Archive for July, 2010

Don’t Give Up On The FHA Just Yet

July 27th, 2010

This is a guest post by David Ruiz from

The much-talked-about $8,000 homebuyer credit is coming to an end, but that doesn’t mean the government is no longer supporting first-time homebuyers or potential owners and borrowers. The federal Housing Administration (FHA) enables thousands of prospective homebuyers to access loans that they wouldn’t otherwise qualify for. As a result of the recent economic downturn, FHA loans now make up nearly a third of all mortgage loans in the United States.

Initially, this may sound like more of the same irrationality that got us
into our current financial crisis-unqualified buyers buying homes that they
can’t afford with loans that they can’t pay off. Admittedly, there are some
risks and controversies surrounding the FHA.

It’s true that FHA loans require minimal down payments, and it’s true that
loans with minimal down payments are harder to pay off and easier to default on. It’s true that individuals with poor credit scores often turn to the FHA to finance their homes because conventional loans are unavailable to
them. It’s also true that the FHA has picked up where the now-defunct
subprime market left off by providing loans to many of the highest-risk
borrowers in the nation.

But that’s kind of the point. Originally, the FHA was intended to be a back
door into homeownership for individuals who otherwise wouldn’t have made it onto the playing field due to economic strife. This is the kind of social development that our government and our taxes are intended to support. And in the end, the FHA isn’t actually lending money at all. The FHA insures loans made by conventional mortgage brokers to qualified candidates. This sets the FHA up as a safety net for lenders in case things go awry. Under the FHA, the exchange of money back and forth is still happening primarily in the private sector.

When you compare mortgage rates you will find the they currently at record lows right now, but many potential buyers with steady incomes and the ability to pay for homes are being turned away by lenders out of reactionary fear. Banks don’t want to take risks because the nation is in crisis. But allowing more potential borrowers access to mortgages will help kick-start
the flow of money in the housing industry again, and this may ultimately set
the foundation for continued growth and recovery. The FHA helped get the
United States out of the Great Depression. It’s reasonable to conclude that
a similar strategy may be successful in our current financial situation.


5 Key rules of the Roth IRA in 2010

July 15th, 2010

Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like Credit Score The Quintessential Therapy for a Happy Pocket, Take Creditors and Collection Agencies to Small Claims Court and My Story- From Depression To a Smile.

Do you have a Roth IRA account? If yes, then you should know about Roth IRA rules for 2010 so that you can use your retirement funds effectively. Go through this article to know about the key rules of Roth IRA in 2010.

Rules of the Roth IRA in 2010

Here are 5 key rules of the Roth IRA in 2010:

1. Maximum contribution limit: Roth IRAs have an annual contribution limit. In 2010, you can contribute $5,000 to a Roth IRA account. If you are above 50 years, then you can contribute an additional $1,000 for a total of $6,000. You can own both a Roth IRA and Traditional IRA. However, you should know that the maximum IRA contribution limit is $5,000 including both Traditional and Roth IRAs. This implies that if you contribute $2,000 to a Traditional IRA, then you can only contribute $3,000 to a Roth IRA.

2. Easier to convert 401k into Roth IRA: Before 2010, it was very difficult to convert a 401k into a Roth IRA. Previously you had to establish a Traditional IRA and then roll the 401k into a Traditional IRA. Next you had to open a Roth IRA account and then complete the conversion formalities. When the conversion was complete, you had to close the Traditional IRA account as it was no longer required. But in 2010, you can directly rollover your 401k into a Roth IRA.

3. Income limits: There are some income limits that restrict your capability to contribute to a Roth IRA. The income limits are based on your adjusted gross income and federal income tax filing status.

* Single filers: If you are “single” or “head of the household” and “married filing separately” and your adjusted gross income is $105,000, then you can contribute the full $5000 to a Roth IRA account. You can make partial contribution when your adjusted gross income is between $105,000 and $120,000. And in case your adjusted gross income exceeds $120,000 then you will not be able to make contribution to a Roth IRA.

* Joint filers: Joint filers with adjusted gross income between $167,000 and $177,000 can make a full contribution to their Roth IRA account.

* Married filing separately: If you are married and filing separately and your adjusted gross income exceeds $10,000, then you can’t contribute to a Roth IRA account.

4. Withdrawal rules: Under certain circumstances, you can withdraw funds from your Roth IRA account without paying a penalty. You will have to pay 10% early withdrawal penalty as well income taxes (on the amount withdrawn) if you take out funds from the account before you reach 591/2 age.

