thing you do every month (or whenever you receive your pay)!

Associating Emotions

Having said don’t let human emotions interfere, it is possible to leverage it to your advantage.

Think about the things you hate. Would you ever do it? No. The reason is simple: because you associated an emotion (hate) to that thing. If you’re a shopaholic, you probably associated an emotion (joy) with shopping. Think about it. Most shopaholics feel empty once the stuff are dumped on their beds. What they wanted is the thrill (emotion) of shopping.

So why not associate a negative emotion with breaking your budget? Does only a “weak” person stray from their budget? Repeat that sentence to yourself on a daily basis.

Budget For Fun

But let’s face it, we live in a world of advertisements. It’s not easy to control your environment even if you want to. Associating negative emotions with breaking budgets is great but the ads are associating other emotions that make you buy!

Remember, willpower is a limited resource. Instead of resisting them all, why not set a budget that includes a “fun” fund! If you need to save every penny for 5 years to buy your first home, studies have shown that it’s 99% likely you’re going to fail! Worse, you’re going to resent the process and quit altogether!

Instead, why not save a little less a day and take 7 years instead and spend the rest of the money for you to have fun? It sounds counter intuitive but by having fun in the process, you’ll not only have the motivation to continue, you’ll also be able to “recharge” from controlling yourself.

Emergency Funds

Last but not least, always save for an emergency fund. Things happen in life that no one can predict – your car breaks down, the tap leaks, you may get hospitalized… the list goes on. These are emergencies and they are one of the leading budget-killers for everyone.

The problem is few of us have an emergency fund. So when an emergency shows up, they have no choice but to dip into their savings. “But won’t the net result be the same?”

Financially, yes, the net result is the same. But when you dip into your savings for something you don’t want, it also cost you psychologically. It makes the process of saving not so fun (all these money I saved to repair the car? I could have bought that Gucci!) and you know what happens if you associate a negative emotion with saving.

Ally is part of the team that manages Budgeting Spreadsheet and How to Save Money, which are personal finance guides, based in Sydney, Australia. B

For years now, the United States Postal Service has been in serious financial trouble due to the advances in Internet communication and competition from businesses like FedEx and UPS. Because former customers can now pay bills and communicate with friends with a device like a prepaid phone, the Post Office has been losing a lot of money on postage.

There have been several cost cutting measures implemented in order to keep the struggling company afloat. Many career positions have been terminated, there has been talk of transitioning to a shorter delivery week, and closed down several branches of operations. Now the USPS is looking to stop paying into their retirement accounts in order to stay above ground for a couple more years.

The Postal Service has been putting $115 million into the Federal Employees Retirement system every two weeks since the 1970′s, while maintaining employee deductions into the fund. According to The New York Times, there is a $6.9 billion surplus in the fund because the Postal Service has been overpaying the fund. By taking a break from paying into the system, the Post Office can allocate money to other areas they need to pay into.

Most agree that the retirement funding slash isn’t a stable solution for the Post Office to continue its operations. Instead of simply cutting out money from their retirement fund, they need to get a better grasp about what goes on in the warehouses, post offices, and mail routes across America. The employees of the Post Office were promised certain benefits when they signed contracts to work. Union representatives need to collectively bargain and get to the bottom of the retirement investing freeze.

Democrats in Congress and postal regulators both agree that refunding retirement money back to the Post Office is the best decision to make. While they might be owed those funds back, there is no denial that it is only a short term solution. According to Ed O’ Keefe of the Washington Post, transferring the funds back to the Post Office would require the government to start taxing citizens more or borrow money from China.

While technology and competition are harming the post office, bad management and clumsy hiring practices are draining the remaining resources from the business. By running things more efficiently, cutting out all of the red tape involved with the agency, and hiring more diligent workers would cut costs and make it easier to pay retirees. Ultimately the Post Office needs to act like a real business instead of as an arm of the government.

