Six Ways to Boost Your Savings by Making the Most of New Tax Law

I ususally don’t read very carefully the newsletter Fidelity sends to me as I see it as an advertisement. But an article in today’s E-News got my attention. It’s about how to take advantage of the new tax law passed in August to boost savings. Below is the summary of the article

• Workplace Roth 401(k) and Roth 403(b) features become permanent: If your employer offers Roth 401(k) or Roth 403(b) feature in your plan, you can after-tax contributions to the plan directly with your paycheck deduction.
• Automatic enrollment eliminates savings inertia: Starting 2007, the new tax law allows employers to automatically enroll their employees in retirement plans, unless you opt out the program.
• Qualified plan rollovers to Roth IRAs simplified: Beginning in 2008, if you’re eligible to make a Roth IRA conversion, the new law will allow you directly rollover your retirement plan, such as 401(k), 403(b), and governmental 457(b), into a Roth IRA.
• Income limits for Roth rollovers gone in 2010: For couples with more than $100,000 in modified adjusted gross income, they can wait till 2010 to convert an assets to Roth as starting in 2010, the income limit for Roth conversions will be eliminated.
• Guidelines for giving investment advice: Starting in 2007, you can seek professional investment advice for your retirement plans.
• Contribute more to your IRA: Starting from 2008, the annual IRA contribution limit increases to $5,000. After 2008, the $5,000 limit is indexed for inflation, which means your IRA contributions will be increased for cost of living changes.