5. Save tax: In 2010, taxpayers with adjusted gross income higher than $100,000 can directly convert a Traditional IRA to a Roth IRA. Usually a tax is imposed on the conversion amount. But according to the new rule, you can report 50% of the IRA conversion amount as taxable income in 2011. The remaining 50% of the conversion amount can be reported in 2012. This implies that the income taxes payable on the 2010 conversion amount can be spread over 2011 and 2012.

Finally, you have the option to withdraw from your Roth IRA account to make payments for qualified higher education fees while escaping the 10% early withdraw penalty.

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Americans Could Lose Unemployment Benefits Soon

July 8th, 2010

Americans Could Lose Unemployment Benefits Soon
Americans in Debt Face Additional Hurdle

FT. LAUDERDALE, FL – On June 24th the U.S. Senate failed for the third time to act on extending unemployment benefits, which are currently set to expire in November. Although more than 1.2 million Americans will exhaust their unemployment benefits by the end of June, senators are struggling to reach a compromise. A New Horizon Credit Counseling, a nonprofit credit counseling organization, noted that those who are unemployed and in debt face an even tougher challenge with the loss of this important resource.

According to Stephen Marcus, president of A New Horizon, “Many people relying upon unemployment benefits often find that the majority of their check is spent on making minimum payments towards existing debt, such as credit card bills.” When unemployment benefits end, said Marcus, people find that they quickly become delinquent on their bills. With the unemployment rate hovering just below 10 percent, the number of Americans facing potential financial peril is staggering.

Many experts predict that the bankruptcy rate will continue to climb as jobless Americans become unable to meet their debt obligations. According to Marcus, “A New Horizon has already experienced an influx of clients who turn to their debt management services, which help consumers avoid delinquency or bankruptcy”. While A New Horizon can help its clients reduce their debt, those consumers facing bankruptcy are not alone; the number of bankruptcy filings virtually doubled between 2006 and 2009, totaling nearly 1.4 million.

Senate Democrats calling for an extension of benefits have faced tough opposition from Republicans, citing the rising national debt. Senator Olympia Snowe of Maine may be the first link to a bipartisan agreement. Snowe has asked the democrats to propose a standalone bill, rather than the previous package deals they have offered. As the end of June approaches, however, many unemployed Americans with debt will likely face a tough road.

A New Horizon Credit Counseling Services is a nonprofit credit counseling organization that has been helping consumers with credit card debt since 1978. For more information about their programs, contact 1-800-556-1548. They can also be found on the web at, or reached via email at

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The How and Why of Opening a Roth IRA

July 6th, 2010

This post is from PT of, author of 52 Ways to Make Extra Money.

The Roth Individual Retirement Arrangement (IRA) is a retirement savings account created by the US federal government, regulated by the IRS, with the intention of creating a tax incentive for you to save more for retirement. It was created years after the traditional IRA to please those looking to shelter future income from taxes vs current income. Here’s how it works: you open up a Roth IRA, start contributing after-tax funds, choose your investments, retire, and withdraw your Roth IRA funds tax free. That’s right. You get to withdraw your money in retirement without paying taxes. If you expect to save enough to retire on, then your account will see significant gains (earnings) over the long haul. And in a normal taxable account, you’d pay upwards of 35% in taxes for those earnings. With the Roth IRA you don’t have to pay those taxes. Nice.

Contributions to the Roth IRA are limited to $5,000 annually ($6,000 if you are older than 49). Withdrawals from your Roth IRA earnings can be made tax and penalty free at the age of 59 and a half. Keep in mind that there are income limits to those who qualify to use a Roth IRA.

Most people use a Roth IRA in combination with their 401K or company pension. Why? Well, because it has an opposite tax treatment, and thus, will give you tax diversification in retirement (i.e. pay taxes on some savings now, pay some later).

So how do you open up a Roth IRA? Well, it’s pretty easy these days. You can go to a bank, a mutual fund company, or you can pick from one of the best online stock brokers. If you’re looking to do mainly passive investing within your Roth IRA, then I suggest a mutual fund company like Vanguard. If you are going to be more of an active trader wanting to do cheap stock trading, then choose a low-cost online broker. Skip the banks, as they may be expensive and have a limited choice of funds.

Once you have your account opened, you will need to choose some investments. You can usually invest in a variety of investment types within your IRA: individual stocks, bonds, funds (index, mutual, EFTs), and more. Find an asset allocation model that fits your age and risk tolerance and choose the investments that will give you that mix.

Now that you have an account and some investments picked out, create automatic savings contributions to the account. It’s critical that you set up automatic contributions. Since this account is not tied to your employer, it’s up to you to remember to save. Creating an automatic savings plan will help to take the pressure off of trying to remember. Start small and work your way up to contributions that will get you to your annual limit of $5,000.

Have you considered a Roth IRA? What’s stopping you from opening one up today?

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