Contribution Limits

       The maximum amount you can contribute to a SIMPLE IRA depends on your age. These are the correct SIMPLE IRA contribution limits for 2009 and 2010. Contributions to other qualified retirement plans (401(k), 403(b), SIMPLE, or SEP) will count toward this limit. You cannot contribute more than 100% of your income.

  • Under age 49 at the end of the year: $11,500
  •  

  • Age 50 or older by the end of the year: $14,000

Deadline for Contributions

       Elective contributions are generally made from your paycheck, so you need to have your contributions set up within the year. You can choose to contribute everything at the beginning of the year if your plan allows it, or you can just contribute a certain amount or percentage from each paycheck.

Tax Deduction for Contributions

       SIMPLE IRA contributions reduce your taxable income, so you don’t need to take a tax deduction on your return. However, you may be eligible for the Retirement Savings Contribution Credit.

       Peruse Ramit Sethi’s blog I Will Teach You to Be Rich for just a few minutes and you’ll quickly learn that being frugal is a waste of time. Actually, you’ll learn that it’s impossible to be truly frugal – so why try? You’re much better off just focusing on the “big wins” and then trying to earn more money…all so you can spend “extravagantly” on the things you love. (The quotes are not for sarcasm. Those are the terms Ramit uses. And I’m not just bashing him. There are other “experts” who tell you the same thing. And yes, sarcasm was intended with the quotes that time.)

       Ramit’s stance is that you should only focus on the frugal tips that will save you big money. These “big wins” should save you at least several hundred dollars a year, require very little time on your part, and in no way negatively affect anything you love to spend money on. He calls these things the “big 5” and with limitations like that you’d be lucky to find five things you should cut back on.

       Now, it’s easy for me to pick on Ramit because Provident Planning is not about spending extravagantly on the things you want and love. (Actually, maybe it is if what you want and love is God.) It’s not about making you feel guilty for spending money on things that aren’t needs either. My goal here is to explore how Christians can glorify God through their financial decisions – to look at how our faith in Jesus is reflected in our budgets. And that means frugality is as good an option as earning more. Here are a few reasons why being frugal is not a waste of time.

Choosing a Simple Life

       Living frugally allows you the freedom to live with less. It gives you the opportunity to focus less on earning money. Yes, you’ll still need some money to live. But frugality can help lower the amount you “need” by quite a bit. The less you need to earn, the more time you have to live frugally.

       This translates into many different options depending on your calling. For some, it allows more time with your family. For others, it’s a chance to volunteer more or work on a personal project that doesn’t provide income. I’ve even read of those who choose to live simply and earn less income to avoid paying taxes because they don’t agree with how the government spends the money – especially on war. For all these people, being frugal is not a waste of time. It’s a tool that helps them achieve their goals.

Conserving Resources

       Frugality is not always about being cheap. It can be a way to use less of the world’s resources. Americans are notorious for wasteful living. And whether we acknowledge it or not, this lifestyle impacts millions of the world’s poor and will affect our future and our children’s future. For those who seek to use less “Stuff”, being frugal is not a waste of time either.

Concern for the Poor

       This aspect of frugality is partly connected to conserving resources. Part of the impact of wasteful living is the injustice that happens in Third World countries. The coffee you drank this morning was probably harvested by somebody who earned only a few dollars for an entire day’s hard work. Those bananas sitting on your counter were likely picked by people who still can’t afford to feed their families despite having a job.

       Being frugal is not just about time and money. Our choices impact someone, somewhere. Frugality can be a choice to avoid supporting those things you don’t agree with. Conscious living is hard in this world, but it can be an example of your values.

Your Take

       Those are just a few reasons why being frugal is not a waste a time. When you stop thinking about time as money, you can start to see that you can’t judge frugal tips merely by their cost savings. What’s your take? What are some other reasons that being frugal is not a waste of time? What do you think of the examples I gave? Or am I just wrong? Let me know in the comments.

