More
close ad

7 Ways to Save More Money

Follow our financial experts' tips for spending less and saving more, and your family's finances will soon be solid.

By Chris Taylor

  • view all thumbnails
Save more money
Susy Pilgrim Waters
3 of 14
Switch to a Roth IRA

The traditional individual retirement account (IRA) is a popular savings vehicle for many Americans, and no wonder. You're building a nest egg and your contributions are tax deductible. But it's got one big drawback. "When you reach retirement and start withdrawing, you're going to be paying taxes every year," says Jean Chatzky, author of Money 911: Your Most Pressing Money Questions Answered, Your Money Emergencies Solved (Harper Collins) and financial editor for NBC's Today show. "With a Roth IRA, your money grows tax free, forever." Why? You're not getting a deduction on the front end, which means the IRS can't claim a penny down the line -- no matter how much your account grows in stocks, bonds or money-market funds -- when you start taking the funds out.

This year there's a special window to convert your traditional IRA to a Roth. Anyone, regardless of income, qualifies. You'll have to pay taxes (for a $20,000 IRA, someone in the 15% tax bracket would fork over $3,000). But those who convert this year can spread out that payment over the next two years. The short-term hit, says Chatzky, is worth the benefits over the long haul.

3 of 14