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What the experts say

Switch to a Roth IRA?; (Not much) Cash4Gold; Pay that nanny tax

Switch to a Roth IRA?“With retirement savings in shambles,” many investors are wondering if they ought to switch from a conventional IRA to a Roth IRA, said Tom Lauricella in The Wall Street Journal. Both conventional and Roth IRAs shelter retirement savings from taxes. The difference is that contributions to conventional IRAs usually aren’t taxed, but distributions from the accounts are. By contrast, contributions to Roths are taxable, while distributions aren’t. That includes contributions from a conventional IRA when it’s converted to a Roth. So if the value of your IRA has plummeted over the past year, then the tax hit will be reduced as well, and your savings “will grow going forward tax-free.” Such a switch could be worth it if you anticipate paying higher taxes in the future. But conversion “doesn’t make sense if you are an older investor currently in a high tax bracket but expect to be in a much lower one when you retire.” The higher tax bill paid this year “could erase the savings gained from not paying taxes later.”

(Not much) Cash4GoldViewers of the Super Bowl might remember the 30-second ad for Cash4Gold.com, “the metal refinery that offers fast money to those who mail in baggies full of jewelry,” said David Sarno in the Los Angeles Times. What the ad didn’t mention is that Cash4Gold “is essentially a buyer of scrap metal. And scrap metal doesn’t fetch much” these days. That’s what New Yorker Frank Poindexter learned when he sent in what he claimed was $150–$200 worth of gold. All he got back, he said, “was a check for 15 cents.” He’s not alone. The Better Business Bureau “has processed 269 complaints” about the company in the past three years. Most consumer complaints allege that the company isn’t offering fair value for the items they send in. Cash4Gold.com defends it business practices, noting that it promises to return jewelry to customers who don’t like the price they’re offered.

Pay that nanny taxEven if you’re not nominated to President Obama’s Cabinet, you’d be wise to pay taxes for household help, said Kayce Ataiyero in the Chicago Tribune. Experts estimate that as many as 80 percent of the people who employ nannies, housekeepers, or other household workers “don’t pay the required taxes, leaving the workers without unemployment or retirement benefits.” Failing to pay such taxes can expose employers to tax fraud and perjury charges. Many people who don’t pay mistakenly assume that, since “they are not trying to be a judge or attorney general,” they won’t get caught. Don’t be so sure. The IRS has started to crack down on nonpayers, helped by unemployment offices that refer fired employees’ complaints about nonpayment to the tax agency.

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