Contribution Limits

       The maximum amount you can contribute to a 457 plan depends on your age and the details of the plan. These are the correct 457 plan contribution limits for 2009 and 2010. Contributions to qualified retirement plans (401(k), 403(b), SIMPLE, or SEP) do not affect your 457 plan contribution limits. You cannot contribute more than 100% of your compensation.

  • Under age 49 at the end of the year: $16,500
  •  

  • Age 50 or older by the end of the year: $22,000 (only in governmental 457 plans, otherwise the limit is $16,500)

Special 457 Plan Catch-up Contributions

       If you are within 3 years of normal retirement age as defined by the 457 plan, you may be eligible to contribute up to an additional $16,500 per year. However, this special catch-up contribution is limited to your unused regular contribution limits from previous years. If you’ve contributed the maximum every year you’ve been in the plan, you won’t qualify for this special catch-up contribution. For more information, be sure to speak with your human resources department and consult the IRS website here and here.

Deadline for Contributions

       Elective contributions are generally made from your paycheck, so you need to have your contributions set up within the year. You can choose to contribute everything at the beginning of the year if your plan allows it, or you can just contribute a certain amount or percentage from each paycheck.

Tax Deduction for Contributions

       Your contributions to a 457 plan reduce your taxable income, so you do not need to claim a tax deduction on your return. However, you may be eligible for the Retirement Savings Contribution Credit if you contributed to a governmental 457 plan. Non-governmental 457 plan contributions will not qualify for that credit.

Are You Giving Sacrificially?

Corey —  April 2, 2010 — 2 Comments

       Does your giving require sacrifice on your part? Or are you only giving what is easy?

       I read a post at Free Money Finance a couple Sundays ago asking “Where Did All the Givers Go?“. In that post and a few of his others, FMF seems to criticize those who believe in “generous giving”, “cheerful giving”, or “grace giving” because the average Christian in America doesn’t give very much (2.6% of income). He sees a philosophy of “generous giving” or “New Covenant giving” as weak and an excuse to give less. He’s a proponent of tithing for Christians today.

       However, you should know by now that I don’t believe Christians are under the law of tithing. I believe in generous, sacrificial giving that models Christ’s life and sacrifice. If you’ve read my thoughts on the matter, you’ll realize it’s not an excuse to give less – even though I do believe you should be caring for your family’s needs first and paying what you owe.

       However, my beliefs about giving shouldn’t lead to giving less than 10% (especially in America). That’s because those beliefs about giving are closely tied to my beliefs about contentment in Christ. When Christ meets all of your needs, you find that you don’t need much in this life to be satisfied and happy. Your needs become very small. And that frees you to become extremely generous.

Sacrificial Giving

       When you begin to live in a way that values Christ and people above material wealth, you choose to make “sacrifices” in the world’s view. You don’t buy a large, extravagant house. You choose to drive an older vehicle. You don’t eat out all the time. You find alternatives to the typical entertainment options. You spend money thoughtfully and carefully – questioning the necessity of the item and seeking God’s will instead of mindlessly following our culture of materialism. You are no longer defined by what you buy. You are defined by who you live for and what you give.

       So my question for you is this: What are you sacrificing today in order to give more? Are you making conscious choices to question the lifestyle that the American culture teaches you to follow? Are you praying for God to guide you as you budget and spend the money He has blessed you with? Are you laying down your life to meet the needs of others?

       How are you following Jesus in your giving? It doesn’t matter if you’re giving 10%, 20%, or 3%. Considering what you have, how is your life reflecting the love of God? How is your budget testifying to the fact that Christ lives in you?

       If you can’t answer those questions, then now is the time for you to seek God’s will for your giving. I don’t care if you believe in tithing or generous giving. What you believe doesn’t matter when you answer those questions. What are you doing? How has your life been changed by the power of God’s Spirit working in you? How is that evident in your giving?

