Before you get overly excited, let’s look at one aspect that may impact just how much of that “free” money you get to keep.  All the matching money and earnings from that money are subject to a vesting schedule.

Vesting means that you get to keep the matching money even if you are no longer employed by the company.  You typically are not vested right away; instead you vest either on a gradual scale or on a cliff.

Gradual Vesting – This is when you become vested a certain amount per year that you work for the company.  While the scale varies from company to company it must meet the following requirements:  20 percent vested after 2 years, 40 percent after 3 years, 60 percent after 4 years, 80 percent after 5 years, and 100 percent after 6 years.

Cliff Vesting – Instead of becoming vested a little bit each year cliff vesting allows you to become vested all at once at a specific number of years of service to the company.  This looks like: 100% vested in employer contributions at 3 years.

Other Valuable Information:

• There are a couple exceptions to having to wait to be vested.  In the Simple 401K, and the Safe Harbor 401k you are immediately vested.  There are also some more detailed exceptions that can apply, so check your company policy for more specifics.
• Your plan documents for your 401K will give you the specifics for your company.  You can get these on the website for your 401K or from your company retirement person.
• The vesting only applies to the company contributions, not your own personal contributions.  You are automatically vested in both your own contributions and the earnings from your contributions.
• What this does not guarantee – this does not promise that the dollars you put in or that your company matches will maintain their value.  You are still subject to market risk.
• Vesting requirements and schedules may be different for other types of retirement programs, such as SIMPLE IRA, SEP and pension plans.
• The requirements for vesting are actually set by Employee Retirement Income Security Act (ERISA).  You can find more detailed information at Employee Benefits Security Administration.

The problem with using this approach with anything that relates to personal finance is there really is not one right answer.  Yes, there are some basics but ultimately your personality comes in to play when determining what is right; thus the “personal” part of personal finance.

When selecting a college you went through a list of criteria you wanted to know about: does it have my major, is it accredited, how far from home is it and how many students attend.  Each of these had a specific answer, yet when two different students see the list they will have two different opinions of it is a good school.  A school with 25,000 students might be perfect for one but way too big for the other person.

When looking at a basic list of characteristics of credit cards you might not consider one aspect good while another person might.  Perhaps you are fabulously disciplined and have no problems staying on budget.  Yet maybe you can’t stay on budget with a credit card because of the ease of splurging.

Your personality factors will go into determining if a credit card is right for you.

So how do you incorporate factual information with your personality?

1. Gather as many hard facts as you can.  Including: what is the interest rate and what are the payment terms.  The more you know the more informed your decision can be.
2. Understand and assess how you would interact with the personal finance item you are deciding on.  For example, I think there are many advantages to investing in individual stocks.  Yet I don’t have the time to commit to the necessary research for quality investing, there for I use mutual funds instead.  This is a personality issue for me, not a math issue.
3. Finally gather all the information from the above two items and make a decision that is right for you.  Please remember that it is okay to change as you get to know yourself better and your life changes.  What is right for 25 year old you may not be right for 45 year old you.  It is also okay to make a mistake – that is how we learn.

Life can be easier when we are able to just be told what to do, but then it is not your life.  Choose what is right for you.

What is a Target Date Fund (or Life Cycle Fund)

These funds are supposed to take care of all the asset allocations for your portfolio for you, so that you don’t ever need to worry about how much you have in stocks versus how much you have in bonds.  As you get closer to your retirement  date your portfolio will get more conservative without you lifting a finger.

The funds create this allocation by investing in other funds, so it is a fund of funds.  For example if you are 80% stocks and 20% bonds, the fund will select a few stock funds and bond funds to create the desired mix.  They will then adjust and re-balance those as needed over the years to maintain the right allocation for your retirement.

The Benefits of a Target Date Fund

• You select the approximate year you want to retire and you are done!  It is a set it and forget it approach to investing.
• Saves time – obviously if you only need to select your year and check out a few other things (see below for those other things), then you don’t have to spend as much time focusing on your investments.  This eliminates the “I don’t have enough time” excuse.

Negatives of a Target Date Fund

(Two side notes: all funds that I discuss will be the 2040 version, I do not own any of these funds and am not recommending them – I selected them for example purposes only so it would be easier to see what I am discussing.)

