Tips on Saving Money: Great Savings Account Tips

Everyone wants to save more money. If you'd like to pad your savings account and stash more cash, try these time-tested saving techniques.

1. Automate your savings
Most people know that it's a great idea to have money automatically transferred from their paycheck into their savings account each month. But unfortunately, not everyone does it. In fact, about 1 out of 4 Americans employed full or part time have failed to take this basic step of automated saving, which can make saving more money each month easy and hassle-free.

2. Comparison shop online
If you're going to sock away your hard-earned dollars, you really want your money to work as hard as you do. So leverage the power of the Internet and find the highest rates you can for your savings accounts. The new InterestPlus Online Savings account offered by Capital One is great because it pays you an above-average interest rate -- plus you can get a 10% bonus each quarter. So it's basically like turbo-charging your savings, because you're getting paid twice to save.

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11 Things You May Not Know About Your IRA

The most important part of your individual retirement account (IRA) is the fact that it is "individual". You can customize when you make deposits, take withdrawals and pay taxes on distributions. You can even control what happens to it after you die. Want to take advantage of all that your IRA has to offer? Read on for some little-known features that will help you get the most out of your contributions.

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11 Things You May Not Know About Your IRA

1. You can contribute to more than one IRA.

It is possible to end up with more than one IRA for a number of reasons. For example:

· You had an existing Roth account and then rolled an old 401(k) into a Traditional IRA.

· Your adjusted gross income (AGI) rose to the point where you were no longer eligible to contribute to your Roth IRA, so you opened a Traditional IRA.

· You inherited an IRA from a loved one, but you already had one of your own.

· You maintained your Roth account and opened a Traditional IRA to take advantage of tax deductions.

Contribute to as many IRAs as you want, but the total deposited in all IRAs is limited to the annual maximum amount. For example, the annual maximum contribution for 2008 is $5,000. So, if Bob deposits $2,000 into his Traditional IRA, he can also contribute $3,000 to his Roth account during the same year.

11 Things You May Not Know About Your IRA

2. All IRA contributions must be made in cash.
This limitation may be irritating if you're rolling over an account and you don't want to liquidate the assets. Cash contributions force a new basis for investments inside the account. The basis of the IRA is important because when you take a distribution from a Traditional IRA, you pay taxes on the gains and income from your investments, but not on the basis.

11 Things You May Not Know About Your IRA

3. IRA losses may be tax deductible.
One of the main advantages of an IRA account is the ability to defer taxes on gains and investment income. But you can't use losses inside the IRA to offset gains. This is because the IRS gives you a reprieve after you liquidate the account: If the total distributions from your IRA are less than your basis in the account, you can deduct the loss after all assets are distributed from the account.

11 Things You May Not Know About Your IRA

4. You control your required minimum distributions.
Traditional IRA owners must begin taking distributions by April 1 of the year after they turn 70.5 years old. The minimum amount distributed is based on the balance of the account on December 31 of the previous year and the owner's life expectancy. For each year thereafter, the required minimum distribution (RMD) must be withdrawn.

If you have multiple Traditional IRAs, you don't have to take RMDs from all of them. You can combine the total balances from the end of the previous year to calculate your total RMD and actually take the distribution from one account or a combination of accounts. For example, you may prefer to liquidate the investments in one account over the investments in another account.

11 Things You May Not Know About Your IRA

5. All beneficiaries are not created equal.
One of the benefits of owning an IRA is the ability to transfer funds directly to beneficiaries without going through probate. This is because spousal beneficiaries can claim inherited IRAs as their own. This flexibility allows the spouse to control new contributions and distributions.

Non-spousal beneficiaries cannot treat inherited IRAs as their own. They can't add to them and they must completely liquidate the account within five years of the death of the owner. Keep this in mind if you plan to leave IRA assets to your children or grandchildren.

11 Things You May Not Know About Your IRA

6. A basis is needed for IRA transfers, but not rollovers.
It is common for individuals to move accounts from one financial institution to another. If you just decide to maintain the same type of IRA account with a different company, that's considered a "transfer". All assets are moved "in kind" (as they are), without liquidating anything. In this case, it's your responsibility to retain the original basis on the account; the receiving institution will request a copy of a statement proving the basis.

You need to have an accurate basis amount for Traditional IRAs, because distribution amounts above the basis are taxable. IRA assets above the basis can be rolled into other types of retirement accounts, but the basis must be maintained in the IRA, or it will be considered a taxable distribution.

A rollover involves moving your money from one type of retirement account to another. For a rollover, you must liquidate the previous holdings to move cash into the IRA, so the basis becomes irrelevant.

11 Things You May Not Know About Your IRA

7. You can deduct IRA fees from your taxes.
Financial services firms may charge annual fees on top of transaction fees for the purchase or sale of investments. You may be able to deduct these fees using 1040 Schedule A.

11 Things You May Not Know About Your IRA

8. Your annuity can act like an IRA.
Your annuity can operate under the same rules as an IRA. The benefit is that annuity policies were designed to provide retirement income for life. Some annuities also offer optional features not available in regular IRAs. The downside is that annuity premiums, which contain insurance payments, can be higher than other investments.

11 Things You May Not Know About Your IRA

9. IRAs are non-fiduciary accounts.
Brokerage accounts allow you to give your financial advisor written authorization to make investing decisions and routine transactions without notifying you first. Often, a flat fee is charged for managing the account. This type of fiduciary activity is not allowed for IRAs.

11 Things You May Not Know About Your IRA

3. Start small if you must
Too many people make the mistake of not saving money because they say "I don't have a lot of money to put away." Well, the truth of the matter is that every little bit helps. Even if you can't afford $200 a month or $500 a month, you might be able to afford $25 or $50. Just get started. Whatever you can save, do it! Over time, even small amounts of money really add up to great savings.

4. Use the 24-hour rule
Controlling your spending is critical to saving money in this tough economy. I'm not a fan of telling people to deprive themselves because financial diets don't work -- just like food diets, they're too hard to stay on for very long periods of time. But when you find yourself out shopping, or at a mall, and you want to spend money on a whim, instead of spending your cash -- or whipping out a credit card -- give yourself a 24-hour cooling off period. Try to just walk away from the item. If you're still dying to have it a day later, you can go back and buy it. But a lot of times, people can really rein in their spending and save money just by avoiding impulse purchases.

5. Evaluate "wants" vs. "needs"
Sales are great. But sometimes we fool ourselves into thinking that "discounts" and "deals" are all smart purchases. That's not always the case. What good is it to get a $100 item for "50% off" if you really didn't need the item in the first place... or if you really didn't have the 50 bucks to spend to begin with? To avoid this pitfall, think about whether what you want to buy -- even if it's on sale -- is really a "need," or if it's just a "want."

As I explained in a recent ABC News interview, these are some of the strategies that I personally have used to get out of debt and become a better saver while building up my savings account.

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Lynnette Khalfani-Cox, an award-winning financial news journalist and former Wall Street Journal reporter for CNBC, has also been featured in top newspapers including the Washington Post, USA Today, and the New York Times, as well as magazines ranging from Essence and Redbook to Black Enterprise and Smart Money. Check out her New York Times bestseller, 'Zero Debt: The Ultimate Guide to Financial Freedom.'