MONEY AND TAXES 2008
Tips for making the most of your pot of gold
Copley News Service
Traditionally, the primary source of retirement savings in the United States, excluding Social Security, was a defined benefit, which guarantees employees a fixed annual income upon retirement.
Since the 1980s, defined benefit plans have declined in the private sector and defined contribution plans, which hold employees responsible for saving for retirement, have taken their place.
The most popular defined contribution plan is a 401(k) plan, named after a section of the Internal Revenue Code. These types of plans came about as part of tax reform in 1978.
Under a 401(k) plan, an employee is allowed to defer part of his or her pre-tax income up to specified limits. In some instances, this amount is matched by a contribution from the employer. Employee contributions are not subject to income taxes, but subject to payroll taxes. Employees can typically determine the investment allocation of their savings, within limits. All gains and losses are typically borne by the employee.
In addition, all employees can, within certain limits, contribute to an Individual Retirement Account, or IRA. The tax advantages of IRA contributions are greater for workers who are not participating in an employer-sponsored plan.
The contribution limits to IRAs are substantially lower than the dollar contribution limits for employer-sponsored defined contribution plans. Aside from their contribution limits, IRAs operate very similarly, although employees generally have more investment options.
-- Source: Center for American Progress. (CNS)
Auto insurance rates can vary greatly, depending on what type of car you have, your driving record and, of course, the company you get your policy from. Here are some ways to save money.
-- Shop around: Prices vary from company to company, so get at least three price quotes. Also, ask friends or relatives for recommendations because price isn't the only consideration.
-- Compare costs before buying a car: Your premium is based in part on a car's price, average repair cost, overall safety record and the likelihood of theft. Also, some features will warrant discounts, such as air bags, anti-lock brakes and anti-theft devices.
-- Check deductibles: The higher the deductible you agree to pay, the lower your insurance rate. For example, increasing your deductible from $200 to $500 can save 15 to 30 percent on your rate.
-- Covering older cars: Consider dropping collision and/or comprehensive coverage on older cars. It may not be cost-effective to insure cars that are worth less than 10 times the amount you pay for coverage.
-- Combine policies: Many insurers give discounts if you buy two or more types of insurance from them. For example, buying both auto insurance and homeowners insurance from the same company could reduce your overall cost. Still shop around, however.
-- Low-mileage discounts: Some companies offer discounts to clients who drive lower-than-average miles each year.
-- Maintain good credit: Your credit rating may affect your insurance rates. Credit makes rates more accurate, fair and objective. That's partly because it is fact that drivers with long, stable credit records have fewer accidents than drivers who do not.
-- Driver discounts: Ask your insurance carrier for safe driver discounts if you haven't had an accident or any moving violations for several years. Also, ask about good student discounts for the younger drivers in your household.
Source: Insurance Information Institute. (CNS)
REGULAR GAS IS FINE FOR MOST ENGINES
Do you put premium gas in your tank because you think more expensive means better? You may be making a big mistake.
Mechanics say it could be a waste of money -- and even hard on the engine.
"It makes them run bad," said Rob Hattery, owner of Rob's Auto Service in Canton, Ohio.
Most newer cars are designed to run on 87 octane fuel, which creates a valve "ping" or "knock."
"The knock sensor reads the ping and adjusts the timing to make the car run right," Hattery said.
William Bohley, senior master technician at Waikem Ford in Perry Township, Ohio, said the sensor is a crystal that picks up the audible ping and sends a signal to the car's power train control module -- the car's computer.
That signal actually "detunes" the car and changes the timing and air-fuel mix. That takes power away, but "it all happens in a millisecond" and most drivers won't even notice it, Bohley said.
Some new cars don't run right on a higher octane gas because of the sensor. "If it can't read a ping, it's jumping around not knowing how to get it set," Hattery said.
Waikem Service Manager Bill Graf said all new Fords are designed to run on 87 octane gas.
"I think they make them to run on that because that's what people are going to buy anyway," Graf said.
There are exceptions, and the best way to find out is to check the owner's manual, he said. Car owners also can check with their mechanic. Using lower octane in a car designed for premium grades can reduce the engine's power, decrease fuel economy, and may lead to a buildup of residue on the valves.
"There still are some cars that won't run well on the lower octane," Hattery said. Those are cars older than 20 years -- from pre-computer days.
Those cars also need lead added to their gas tanks, said Bohley. "Their motors were designed differently" because there was lead in gasoline then, which quieted the valve knock.
On those older models, "It makes a world of difference on the life of that motor," Hattery said.
Using the higher octane could cause problems in the engine, especially at high temperatures, Bohley said.
And most importantly, "It's a waste of consumers' money." (CNS)
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