May not match your risk preference

The fund may end up taking on much more risk than you would normally consider taking in an investment (or possibly less risk).  For example, the John Hancock fund has a 2.2% currency strategy position.  So beyond stocks and bonds it is also investing in things such as commodities and currencies.  Fidelity Freedom has close to a 9% allocation towards commodity/other funds, while the Vanguard fund has no commodities/other exposure.

Many people would consider an investment in currencies or commodities to be very risky and not necessarily want them in their portfolio.   You need to decide your comfort level in being invested in these, obviously the smaller the percentage the less the risk, but it still is there.  (To give you an idea of my comfort level, I only have 3% of our assets in commodities and only added those once the nest egg was big enough that 3% was not going to make or break it!)

Along with investments that you would normally not consider, the funds may also take an allocation percentage (how much you commit to each class of investments such as stocks and bonds) that you would not use.  This impacts you not only today but as you get closer to retirement, as this will adjust.

So if you are comfortable with the allocation today, you may not be as the allocation closer to retirement changes.  For example the Fidelity Fund 10 years after retirement targets 20% in stocks, while the Vanguard fund 10 years after retirement targets 30% stocks.  While as it stands today Fidelity has 72% in stocks and Vanguard has 88% in stocks.  These are fairly big differences in investment allocations for the same retirement date.  (Don’t forget when looking at the current difference that Vanguard is higher in stocks because they do not use commodities while Fidelity does.)

Still Untested

Target Date funds were created in 1993 by BGI and WellsFargo.  While you may consider 19 years a long time, when you consider that as a 21 year old you would have forty four years to save for retirement the target date funds have not existed long enough for a new worker to get to retirement.  When you are in it for retirement, it is hard to judge a product that has not run the full span of its appointed task.

Expenses can be High

Fees can kill your investment return.  So it does not help that with the target date funds two sets of fees come into play.  The first is the expense ratio for the fund itself.  The second is the expense ratio for the underlying funds.  Because of this, you may be paying more in fees than is healthy for your portfolio.

The Vanguard fund has an expense ratio of .19%, plus its underlying funds charge between .17% and .22% for a possible total of .41% – which is actually pretty good.  Comparatively Fidelity Freedom has an expense ratio of .78%.  With a range of .20% to 1.13% in the funds within the fund, making up a possible fee of 1.91% – which is high!  I even found funds that had expense ratios of 1.88% in addition to the underlying assets (State Farm) and 2.10% (PIMCO), which could possibly push you into total fees of 3%.  Three percent in fees is a HUGE hurdle to creating retirement wealth; it is the equivalent of trying to overcome inflation two times!

Only as Good as the Investment Company

Most target date funds use funds from their own company to create your portfolio.  Thus if you use the Vanguard fund then it will contain Vanguard funds, likewise Fidelity will use Fidelity funds.  This means that your investments are only as good as the company.  You need to ensure the family of funds has a strong history of good performance.  This becomes harder to track for companies such as State Farm, which hires out a firm to manage their funds for them, at this time they have hired BlackRock but this can change at any time if State Farm decides to hire a new manager.  This makes it harder for you to keep track of the quality.

How to Decide if the Target Date Fund in Your 401K is Good

Using the problems that we discussed above there are four things you should look at to determine if you should invest in the target date fund in your retirement plan.

Look at the Current Allocation and the Future Allocations

First you want to make sure that the level of risk that the fund is taking is what you find acceptable.  (Not sure what your asset allocation should be?  Here is my favorite chart to help you decide.)

To do this you can do this one of two ways:

1. Go to the fund companies website, find the fund and within their information you should find a list of the current assets.  For example at Vanguard if you go to the investor site and then key in the ticker symbol you can find a summary of information with a tab for the Portfolio (see the picture below).  This tab will show you the allocation to stocks and bonds, plus the actual funds that it is invested in.

Vanguard Summary

2. Go to Morningstar.com and at the top of the page, type in the ticker symbol in the quote box.  Then click on the  portfolio tab.  Here you will find the allocations and the current mutual funds being used.

Morningstar Allocation Information

Then while you are there check to see what the pace of moving from stocks to bonds is the closer you get to retirement (the glide path).  On the funds sites it varies as to where they put this, some include it in their summary information, and while others you need to open up the prospectus.  At the Morningstar site simply scroll to the bottom of the portfolio tab and it will have a glide path to show you the progression.

