Posted: 12/2/2010 3:32:02 PM EDT
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I have a couple of different issues going on, with a little overlapping with each other.
First, long story short (divorce and getting screwed on joint taxes) I owe the IRS $5K. So, for fiscal year 2010 I need to sink some money into an IRA. I’ve read thru the different types and forgetting the details, I need the types where, I think, where pre-taxed money goes n. If so, how much can I put in to an account like this? What are other tax shelters? I’m looking into buying a house for this purpose but it’s too late into the year for that. Second, I figure that I’m in the hole for around $20-22K (credit card, various bills, plus IRS thing). Is it advisable to get a personal/signature loan to cover all these? I had thought of tossing it all onto my credit card then shoot for a lower rate. In any event I plan on making some drastic budget cuts and dump my retirement pay (500 bucks per month) and then some salary into this effort. I generally live below my means, have a very good credit rating, support a kid going to college (and he works too). My car (Cherokee) is paid off but recently had to splurge and buy the kid another vehicle because he totaled his Jeep in a no-fault accident. But, paying a couple of cell phone bills today that totaled over $800 really set me on edge (recent carrier change and some confusion: old plan kept running concurrent with new plan). So, I’m looking for the best idea of cleaning-up some old debt, and staying off the IRS radar. Thoughts and suggestions? |
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You can open an IRA almost anywhere. Charles schwab, a bank, insurance agent etc. What you invest it in is up to you (I would avoid insurance or annuities). Keep in mind that this money will be tied up until 59 1/2 or you pay hefty penalties.
The contribution limit can be found here: http://www.irs.gov/retirement/participant/article/0,,id=188232,00.html I would only take out another loan if you can get a way lower rate (like 6-7%). If you can't, then pay off the cards, smallest to largest, very aggressively. Make a plan. Put it on paper. Stick to it. Good Luck! |
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Quoted:
You can open an IRA almost anywhere. Charles schwab, a bank, insurance agent etc. What you invest it in is up to you (I would avoid insurance or annuities). Keep in mind that this money will be tied up until 59 1/2 or you pay hefty penalties. The contribution limit can be found here: http://www.irs.gov/retirement/participant/article/0,,id=188232,00.html I would only take out another loan if you can get a way lower rate (like 6-7%). If you can't, then pay off the cards, smallest to largest, very aggressively. Make a plan. Put it on paper. Stick to it. Good Luck! Thanks! |
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So, for fiscal year 2010 I need to sink some money into an IRA. I’ve read thru the different types and forgetting the details, I need the types where, I think, where pre-taxed money goes n. If so, how much can I put in to an account like this?
IRA Contributions are tax deductible. 
Gains are taxable upon withdrawl. 
Roth IRA Contributions are NOT tax deductible.
Gains are NOT taxable upon withdrawl.
Take yer' pick. The contribution limits are $5,000 per year for most people and $6,000 per year if you are over 50 years old. Either way, the IRA is a fantastic tool for savings for retirement and keeping Uncle Sam's hands off your money. If only the contribution limits were higher. |
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dear OP:
this is an extraordinarily confusing post. i'll just pull the highlights out... Quoted:
I owe the IRS $5K. I need to sink some money into an IRA. I’m looking into buying a house. I figure that I’m in the hole for around $20-22K (credit card, various bills, plus IRS thing). I generally live below my means support a kid going to college paying a couple of cell phone bills today that totaled over $800 so now we can discuss... Quoted:
So, I’m looking for the best idea of cleaning-up some old debt, and staying off the IRS radar. Thoughts and suggestions? 1) PAY THE IRS. if you choose to ignore them it will just get worse for you. 2) DON'T START AN IRA. use the money you thought you were going to open an IRA with to pay down your credit card debt. 3) you are not living below your means, otherwise you would not have $20-22K in near term, unsecured, high interest rate debt. you need to fix this behavior and live such that you can pay off your credit card in full every month. otherwise, you are just falling farther and farther behind while the credit card company makes 15-25% on you. 4) you are not ready to buy a house until you clear your $20K (+) of debt. trust me, adding hundreds of thousands of dollars of long term debt is not going to help your situation in the near term. rent a house for a year and get on stable financial footing –– and there are currently tons of houses to rent for cheap. concentrate on getting your kid the rest of the way through school. 5) kick both your kid and yourself in the balls if you are seeing $800 cell phone bills. that is reality. you may not like some of the answers but you know what you gotta do. ar-jedi |
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[/quote]
1) PAY THE IRS. if you choose to ignore them it will just get worse for you. 2) DON'T START AN IRA. use the money you thought you were going to open an IRA with to pay down your credit card debt. 3) you are not living below your means, otherwise you would not have $20-22K in near term, unsecured, high interest rate debt. you need to fix this behavior and live such that you can pay off your credit card in full every month. otherwise, you are just falling farther and farther behind while the credit card company makes 15-25% on you. 4) you are not ready to buy a house until you clear your $20K (+) of debt. trust me, adding hundreds of thousands of dollars of long term debt is not going to help your situation in the near term. rent a house for a year and get on stable financial footing –– and there are currently tons of houses to rent for cheap. concentrate on getting your kid the rest of the way through school. 5) kick both your kid and yourself in the balls if you are seeing $800 cell phone bills. that is reality. you may not like some of the answers but you know what you gotta do. ar-jedi [/quote] I can't agree more with this post. Your logic is spot-on. |
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Quoted:
So, for fiscal year 2010 I need to sink some money into an IRA. I’ve read thru the different types and forgetting the details, I need the types where, I think, where pre-taxed money goes n. If so, how much can I put in to an account like this?
IRA Contributions are tax deductible.
Gains are taxable upon withdrawl.
Roth IRA Contributions are NOT tax deductible.
Gains are NOT taxable upon withdrawl. Unless Congress changes their mind in the future and reneges on that agreement.
Take yer' pick. The contribution limits are $5,000 per year for most people and $6,000 per year if you are over 50 years old. Either way, the IRA is a fantastic tool for savings for retirement and keeping Uncle Sam's hands off your money. If only the contribution limits were higher. |
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Couple of thoughts....
Save until it hurts.....I absolutely advocate making lifestyle sacrifices to secure a financial future. You wont regret it....it may suck for a year or two, but in the long run, I've never met a single person that regretted saving money. As already pointed out, take care of your tax bill. I dont particularly like giving the IRS money....actually, let me rephase that.....I despise giving them what I earn so that they may distribute it those who didnt. Still, its the law of this land and to remain a citizen in good standing, its part of the deal. Pay them...take a part time job, sell off things you dont use on ebay.....just get the cash together and pay them. Defer long term investments (like an IRA) until you get out of debt entirely. Given the numbers you provided, if you hustle and work your butt off, you can be at $0 debt in a year or two max...commit to fixing the problem, make cuts where you need to, and get it done. Not saying you will want to wait forever...the future isnt neccesarily looking bright...we are all going to need some significant rainy day money for retirement....but the time to focus on this is after you get out of debt. I know it can seem like an uphill climb...and it is...but you arent the first person to do it, and based on the amounts you gave, your situation is very managable. People have gotten through harder tiimes with less...so can you. Make a plan....see it through....and someday, once you have it behind you....help someone else do the same 
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