The economy's still lousy. And 2008's abysmal stock market performance has probably left your 401(k) flailing to recover. Right about now, you're probably wishing there were some way you could get money for free.
You're in luck.
Make the most from your money
For starters, many employers will match some portion of your 401(k) contributions. Let's say that your employer matches 50% of what you chip in, up to 6% of your salary, and that you earn $50,000 per year. If you contribute 6%, or $3,000, your employer will add $1,500 -- for free. That's an immediate 50% return on your investment.
Deals like 401(k) matching don't come around every day. But you can take other steps to make sure your money is working as hard as it can for you -- and the extra income those steps generate is just as good as "free" money.
The power of payouts
When you invest in dividend-paying companies, they generously reimburse you merely for holding their shares, above and beyond whatever additional value they'll accumulate over time. While you wait for that appreciation, the dividend-payers will keep coughing up cash for you, supercharging your income. Even Warren Buffett is a dividend enthusiast.
These familiar names currently offer attractive dividend yields:
|
Company |
CAPS stars (out of five) |
Recent dividend yield |
|---|---|---|
|
Verizon (NYSE:VZ) |
**** |
6.5% |
|
SYSCO (NYSE:SYY) |
***** |
3.6% |
|
Nokia (NYSE:NOK) |
**** |
4.1% |
|
Lockheed Martin (NYSE:LMT) |
**** |
3.7% |
|
DuPont (NYSE:DD) |
**** |
5.1% |
|
China Mobile (NYSE:CHL) |
***** |
3.6% |
|
Reynolds American (NYSE:RAI) |
**** |
7.4% |
Data: Yahoo! Finance. Yields based on trailing 12-month dividends.
Be interest-ing
Interest payments are yet another way to get more from your money. Why leave cash sitting around in a checking account, earning nothing, when it could be generating even a small amount parked in your savings account instead? Even at a meager 1.5% interest rate, $10,000 in a savings account would still snag you a free $150 each year. Move that $10,000 into a CD that pays 2%, and you'll collect $200. Bear in mind that we're at a rock-bottom low point for interest rates at the moment; in previous years, certain savings accounts and CDs have paid much more generous percentages, sometimes even topping 10%.
Not so taxing
The IRS may reach into your wallet every April 15 -- but sometimes, it'll give something back. A tax advisor, or a little online research of your own, can help you unearth tax credits for which you may be eligible. They're available to offset the costs of education, adoption, dependent support, and more, and they reduce your taxes dollar for dollar. A $1,000 tax credit will lop $1,000 off your tax bill.
Tax-advantaged retirement savings accounts can be equally powerful. With Roth IRAs, your contributions won't reduce your taxable income, but they'll subsequently grow tax-free -- and you most likely won't pay a dime in taxes to Uncle Sam when you eventually withdraw them. If your $30,000 investment grows into $200,000 over 20 years, that $170,000 in capital gains will be sweet, tax-free income for you, sparing you tens of thousands of dollars you'd otherwise have to fork over to the IRS.
Even traditional IRAs let you enjoy a more immediate tax break. If you earn $60,000, and contribute $5,000 to a traditional IRA, you'll reduce your taxable income to $55,000. If you're in a 25% tax bracket, you'll be spared paying 25% on that $5,000, for a $1,250 savings!
Don't assume that you're out of luck when it comes to finding some extra cash. It may require a little time and effort, but there's plenty of free money just waiting for you to take it.