Many people are very concerned with the state of Social Security these days and wonder if it’s even a viable entity anymore. Then on the other hand we all hear in the news about the latest company that’s decided to cut pensions and benefits, and there’s nothing that anyone can do about it. This is an unfortunate reality that only goes to show you some of the potential risks that face retirees today. This is why so many have taken it upon themselves to manage their own retirement accounts and start IRAs. SEP and Roth IRAs are a very popular forms of investment and here’s what they are and the difference between them:

A SEP IRA stands for “Simplified Employee Pension Investment Retirement Account.” It’s a retirement account that’s used widely by self-employed people that don’t have a company to set it up for them. It’s a great investment vehicle for small business owners and it takes a lot of the hassle out of the process. Traditional IRAs are typically filed by companies with departments that are familiar with the very complex investment process. The SEP IRA takes much less effort and expense to manage. It’s also a lot easier than a 401k. Though it’s similar to a traditional IRA, the owner can decide which funds and the amount of contributions you invest. Also, you can decide how much will be deducted from your taxes.

On the other hand you have Roth IRAs. These are also another popular form of retirement investment. There is, however, one great advantage that a Roth IRA has over the other forms of IRA’s. When you start one of these accounts, you pay the taxes up front. So let’s say that you take a thousand dollars and you put it into your Roth IRA account; you’re taxed on the principal going in. Whatever interest you draw on the money throughout the life of the account is totally tax free when you withdrawal it. You’re still paying taxes either way, but with a Roth IRA, you end up paying much less.

Whether it’s a traditional, SEP, or Roth IRA, all of these are pretty solid investments. There’s little to no risk involved and it’s not like you’re gambling with the money you put it. You don’t have to worry about losing everything in a big stock market swing. It’s important to have a good retirement calculator to figure out how much you’re going to need for later on and having an IRA account will help set you on the path of financial security for when the time comes that you need it most.

Thinking about inflation should be a big part of your retirement planning. You will need to understand inflation and the effect that it could have on your savings before you retire. Keep in mind that you have no control over inflation and that it’s possibly the most serious risk there is to your future financial security.

What inflation means to consumers is that what costs a dollar today will cost half again or two times as much in the future, depending on rates of increase. The bottom line is that your money will be worth less in the future than it’s worth today. This means that, as times passes, you will need more money to support yourself at the same level that you enjoy today.

While you’ve been working, you probably won’t have noticed inflation. You probably got yearly increments in your salary which camouflaged inflation. But as soon as you retire and are living on a fixed income – believe me – you’ll notice it! When thinking about retirement planning investment don’t forget to take inflation into account. A failure to do so could mean future financial doom!

You may ask “How Can I Predict Inflation?” You can’t. You can only make an educated guess. If you were to ask a retirement planner, he or she would most likely quote you an inflation rate of 3% because that’s the rate that’s been going on for the past 20 or 30 years. But looking at today’s unstable economy, it’s probably smarter to look back to the 1970s. In the 70s, prices doubled in ten years. What that signifies is that a 1970s dollar was worth 50 cents by 1980.

The 2008 credit crisis have made future inflation particularly hard to predict. The economic outlook has additionally become extremely rocky due to other things such as the huge numbers of Baby Boomers going into retirement, the unpredictability of the future of Social Security, and recent bank and financial institution bailouts.

So, Can I Afford to Retire?

A good place to start retirement planning is to find a free financial retirement calculator online. Apply a variety of inflation rates and you’ll get a variety of possibilities. Don’t use the lowest rate of inflation. This will cause you to underestimate how much you need to retire.

Even using a 3% rate of inflation, which is what most planners use, 24 years is all that it will take for the cost of living to double. This means that in 24 years you’ll need two bucks to buy what you could buy for a dollar today. So think how bad it could be for someone who figures how much they’ll need to retire using a 3% rate of inflation if the rate of inflation turns out to be more like 5% or 6%. Take this into consideration when calculating how much you’ll need to have to retire.

