What the experts say
Learn to love spousal IRAs
“Some of the most powerful retirement savings strategies depend on a legal loophole,” said Paul Katzeff in Investor’s Business Daily. One of the most effective is the spousal IRA. “Normally, you can contribute to an IRA only if you have earned income,” and you can’t contribute more than you’ve earned. But a spousal IRA allows a spouse who has zero earned income to save based on his or her partner’s earnings. That means the working partner can put up to $5,500 (this year’s annual contribution limit) into his or her own IRA, plus another $5,500 into a spousal IRA, as long as the working spouse has made at least $11,000. If you’re age 50 or older, you can contribute up to an additional $1,000 to both accounts. “In other words, you can double your annual IRA contributions.”
How to HELOC responsibly
Home values are soaring. So, “naturally, a lot of banks are advertising home equity lines of credit, or HELOCs,” said Geoff Williams in USNews.com. Whether or not that’s a good idea depends on how you plan to use the money, and, more importantly, how you plan to pay it back. “A HELOC is like using your home as a credit card.” It’s not free money, but it is a much cheaper way to borrow. The average rate for a $30,000 HELOC is currently 5.5 percent, versus 16.7 percent for the average credit card. That makes it a useful tool for consolidating debt, or funding big expenses like home improvements. “If you actually do use it like a credit card and pay off what you borrow every month or so, and you owe nothing after 10 years, then it was probably a good idea.”
Refinancing an auto loan
Now might be a good time to refinance your car loan, said Anthony Giorgianni in ConsumerReports.com. These days you can often find refinancing rates that are 3 percent or lower. “If you’re paying more than that, refinancing might shave hundreds, even thousands, of dollars from the cost of your loan and reduce your monthly payment.” Unlike refinancing a mortgage, there are fewer hoops to jump through, and no closing costs or appraisal fees. Generally, the sooner you’re able to refinance the better. For example, by refinancing a $30,000 loan from 8 percent to 2.2 percent after 24 months, you could save $2,700. Wait 36 months, however, and the savings would be reduced by more than $1,100.