What the experts say

Higher taxes now, zero later

The costs the federal government is currently incurring will be showing up on your tax returns for years to come, said Andrea Coombes in Marketwatch.com. “If you look at income tax rates now versus the future, they’re probably going to be higher in the future,” says financial planner Joseph Montanaro. One possibly counterintuitive way to avoid a larger tax burden in the future is to pay more taxes now, by converting your IRA to a Roth IRA. You’ll pay taxes on its current value—but never pay them again. Considering that most portfolios have taken a beating, and tax rates are relatively low by historical standards, you stand to save a lot. The “daunting tax bill” caused by such a conversion in a single year means the strategy is not for everyone. But a “special perk available only next year” will let those who convert to a Roth in 2010 take two years to pay the tax.

Don’t look back

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Even when the stocks in the S&P 500 eventually turn around, they may take eight years to “regain their hefty losses,” said Adam Shell in USA Today. That estimate assumes an annual return of 10 percent, as calculated by Bespoke Investment Group using recent data from the Standard & Poor’s 500 index—discouraging news if you’re still wishing stocks were at their October 2007 peak. Then again, it’s better than the alternative. Were you to pull out of the market now and put that money into long-term Treasurys, you’d have to wait 28 years for your portfolio to reach its previous level. Best to avoid dwelling on the past at all. “It’s counter­productive to get too caught up in get-back-to-even scenarios.” Instead, revisit your financial plans and make sure they’re viable for the future under various scenarios.

Why banks want you

More Americans are hoarding cash, and banks that want it are now offering some sweet incentives, said Kelli B. Grant in SmartMoney. Many regional banks, such as Southern Missouri Bank and Kansas State Bank, now offer so-called reward accounts. For customers who set up direct deposit and use paperless statements, they’ll pay “cash back” of up to 6 percent of debit purchases. Other banks, including Citibank and HSBC, have sign-on bonuses to entice new customers. Wainwright Bank & Trust in Boston “currently offers a $200 savings bond for new customers who open a Value Checking account and fund it with at least $10.” To snag these bonuses you need to maintain a minimum balance and agree to other stipulations. If you “don’t want to jump through all the hoops,” check out the top-yielding banks at Bankrate.com. Many banks are offering 2.5 percent, with no strings attached.