12 New Rules for Your Money

In this era of high unemployment, flat home prices and do-it-yourself retirement savings, some traditional rules of saving and investing are due for an overhaul.

Renting may beat buying. Buying wins hands down when home prices are rising. But when they're flat or falling, it makes sense only if you get a great deal, your monthly payment won't exceed rent on a comparable home by much, and you'll own the home long enough to recoup your costs for both buying and later selling your home.

Consider a Roth. Although the traditional rule of tax planning is never to pay a tax bill today that you can put off until tomorrow, Roth IRAs and Roth 401(k) plans stand that rule on its head. With a traditional IRA or work-based retirement plan, you get an upfront tax deduction, but every dime you withdraw in retirement is taxed at your ordinary income-tax rate. With a Roth, you forgo the upfront tax break, but all withdrawals — including decades of earnings — can be withdrawn tax-free. If income-tax rates rise, a pot of tax-free retirement income could be a financial lifesaver. To contribute to a Roth IRA, your income in 2010 can't top $120,000 if you're single or $177,000 if you're married. Anyone, regardless of income, can now convert a traditional IRA to a Roth IRA, but you'll owe taxes on the entire amount. There are no income-eligibility limits to contribute to a Roth 401(k), but not all employers offer them. (more)