Glide Path Example

Remember, even if the guidelines are in line for everything that is recommended if you are uncomfortable with the investments inside the fund then you should not invest in them.  You still need to sleep at night and you need to be comfortable with where your money is at.  You can build a more conservative portfolio using individual funds to suit your needs instead.  Just remember you may need to save more to get to where you want to be.

Look at the Expenses

For this step you can continue to use the two resources from the above section.  You will want to look up not only the funds cost, but also the cost on the underlying funds.

On the funds website the information on the cost of the target date fund should be on the summary page.  Then to get the cost of the underlying funds you need to head to the portfolio information and take a look at each of those funds.  (You will notice in the Vanguard picture above that it lists out the funds right below the allocation.)  Once you have those you can search for each of those funds on the site and go to its summary page to get the expense ratio.  Adding the two together gets your total expense exposure.

On Morningstar it is a bit easier, on the portfolio page at the top click on Holdings and then scroll to the bottom.  Here you will see a list of funds, you can actually click on the fund name and it will open a new tab for that fund, from here you can click on quote and see the fees! (Some funds are not clickable as that means they typically are an individual investment that only the fund company can get).

While determining the exact amount of fees that is acceptable can be difficult since there is no right or wrong answer, I would recommend you try and stay under 1.25% and preferably under 1%. I did write a post on fees if you need more information on why fees are bad for your investments.  The Impact of Fees on Mutual Funds

Check the Management Company

This is probably the hardest thing to measure, as many fund companies have fantastic funds and also some bad funds.

Other than going fund by fund, I recommend heading to Morningstar and using their Fund Family pages.  These are not overly easy to find as they don’t have a link on a specific page.  Instead you need to head to the bottom of the page, select the Site map and then under Mutual Fund Performance data you can select the fund company you are looking at.  Once you click on that fund you can do a quick scan of the fund companies funds, rating and returns. Then click on the words Data Pages next to the name of the fund company, it will take you to a snap shot page that includes averages for expenses, returns and lots of other great information.

By scanning this information you should be able to determine if across the board fees are reasonable and how many funds are on the bad side that you may be invested into.

Example of Fund Company Information

What other Funds are an Option in Your 401k

Once you have looked at the target date fund before you decide to pay the extra fee to have someone do your allocations for you, check out the other funds available in your plan.  Can you easily select a balance based on your desired allocation?  Are those funds better and cheaper?  Let’s say your 401K also has an index fund for the total market, an international index and a bond fund, you may be better off with a mixture of these than a target date fund just based on fees.

Are you going to reallocate?

Finally assuming that the risk levels are acceptable, the fees are good and you are happy with the fund company.  You need to decide if you would rather set it and forget it with a target date fund, or if you would once a year re-balance your portfolio and adjust your allocations as you get closer to retirement.  If you can guarantee that you won’t touch it after you set it then a target date fund is probably the best.  If you will sit down once a year and make sure you are on track, then you may be better off picking individual funds.

Ultimately it is a decision that can only be made by you.  You need to look at all the information, pair that with your personality and habits to create a winning investment plan for you.  Happy Investing!

So how do you keep focusing on the future without going crazy today?

1. Forget about it for a while.  Sometimes it helps to just have a day to feel like you are not restricted.  Similar to the free day in your diet, a free day in your spending can help you get the little bit of splurge that you need.  The caution with this is that you don’t want to let this force you to spend more than you make, you still need to make sure you are not blowing your budget.  The way that I typically handle this is I will save for a few months and then use that money for my splurge day.  For me this is typically with my clothing purchases.  I buy my clothes for the year in a day or two and this amazingly eliminates the feeling of sacrifice.
2. Focus on what you enjoy the most.  I understand that you may not really enjoy any of it, but there has to be something that is a bit easier for you than the rest.  Pick your favorite and then spend one of your money days on this item only.  For me this is investments, by spending time reviewing investments and picking out new ones I become motivated to not only continue to save but also to find new ways to cut the budget to increase my savings.
3. Manage your expectations.  When we are bombarded with advertisements and easy access to seeing what others have (reality TV, blogs, etc) it can be easy for our expectations to be unbalance.  Your expectations should be based on your income not that of the people on TV.  It is also easy to set unrealistic expectations based on how you were raised.  You will most likely not be able to immediately be in the same income position as your parents.  You cannot expect to be able to spend like they do.  It is unrealistic to lose 10 pounds in a day (and do it so you are still healthy).  Likewise if you make $25,000 it is unrealistic to purchase a new outfit for every weekend or take lavish vacations.  Adjust your expectations.
4. Do not compare yourself to others.  This goes along with managing your expectations.  You have no idea where others stand with their money.  You don’t know how indebt they may have gotten in order to “appear” rich.  It is easy to believe everyone else is doing just fine when you do not see their outward money struggles.  You can only compare yourself to you.   Remember 42% of Americans are living paycheck to paycheck.
5. Remember why you are doing this.  What are the chances social security will be available for you?  Do you have a pension and know that it will be around when you need it?  With the changes in retirement funding it is more important than ever for you to be working towards a solid future.  If you don’t take the time to save and control your money today no one else will.  Visualize what you want your retirement to look like.  Once you have this in mind figure out what you would need in income each year to make this happen.  Now time for the reality check: could you make this happen with what you are saving today?  Put this vision on the wall, and remind yourself why sometimes the pain of being smart today will pay off in the future.

