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- Beef Up Your Retirement Savings
- The Tax Clock Has Started
- Does It Pay to Belong?
- How Much Life Insurance Do You Really Need?
- FAQs on Auto Insurance—
What Your Auto Policy Really Covers
Beef Up Your Retirement Savings
(Because Your 401(k) May Not Be Enough)
There’s no doubt Americans have a love affair with their 401(k) plans. But with their portfolios battered by the financial meltdown, and the specter of rising health care costs looming, many future retirees are supplementing their retirement savings with an old friend—the Individual Retirement Account (IRA).
Benefits Any Way You Slice It
The original, or “traditional,” IRA allows retirement contributions to grow tax-deferred until withdrawn (potentially speeding its growth). Currently, you can contribute up to $5,000 a year—or up to $6,000 a year if you’re 50 or older. Eligible taxpayers can also take a tax deduction on their IRA contributions (certain limits apply).
By contrast, the newer Roth IRA offers tax-free growth. Taxes are paid up front—contributions are made with already-taxed dollars, so there is no deduction for contributions. That means contributions (but not earnings) can be withdrawn tax-free, without penalty at any age. (Certain limits on contributions apply.)
The good news is that Uncle Sam is making it easier to convert an existing traditional IRA to a Roth IRA by repealing certain income limits in 2010.
The Bottom Line
If you’ve contributed the maximum to your 401(k) and still have money left over for retirement savings, an IRA may be a great place to put it.
For information about AAA’s Deposit Program, including traditional and Roth IRA CDs, call 1-888-728-3096 or visit AAA.com/Deposits.
Misconceptions = Missed Opportunities
Misconception: IRAs are for older
people.
The truth is that younger investors often benefit the most because they have time (and the power of compounding interest) on their side.
Misconception: You need thousands of dollars to open an IRA.
Wrong! Getting started without an initial lump sum is as easy as setting up automatic monthly payments.
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The Tax Clock Has Started!
It’s never too early to start thinking about your 2009 income tax return. What does your big refund equal? A vacation? Investing? Paying off the holidays’ credit card bills? With TurboTax, AAA members receive special discounts on the highest-rated, bestselling tax preparation software. With TurboTax, you simply complete a step-by-step interview with easy-to-understand questions—TurboTax automatically fills out the proper forms based on your answers. Returning customers receive faster, easier filing with automatic transfers of last year’s data.
If you need to file a 1040EZ return, AAA members can now try the TurboTax Online Free Edition. For TurboTax Online Deluxe, Premier, and Home & Business, AAA members receive a 25 percent discount. Prefer the desktop version of Deluxe, Premier, Home & Business, and Business on your own PC? Your AAA member discount is 15 percent.
TurboTax is the easy way to do your taxes. Best of all, TurboTax guarantees 100 percent accurate calculations.
Visit AAA.com/TurboTax to start your tax preparation today.
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Does It Pay to Belong?
Bankrate.com, the Internet’s leading bank rate monitor, recently published a story entitled “Top savings rates for members only.” The article examined warehouse clubs, auto clubs and other organizations—including AAA—to determine if financial savings vehicles such as CDs, Money Market Accounts and IRAs were truly good deals.
In the story, Bill Gerhard, director of financial services for AAA’s national office in Orlando, FL, said the benefit to opening an account under a club’s membership is that its rates may be higher than a bank’s regular interest rates. For example, AAA members receive a 5 basis point interest rate advantage over Discover Bank’s published rates. This means the rate is 5 hundredths of a percent higher than what the member would receive by going directly to Discover Bank.
Bankrate.com does point out that the cost of your club membership should be considered when calculating the savings. Of course, it’s important to also weigh other benefits—such as emergency assistance, free travel plans and maps, and discounts at different retailers—when making a decision.
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How Much Life Insurance Do You Really Need?
One of the most difficult things to do is figuring out how much life insurance you’ll need should you meet an untimely death. Talking with an insurance agent is the best way to determine your life insurance needs, and considering these three questions beforehand will help you get more out of your discussion.
Do I need life insurance at all?
If you have someone who depends on you financially, then you need life insurance. Should a tragedy occur, your policy’s proceeds can help your family maintain their lifestyle and keep college plans on track. If you don’t have anyone depending on you, your proceeds can be donated to charity or left as a gift to a friend or relative.
What type of life insurance should I buy?
Term life insurance gives you coverage for a set period of time and is an option if you need coverage for less than 30 years. Premiums generally stay level throughout the term, which makes budgeting easier. Whole life insurance and universal life insurance are types of permanent life insurance. They are typically used when you need life insurance for more than 30 years. While they vary in their degrees of flexibility, both build cash value that is most often tax deferred.
How much life insurance do I need?
Whether you simply want to cover your final expenses or you want to replace your income for your family, your coverage amount will vary depending on your desires for the policy’s proceeds. Generally, people with families need six to 10 times their annual salary in life insurance to meet their needs.
To learn more about the types and amounts of life insurance you need, call or stop by your local AAA office and talk to a licensed AAA Insurance representative today.
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FAQs on Auto Insurance—
What Your Auto Policy Really Covers
You don’t even think about it. It’s automatic. Every month, your auto insurance premium is withdrawn from your bank account and you know you’re covered.
But the truth is you may not have the coverage you really need because you don’t fully understand your auto policy. Here are some FAQs and answers that will help you better understand the different types of auto insurance and the protection they offer.
What is liability coverage, and why do I need it?
Liability coverage is important because it covers injuries to people and damage to property. Most states require drivers to carry bodily injury and property damage liability coverage, although the minimum requirements vary from state to state.
I bought a new car. What coverage do I need in addition to liability?
Your state or your lender may also require you to have PIP (Personal Injury Protection), Comprehensive or Collision insurance. You may also want to consider Uninsured Motorist insurance. This protects you if another driver hits you and doesn’t have any or enough liability coverage.
My property damage liability coverage is $20,000. How much will my insurance pay if I cause damage to another vehicle that results in $25,000 in repair or replacement costs?
Your insurance company will only pay $20,000, the amount of the policy. That means you are responsible for $5,000. In this situation, your personal assets could be at risk up to $5,000. Ask a AAA Insurance representative to review your policy with you and make recommendations to protect you, your car and your personal assets.
To learn more or get an auto insurance quote, call 1-877-222-5023, click AAA.com or visit your local AAA office.