If you user higher inflation estimates, perhaps you’ll save too much. That’s not a bad thing. Big savings will keep you financially comfortable. And if worse comes to worse, you’ll be leaving your heirs a healthy inheritance!

Consider Inflation When Investing

Another way to secure retirement planning that minimizes the risk of inflation is to find investments that will grow as time passes. It was common, in the past, to invest in growth stocks until the time of retirement and to then switch to bonds that were more stable but had lower returns. This strategy has become chancy since the market declines of 2000 and 2008.

Investing in rental real estate – either for appreciation or for the income from the rental – or in Treasury Inflation Protection Securities (TIPS), specialized securities that adjust as inflation adjusts, are alternatives to investing in stocks. No matter what you decide to do, you should think carefully before you do it.

Wondering “When can I retire?” Well, the truth is, that if you don’t plan for an adequate amount of inflation, the purchasing power of your savings is going to be dramatically reduced. If you retire when you’re 65, you may have 30 or 40 years to live on your retirement savings. You should plan on the buying power of those savings to be cut in half at least once, and maybe twice during those years.

As unpredictable as inflation may be, one can predict that it will rise in the future and take a bite out of people’s savings. That can take a toll on your future security. Make sure you take some very valuable time to factor inflation into your retirement planning. This will not only make your future secure, but the future of your family secure as well.

About the author: Mark T. Harris lives in Nevada with his wife and two grown children. He spends time traveling and surfing the Internet, when not just enjoying his money! Mark speaks about retirement planning and wealth building.

If you’re still not sure if the Roth IRA conversion is right for you, here is a list of conversion calculators that can help with our decision.  Disclaimer:   all calculators are created different, so it’s still important to meet with a professional to see if the Roth IRA conversion is right for you.

photo credit: Horia Varlan

Is the Roth IRA Conversion Right For You?

If you have a traditional IRA and are considering converting to a Roth IRA, here are a few factors to consider:

• A conversion may be more attractive the further you are from retirement. The longer your earnings can grow, the more time you have to compensate for the associated tax bill.

• Your current and future tax brackets will affect which IRA is best for you. If you expect to be in a lower tax bracket during retirement, sticking with a traditional IRA could be the best option because your RMDs during retirement will be taxed at a correspondingly lower rate than amounts converted today. On the other hand, if you anticipate being in a higher tax bracket, the ability to take tax-free distributions from a Roth IRA could be an attractive benefit.

There is no easy answer to the question: “Should I convert my traditional IRA to a Roth IRA?” As with any major financial consideration, careful consultation with a professional is a good idea before you make your choice.

Roth IRA Conversion Calculators

• Charles Schwab Conversion Calculator
• Calcx Conversion Calculator
• MSN Money Conversion Calculator
• CalcTools Conversion Calculator
• Vanguard Conversion Calculator
• TIAA-Cref Conversion Calculator
• Bankrate Conversion Calculator
• Bank of America Conversion Calculator

photo credit: lgkiii

Business owners who claim deductions that total more than their income in a given year may record a net operating loss (NOL). Net operating losses may result from high startup costs associated with launching a new business, large first-year depreciation deductions, or significant business losses for existing businesses. An NOL can be carried backwards (for a maximum of five years) or forward (for a maximum of 20 years).

For taxpayers with unused NOL being carried forward for tax purposes, a Roth IRA conversion may be an attractive strategy since the income generated from the conversion could be offset by the NOL. In essence, one could convert tax-deferred retirement assets to a Roth without any tax consequences for that particular year. For example, let’s assume that a small business had a NOL of $30,000 in it’s first year of starting up.  If that business owner had a decent chunk in a old traditional IRA account or 401k, they could use that to offset the loss.   Now they have a nice chunk of tax free savings for retirement.  Complex tax rules govern reporting an NOL, so consult with a tax professional for guidance.

How to Open a Roth IRA

If you satisfy the Roth IRA eligibility rules, then the next step is to open a self directed Roth IRA account and start taking advantage of those tax free savings. You have the option to open a Roth IRA at a brokerage firm (either brick and mortar or online), directly at a mutual fund company (think Vanguard) or at a local bank. Many people confuse the Roth IRA as an investment and want to know what the rate of return is.