Being smart with your money is not always easy, but it is always worth it.

History (short and sweet):

Back in 1997 congress put together a bill called the Taxpayer Relief Act of 197.  One of the great things to come out of this was a new IRA, called the Roth.  (Named for the Senator that pushed for it’s creation.)

Roth IRA Basics:

An Roth IRA is not actually an investment, such as a stock or a bond is an investment. Instead an Roth IRA is an account where you hold your investments.

Why the special account? IRA’s as a whole were designed to be used as a retirement savings tool that protects your investments from taxes and you getting at the money before it is retirement time.

The best way that I have heard to describe it is that it is a coat that you wrap around your investments. Why would your investments need a coat?

Just like a real coat protects you from the cold, an IRA is protecting your money from taxes. The less you pay in taxes the more your money will grow due to compounding.

Benefits of a Roth IRA:

• The money in the account grows tax free. Any gains on investments outside a tax sheltered account will be taxed the year you receive the income. In a Roth IRA you don’t pay taxes on those gains – ever. This allows your money to have more to compound with!
• Creates a stop and think barrier before you take the money out before it is time! If you make a withdrawal before the age of 59 1/2 then there is a penalty of 10%, a hefty penalty to tap you’re saving before it is time, thus making it more attractive to leave the money to sit and grow. (There are ways around this 10%, either call your CPA or check out this article at Fool.com)
• You do not have to begin taking money out – ever. 

Other Details about the Roth IRA:

• The money you put in a Roth IRA does not earn you a tax deduction.  So you pay taxes on it today.  This is one of the reasons you never have to take money out, as the government already collected taxes and does not take any taxes on your gains.  Therefore there is no need to have you take money out!
• You can put any investment into an IRA – stocks, bonds, mutual funds, savings account, CD’s, even rental properties.
• Most traditional accounts are held at a bank or brokerage company. Self directed IRA’s are typically at specialty custodian companies.
• The contribution limit for 2012 is $5,000 for those under the age of 50. For those over 50 it is $6,000 (Check the IRS website for future year’s contributions.)
• Contributions cannot exceed your income for the year. So even if the limit is $5,000 if you only made $4,000 you can only put in the $4,000.
• You and your spouse can have separate IRA’s (Roth or Traditional). You can contribute to a stay at home spouses account as long as one spouse has the income to cover both people’s contribution. So if you make $10,000 you can fund an IRA for both your spouse and yourself. If you made $8,000 you could fully fund one and then $3,000 of the other persons.
• No age limit to start a Roth IRA, only requirement is that you have income. So your high school kids has a summer job, they can open a Roth IRA. The benefits of this are huge, as that money then has a really long time to grow! For example if your child was 16 and put in $5,000, made 8% on the money until they were 65 it would be $248,745 and that is if they never added another penny! (Plus that would be tax free since he/she already paid taxes on it – which as a child is low!)
• You can contribute for the current year up until April 15th of the next year. In other words if you want to make a 2011 contribution you don’t have to do so until April 15, 2012!  (Actually April 17 this year because April 15^th is a Sunday). This allows you time to work with your accountant to see the impact of deductions and a possible savers credit (credit from IRS for contributing to retirement).

You may also like: The Skinny on the IRA

Every year at this time we get ready to set New Year’s resolutions. Unfortunately many of us fail to achieve them. Don’t let that happen to you this year. Make this the year you take control of your money goals.