Contribution Limits

       The maximum amount you can contribute to a 403(b) plan depends on your age and years of service. These are the correct 403(b) plan contribution limits for 2009 and 2010. This limit can be split between multiple qualified retirement plans (401(k), 403(b), SIMPLE, or SEP), but the combined total of your contributions cannot exceed this limit. You cannot contribute more than 100% of your compensation.

  • Under age 49 at the end of the year: $16,500
  •  

  • Age 50 or older by the end of the year: $22,000

15 Year Rule

       If you have 15 years of service with a qualified organization, you may be eligible to contribute up to an additional $3,000 per year to your 403(b) plan. However, the rules for this can get tricky, so you should speak with the human resources department at work and read the IRS explanation of the 15 year rule.

Deadline for Contributions

       Elective contributions are generally made from your paycheck, so you need to have your contributions set up within the year. You can choose to contribute everything at the beginning of the year if your plan allows it, or you can just contribute a certain amount or percentage from each paycheck.

Tax Deduction for Contributions

       Your contributions to a 403(b) plan reduce your taxable income, so you do not need to claim a tax deduction on your return. However, you may be eligible for the Retirement Savings Contribution Credit.

Do I Need to File a Tax Return?

Corey —  April 1, 2010 — 1 Comment

       Not sure if you really need to file a tax return? Here’s a guide to figure out if you need to file a tax return.

2009 Federal Filing Requirements

       If your gross income is higher than the amount that applies to your situation according to the table below, you MUST file a tax return.

2009 Filing Requirements

       Here are some minor notes on using the chart:

  • If you were born on January 1, 1945 – you’re considered 65 as of the end of 2009.
  • If you’re married filing jointly and didn’t live with your spouse at the end of 2009 – you must file a return if you have at least $3,650 in gross income, regardless of your age.

       To figure out your gross income for this chart, include all income you received that is not exempt from tax. You must include any income you earned outside the US or from the sale of your home, regardless of whether you may exclude part or all of it.

       If you’re married filing separately and lived with your spouse at any time during 2009, you’ll have to include your Social Security benefits. Otherwise, only include Social Security benefits if one-half of your benefits, plus your other gross income, plus any tax-exempt interest totals more than $25,000 (or $32,000 if you’re married filing jointly). Not all of your Social Security benefits are taxable, so you’ll have to check out IRS Publication 915 to calculate the taxable portion of your benefits.

       Note: If you are self-employed, owe any special taxes (like AMT, penalties on early IRA withdrawal, etc.), or qualify for a refundable credit, these guidelines do not apply. For a list of all possible exceptions, check out this page on the IRS website.

State Filing Requirements

       The filing requirements for states vary by each state. In Pennsylvania, you’re required to file if you have $33 in taxable income (because $33 times the PA tax rate of 3.07% equals $1). Other states may have different rules due to the way they calculate state income taxes. The same goes for any local tax returns as well.

401(k) Plan Contribution Limits

Corey —  March 31, 2010 — 2 Comments

Contribution Limits

       The maximum amount you can contribute to a 401(k) plan depends on your age. These are the correct 401(k) plan contribution limits for 2009 and 2010. This limit can be split between multiple qualified retirement plans (401(k), 403(b), SIMPLE, or SEP), but the combined total of your contributions cannot exceed this limit. You cannot contribute more than 100% of your compensation.

  • Under age 49 at the end of the year: $16,500
  •  

  • Age 50 or older by the end of the year: $22,000 (only if your plan permits catch-up contributions)

Deadline for Contributions

       Elective contributions are generally made from your paycheck, so you need to have your contributions set up within the year. You can choose to contribute everything at the beginning of the year if your plan allows it, or you can just contribute a certain amount or percentage from each paycheck.

Tax Deduction for Contributions

       Your contributions to a 401(k) plan reduce your taxable income, so you do not need to claim a tax deduction on your return. However, you may be eligible for the Retirement Savings Contribution Credit.