Where to Open a Roth IRA

You need to keep in mind that a Roth IRA can be invested in stocks, bonds, or in a Certificate of Deposit (CD). Your investment options greatly depend on where you open your Roth IRA. Opening it at a discount brokerage firm often gives you the most flexibility as most discount brokers allow you to invest your Roth IRA in stocks, bonds or ETF’s.  You can easily calculate the tax advantages of traditional and Roth IRA’s using personal tax software. There are also affordable options available online to assist in organizing an investment portfolio, such as Quicken and Mint.com. Be sure to double check what the custodial fees are.  It will usually run you about $50 at a brick and mortar brokerage firm compared to $10 or less online.

Opening Roth IRA at Mutual Fund Directly

Also, keep in mind that if you open a Roth IRA directly at a mutual fund company you are limited to that company’s mutual funds.  Company’s like Vanguard or Fidelity aren’t as bad because you have several options to choose from.  Be sure to check to see what options you have in case you ever wanted to switch from aggressive to more conservative.

photo credit: box of lettuce

The major advantage of the Roth IRA is qualified distributions are TAX FREE. Investment earnings are not just tax deferred, as with a traditional IRA, but are tax free. One more time… TAX FREE!

That’s what makes financial planning and retirement planning so dang important for those of you in your 30’s and 40’s. I mean right now you’ve got to be thinking about getting with this program if you haven’t done so already. The Roth IRA will be the single most important move you make towards securing your financial future. Period.

Those that have been contributing to Roth IRA’s and have converted regular IRA’s are licking their chops. If you do the right things now, put together a solid asset allocation and give your Roth account room to breathe and grow, you will be sitting on a large asset that’s completely TAX FREE! TAX FREE!

Qualified Distribution

In order for a distribution or withdrawal from your Roth IRA to be TAX FREE it has to be qualified. For distributions to be qualified, they must not be made until five years after the Roth IRA is set up. In addition to the five year test, a qualified distribution must be made for one of the following reasons:

• the owner reaches age 59 1/2
• the death of the owner
• the disability of the owner
• first time home buyer expense up to $10,000

The mandatory lifetime distributions required with a regular IRA do not apply to the Roth IRA, so you don’t have to begin (paying taxes on the money you are forced to take out) at age 70 1/2. Mandatory distribution rules do not apply to the Roth IRA until the individual’s death.

A person who has had a regular IRA his entire adult life just turned 70 1/2 and has to take his first RMD (required minimum distribution). What’s a good place for someone who is still working to put their money?

That’s right, a Roth IRA .  Because at the time of death, the Roth IRA will pass tax free to their heirs.  Keep in mind that the person still has to have earned income to do so and make at lease the amount to contribute the max ($6,000 for 2009).

Non-qualified Distribution

Lets say for whatever reason you need the money before any of the qualified requirements are met. Sometimes life comes at you fast and you unexpectedly need to take money out of your Roth IRA… it happens. This type of distribution is non-qualified.

Non-qualified withdrawals are subject to income tax and a 10% penalty for premature distribution… and should only be done as a last option. The amount in excess of your original contributions will be includible in your gross income for that year and an additional 10% penalty will be assessed on the distribution amount above the original contribution amount.

(These same penalties apply for traditional IRA’s, except in traditional IRA’s the entire distribution amount is taxed and penalized.)

Please remember there are no penalties or taxes for withdrawing the amount you originally contributed to a Roth IRA… that money can be withdrawn at any time with no consequence, because those were your after tax dollars to begin with.

The overwhelming majority of all Roth IRA distributions are qualified. If you are in a desperate situation and need to take an unqualified distribution from a Roth IRA (or a regular IRA for that matter) then chances are you’ve got bigger problems than premature distribution penalties.

So in summary… qualified distributions good, non qualified distributions bad…