Chase yield.Short-term interest rates can't get much lower. Look at the interest you're earning on your checking and savings accounts and see if you can do better.
With savings and checking accounts, there's always a trade-off between convenience, liquidity, safety and yield. Chase yield by concentrating on balances not needed for short-term transactions or liquidity.
Extending the maturity dates on your savings from short-term into slightly longer 1- to 3-year maturities can improve your returns without locking into a long-term rate and regretting it. No one likes being "long and wrong," or locked into a long-term CD only to watch interest rates head higher.
Convert to a Roth IRA.The IRS has removed the income limitations for Roth IRA conversions, starting in the 2010. Work with your tax professional to determine if converting your traditional IRAs to Roth IRAs makes sense. The year 2010 marks a unique opportunity for conversion because you can choose to spread the taxes due on conversion over 2011 and 2012. The Bankrate feature "7 steps to a 2010 Roth IRA conversion" goes over this approach, but the IRS has the final word.
Fund your retirement account early.If you're like many consumers, you wait until the last minute to fund your IRA. Waiting until April 15, 2011, to fund your 2010 IRA contributions has you potentially losing up to one and a quarter years' worth of interest. If you count on a tax refund to finance your retirement savings, you may be over-withholding on your taxes. Put that money to work for you sooner rather than later.
An automatic investment plan spreads contributions evenly across the year. That has you dollar-cost averaging your investment over the year. Don't forget about catch-up contributions available if you're over age 50.
Keep an eye on fees and expenses.Especially important when investing retirement funds, you need to keep an eye on annual fees and expenses in the accounts where you invest. High fees are a drag on yield. Annual account fees when investing in mutual funds can also add up. When starting to build your investments, look to concentrate your investments in one or two diversified mutual funds within a mutual fund family rather than buying a lot of concentrated funds and paying multiple account fees.
<< Read all 2010 money tips
Read tips from previous years: 2005 | 2006 | 2007 | 2008 | 2009 |
Read more Dr. Don columns for additional personal finance advice. To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing" or "Money."
Create a news alert for "investing"