Enter the Smart Money Steps Contest 2012 for your chance to win a gift package that will help you achieve your 2011 money goal.

Giveaway:

• Two personal finance books: The Millionaire Next Door (mindset) and The Total Money Makeover (get rid of debt).
• My budget class Home Budget Class: How to Tame the Budget Monster (Ebook and MP3)
• My Ebook – Healthy Money Healthy Youin PDF format
• Personal Financial Calculator For Dummies – making the math easier than you thought!

   Value of Package: $100

How to Enter:

• Comment on this post with what your money goal is for 2012. (one entry)
• Tweet the following (make sure you have the @smartstep to be entered again, may enter by doing this once a day):   Make your money goals successful in 2012, enter to win a money success tool kit today http://su.pr/2Wwp4z via @smartstep

Giveaway ends at midnight (central time) on Friday January 6, 20112! Valid for US residents and addresses only. I’ll announce (and contact by email) the winner on this post and the winner will have until the 20th to get back to me for delivery details. Limit one entry per person. Winner will be selected by random.org. No cash value.

So How do You Keep Track of Your Contributions?

I use two methods depending on how much time I have when I am making the donation.

• Take pictures with your phone – then write those items down on the receipt when you do have time.  This is what I do when I am pressed for time and just want the item out of the house.  (The picture above is one example.)
• Use this Charity donation list to write the item and condition.  I use this list when I have a bit more time or am actively cleaning a closet.  When the item comes out and in the box it is immediately written down.  I personally like this as it is a clean way to track items donated.  (Afraid you are going to lose the information before tax time?  Here is a post on how to organize money information!)

How to Know the Value for Tax Deduction

Once you hit tax time you need to know the real value of the donated item.  Most organizations that allow you to donate goods to them, will also have a handy guide to knowing the value of such items.  Select one of the organizations website’s and download their value list.  (Here is the link to Goodwill’s list.)

If you are using the downloadable form from above, I have included a space for the value.  If you went with the picture and write on the receipt approach, just add the value next to the item and total.

Things to Keep in Mind for Tax Purposes

•  Items need to be in good condition to qualify for a deduction.
• If your items value more than $500 you will need an extra form at tax time.
• If you are donating one item worth more than $5,000 you need to have an appraisal.  (This is also the time I would check with my CPA to make sure I am getting it right – better safe than sorry.)
• Deductions are only good if you itemize.
• If you want more specific you can head to the IRS, or call your CPA.

Happy Donating!

Why? Well mainly because he wants to cuddle every morning (which I am not going to say no to) but also because change is hard.  As humans we want our daily life to maintain a routine, we are naturally drawn to consistency because it makes us feel safe.

This is one of the hurdles that we face when trying to change our money situation.  Anytime you need to change your habits and expectations, even when the change is for the good, it is difficult to do.  It takes us out of our safety zone.

So how do you mange the change and stay on track so you don’t get frustrated, depressed and overwhelmed and give up?

Have a Vision

Write down why you are making the changes.  Know exactly why you are making changes.  Who wants to change for no reason?   It is easier to give up that dinner out, new pair of shoes and cancel cable if you know exactly why you are doing it.

Make this as specific as possible.  Vagueness will not help.  Instead of I want to stay on budget (which is no fun) it should be I want to pay off debt so I can have money to travel (which is fun).

Now take that one step further and draw/create a picture of this.  The power of visualization and pictures are amazing.  Seeing a picture of the resort you want to visit every morning when you wake up is very powerful for your motivation level.

Take it Hour by Hour

Instead of  “one day at a time” focus on “one hour at time”.

If you are trying to stay at a certain number of calories each day it is easier to focus calories eaten in the next hour than it is to focus on calories eaten in the next twenty-four hours.

With money you can even take it a purchase at a time.  Have a coffee habit?  Focus on not having a $4 latte in the next hour, and then the next hour and so on till you make it through the entire day!

The smaller the time frame the more manageable the change becomes.  Anyone change make a change for one hour!

Give Your Idea of a Splurge a Makeover

Our fun lifestyle purchases and stress relievers can be the hardest thing to change financially.  So instead of going cold turkey and being frustrated and depressed, change your expectations.

