Maximum Allowed Contributions for IRAs Have Increased!

For the first time in four years (since 2008) the maximum allowed contributions for IRAs have increased from $5000 to $5500. I know this may not help most students right now, but it will help in the future.  This increase is for both traditional and Roth IRAs.  The income levels have been increased as well. 

Limits for Traditional IRA in 2013

If you DO HAVE a retirement plan with your employer:

• Single or head of household: If your modified gross adjusted income (MAGI) is $59,000 (up from $58,000) or less, you can take a full deduction. If more than $59,000, but less than $69,000 (up from $68,000) – you get a partial deduction. If over $69,000, you cannot take a deduction.
• Married filing jointly or qualifying widow(er): If your MAGI is $95,000 (up from $92,000) or less, you can take a full deduction. If more than $95,000, but less than $115,000 (up from $112,000) – you get a partial deduction. If over $115,000, no deduction.
• Married filing separately: If your MAGI is less than $10,000, you can take a partial deduction. If $10,000 or more, no deduction.

If you DO NOT HAVE a retirement plan through an employer:

• Single, head of household, or qualifying widow(er): Any MAGI permits a full deduction.
• Married filing jointly or separately with a spouse who is not covered by a plan at work: Any MAGI permits a full deduction.
• Married filing jointly with a spouse who is covered by a plan at work: If your MAGI is $178,000 or less, you can take a full deduction. If more than $178,000 (up from $173,000), but less than $188,000 (up from $183,000), you can take a partial deduction. If $188,000 or more, no deduction at all.
• Married filing separately with a spouse who is covered by a plan at work: If your MAGI is less than $10,000, you can claim a partial deduction. If $10,000 or more, no deduction.

Limits for Roth IRA in 2013

The 2013 Roth IRA income phaseout limits are as follows:

• Married filing jointly or qualifying widow(er): If your MAGI is $178,000 (up from $173,000 in 2012), you can contribute up to the $5,500 max. If at least $178,000 up to $188,000 (both up $5,000 over 2012), your contribution limit is phased out. If $188,000 and above, you cannot contribute to a Roth IRA.
• Single, head of household, or married filing separately and you did not live with your spouse at any time during the year: If under $112,000 (up from $110,000 in 2012), you can contribute up to the $5,500 maximum. If at least $112,000 up to $127,000 (was $125,000 in 2012), your contribution limit is phased out. If $127,000 and up, you cannot contribute to a Roth IRA.
• Married filing separately and you lived with your spouse at any time during the year:If MAGI is between $0 and $10,000, your contribution limit will phase out. If $0, you can contribute up to the $5,500 maximum. If $10,000 and above, you cannot contribute to a Roth IRA.

If you want more information check out the IRS publication 590.

 There is no way I can put away $5500 for myself and my husband.  Frankly there is no way I could put away even $5500 total.  However, once I graduate this will start being very useful to me.  We plan to say 20% once we both graduate (we are older than most students) and this will allow us to stick with IRAs to do so until we earn $55,000.  And since often the prices of mutual funds is better in an IRA than a 401k or 403b, I am very happy.    Maybe in the next two years it will have gone up even more.

Millionaire Update-September 2012

I have been a bit lax in posting my month updates for our retirement saving, but I had to post this month.  As of October 8th, we have $13,482 in our retirement savings.  This is over half of our annual wage ($26,000)!!  Granted, if we retired now, we would need to pay for health insurance ($550/month) so it is not half of our annual retirement spending, but is a lovely start.  Sadly, other than credit card rewards from FIA Card Services, we will not be putting any money in until at earliest June of 2013 because I am back in school.  However, at least .2% of our income being saved ($50 credit we normally get annually from FIA card services), is better than nothing, so we will take it.  Hopefully the market helps us as well.  Is anyone else doing creative things so get more money saved for retirement?

Why I love credit cards

I have just gone back to school, in August and we will be having a baby in January both of which mean that cash is really tight, as is time. We stopping putting money away for retirement, plus cut a bunch of other expenses to pay for my class without any extra debt. However, I am disappointed that we cannot save anything for retirement given that I am 27 and my husband is 30. But funny enough, credit cards to the rescue. Working, lab work, prepping for school, and now school all together have made my life crazy (part of why I have not been posting much), so I have been cutting back on any non-required fiscal time. However, I had some free time today so I checked my fia card rewards and lo and behold I had 15,000 reward points which gives me $150 IF I deposit it in a retirement account. So, as of October 10th my husband's Roth IRA will be $150 richer. For us, $150 is .5% of my husband's wage. It is not a lot, or even enough, but it is a start and a great help when we otherwise would not be able to put anything in.

After that, I thought about checking my discover card as I was setting up the transfer to pay it. With paying for my classes this semester I was just over the $45 required to get the $50 cvs gift card so I grabbed that too. $200 richer in about 10 minutes, not bad, not bad at all.

Credit cards can be harmful if you use them badly, but as shown above, they can also be very helpful. Which are you going to chose?

Obamacare and you....

I do try to keep this blog anti-political because I am political enough in the real world but sometimes, politics affects personal economy. And the Supreme Court ruling that the Patient Protection and Affordable Care Act aka Obamacare is constitutional will affect all young people's personal economy.

If you are under 26, great for you, you will still be covered under your parent's insurance, no matter if you are in school or not, if you are single or married, anything. It is all age based now. However, what happens if your parents don't have health insurance or once you age out?

You must find insurance, either through your employer or on the open market. You will have an easier time finding insurance on the open market in 2014 because insurers cannot deny you based on medical conditions. But they can increase the bill way beyond what you can afford, what then? Well you have to find something or get fined. An adult who does not have health insurance by 2014 would be penalized $95 or 1 percent of income, whichever is greater, so long as the amount does not exceed the price tag of a basic health plan. But by 2016, the penalty increases to $695 for an uninsured adult, and up to $2,085 per household, or 2.5 percent of income, whichever is greater.

What if you really cannot afford it? Well it depends. Medicaid is being increased to cover people with 138% of the federal poverty level but that won't cover most people. I made more than that working part time in college. Otherwise, there are tax credits if you are above the 138% cut off but are still low income. But that be enough? For some people, absolutely not, especially if you lose your job. Personally I would still be saving enough in your EF to cover COBRA.

So what is my opinion? I like it but I was one of those who aged out of their parent's plan and was unable to get a private plan for any amount of money. I ended up COBRAing my mom's insurance for a total of $550 per month. Also, this means those who want to retire early but could not because of pre-existing conditions now (well in 2014) can. However, I am betting health insurance costs will go up so plan for a big jump in those costs in near future.

The Frugal Student Is Going Back To School

As of August of this year I will be a master's student in neuroscience. This means less income and more expenses but it also means that I am one more step closer to my goal. It looks like the first semester cost will be $5615.75 plus books. Because graduate students are no longer able to take out subsidized loans as of this year, last year we took out $8500 worth of subsidized loans under my husband's name. Those loans will pay this semester, and most of next semester but will be due sooner than if I was still able to take out my own subsidized loans. So you might ask, what are we doing to keep costs down?
First, the school accepts discover, not just cash or check to pay for tuition without any fees so tuition will be paid by discover, earn me a $56 credit on my discover credit card. We will be turn $45 of that into a cvs gift card to pay for the grocery game. Secondly, for any books I need, I will be buying used and if the best price is on amazon I will be using my swagbuck earned gift cards. Third, since I will be going back to school, my undergraduate loans are going to be deferred again. That will save me $30 per month. Fourth, all money normally being save will be going to our new expenses, that includes: emergency savings, future car savings, replacement savings for computers and other electronics and of course all money coming from our rental, which means no more retirement savings. That will bring in about $540 per month, any month we have a tenant. We really are going to have to buckle down to keep expense low and not to get much more debt. Fifth, we will be taking advantage of the federal taxes laws and taking the credit for the student fees/tuition. We have already run the numbers and will be increasing our exceptions on my husband's W-4 to get more money per paycheck, instead of waiting till April of 2013. I am not sure how much this will save us, I will report back after we update the W-4. Any other ideas for frugal savings? Post in the comments.

Millionaire Update-May 2012

In the last month we added $417 to our account but because of the stock market, gained less than $20. We now are at $12420. Right now is a very risky time to be in the stock market. I fully expect it to crash again if Greece does not repay its' debts. However, never in the history of the stock market, has the stock market not increased on an average of 10% over 30-40 years and that is the time line I am looking at. If nothing else, I am buying, and will continue to buy low. I will continue to receive dividends and that will increase the value of the stocks I hold. This shows that you should never put anymore you need within ten years into the stock market.

Great Combo Deal

I love going out to eat but it can great very expensive, especially if you like higher end restaurants, which I do. But sometimes there will just be a great deal that turns an expensive night out, into a relatively cheap one. The Melting Pot in Cheektowaga is having discounted cheese and chocolate for two if you sit at the bar on tuesday nights. By doing so you will save about $7 compared to the normal price. Ok deal, not a great one. But here comes living social to make it even better. $15 for $30 worth of food. https://www.livingsocial.com/deals/326354?ref=conf-jp&rpi=62811398 That saves you another $15. It goes from being a $50 meal for two at minimum to a $27 meal for two. Way better deal in my mind.