Recently we have been cutting expenses so we can replenish some of the savings we lost due to housing losses.  I have given up massages and my cleaning lady, but still do pedicures but with an extra week in between.  Adjusting to losing that many lifestyle perks has been really hard (don’t expect a clean house if you come to visit) but that pedicure gives me the boost to keep going, it enables me to stick with the changes for a longer time.

We have also found more low cost/no cost things to do for relaxation.  Things like red box movies, long relaxing baths and more nights in with friends.  Adjusting your idea of what a splurge is and what you want helps you stay motivated and refreshed.

Believe in Yourself

You are much more resilient and disciplined than you give yourself credit for.  The simple act of telling yourself you can do it will work miracles.  Have faith that you can achieve the change that you desire.

Change is hard, even when it is for the better.  Pushing ourselves beyond our comfort zones and what we are used to will only make us stronger and better off in the long run.

Final Thoughts

As JFK said about the goal to go to the moon:

“We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.”

Try subbing the word moon with your goal and hopefully it fires you up; see how powerful it is below (makes me want to go out fighting!)

We choose to be debt free. We choose to be debt free in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.

The rewards on the other side are more than worth the effort, embrace the change!

A ticker symbol is a combination of letters used as an abbreviation for a particular stock.  This is so that it is not necessary to write out the full name of a company when talking about them.  Example: General Electric is GE.

Check out more Investing Glossary Term at my YouTube page!

The letters in IRA stand for Individual Retirement Account.

An IRA is not actually an investment, such as a stock or a bond is an investment.  Instead an IRA is an account where you hold your investments.

Why the special account?  IRA’s were designed to be used as a retirement savings tool that protects your investments from taxes and you getting at the money before it is retirement time.

The best way that I have heard to describe it is that it is a coat that you wrap around your investments.  Why would your investments need a coat?

Just like a real coat protects you from the cold, an IRA is protecting your money from taxes.  The less you pay in taxes the more your money will grow due to compounding.

Benefits of an IRA:

• In a traditional IRA the money can be deducted from your earnings this year, thus giving you a smaller tax bill now.  There are income limits on this and there are some ways around the income limits if your employer does not offer a 401K, please check with your accountant to see what the current requirements are and if you meet them.
• The money in the account grows tax free.  Any gains on investments outside a tax sheltered account will be taxed the year your receive the income.   In an IRA you don’t pay taxes on those gains.  This allows your money to grow longer before you need to give the government it’s share!
• You can do a non-deductible IRA if you make more money than is allowed for your deduction now.  This allows you to at least take advantage of tax free growth.  (And if you make too much to do a ROTH IRA then you can do a non-deductible IRA and roll it to a ROTH as there are no limits on how much you make to do a rollover).
• Creates a stop and think barrier before you take the money out before it is time!  If you make a withdrawal before the age of 59 1/2 then there is a penalty of 10%, a hefty penalty to tap your saving before it is time, thus making it more attractive to leave the money to sit and grow. (There are some times you can withdrawals for a hardship and not pay the 10%, check with a CPA to find out the rules).

Other Details:

• You must begin making withdrawals at the age of 70 1/2
• You can put any investment into an IRA – stocks, bonds, mutual funds, savings account, CD’s, even rental properties.
• Most traditional accounts are held at a bank or brokerage company.  Self directed IRA’s are typically at specialty custodian companies.
• The contribution limit for 2012 is $5,000 for those under the age of 50.  For those over 50 it is $6,000 (Check the IRS website for future years contributions.)
• Contributions cannot exceed your income for the year.  So even if the limit is $5,000 if you only made $4,000 you can only put in the $4,000.
• You and your spouse can have separate IRA’s.  You can contribute to a stay at home spouses account as long as one spouse has the income to cover both person’s contribution.  So if you make $10,000 you can fund an IRA for both your spouse and yourself.  If you made $8,000 you could fully fund one and then $3,000 of the other persons.
• No age limit to start an IRA, only requirement is that you have income.  So your high school kids has a summer job, they can open an IRA.  The benefits of this are huge, as that money then has a really long time to grow!  For example if your child was 16 and put in $5,000, made 8% on the money until they were 65 it would be $248,745 and that is if they never added another penny!
• You can contribute for the current year up until April 15th of the next year.  In other words if you want to make a 2011 contribution you don’t have to do so until April 15, 2012!  This allows you time to work with your accountant to see the impact of deductions and a possible savers credit (credit from IRS for contributing to retirement).

Hope that helps a bit!

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