First-Time Home Buyer Tax Credit

If you have been on the fence about buying a house, like me, the government is offering some incentive to get out and buy.  If you are a first-time home buyer and purchase a home anytime in 2009 before the end of November, you may be eligible for an $8,000 tax credit!  A first-time home buyer is defined as someone who has not owned a home during the past three years. The best thing about this program is that it is a CREDIT–you don’t have to pay it back!
There are plenty of ways you can put the credit to use. While you don’t get the credit right away to use as part of your down-payment, you can save it and use to help pay your monthly mortgage.  This can help if you want to buy a home that is priced a little higher than you want to spend. 
You can use the eight thousand to buy new furniture and appliances for your home.  I’ve been using the same hand-me-down items for the last several years and am looking forward to having something nice for my new home.  Who knows, I may even use a little of the credit on a fun vacation and do my part to help stimulate the economy.
For more information on the First-Time Home Buyer Tax Credit go to

Save Now, Get Rewarded Later

I recently told my friend about a great auto rate at CNB. He bought a Prius a year ago and has a loan with a 7.5% interest rate. I crunched some numbers to show him what his payments would be and the amount of money he’d save in interest if he was approved to be refinanced at 4.74% APY*.

Over a five year period, he would save almost $2,000. No brainer, right? He ended up passing on it.

You see, he lives out of state and to get the deal he had to agree to open a checking account and have the payments automatically deducted. He thought it would be too difficult to have a checking account out of state. I told him he could use his current bank’s online bill pay and send the payment amount to his checking account each month, but he still thought it too troublesome.

When you look at his savings in the long run and what that 2K could do in a Roth IRA, look at the possible returns:

  • Roth IRA in 10 years at 5%…$3,257 at 8%…$4,317
  • Roth IRA in 20 years at 5%…$5,306 at 8%…$9,322

My friend falls into the way numerous members of Generation Y behave financially. Many of us don’t like to think about how much we could have in the future if we looked into ways we could save today.

Instant gratification surrounds us everywhere we go; 0% down, no monthly payments for a year, no interest for three years. All of these deals are thrown at us and we feel like they are too good to pass up. Look at some of these statements members of Gen Y make when it comes to saving:

  • “I can’t socialize and save.”
  • “Why save when you can reverse save?” Reverse saving: spend today, pay tomorrow
  • “When I settle down, I’ll save.” Saving is for older and married people
  • “I love spending money; what else am I going to do with it?”
  • “I just know something great is going to happen to me.”
  • “Banks only care about people with money.”

The skewed view that you can spend now and worry about your nest egg later is one reason all generations are contributing to a negative savings rate. It’s also the reason it is going to get harder and harder for people to truly retire. Do your future self a favor and talk to someone about the benefits of putting money away, and refinancing high interest debt.

The early bird gets the worm, and the early saver gets to enjoy the golden years w/o having to have a part time job!

* Annual percentage rate quoted above available for loan amounts $30,000 or greater for borrowers who meet credit qualifications. APR will be adjusted for different loan amounts. Loan fees and certain restrictions may apply. Auto loans subject to qualifications. Member FDIC.

Rule of 219

It’s that wonderful time of year again, TAX TIME!  Hopefully those of you who will be receiving a refund have a plan in mind for your money, if not, I recently heard some figures that will definitely make one stop and think.  At last week’s bank meeting, one of our financial advisors told us about the ‘Rule of 219.’  This rule involves determining the cost of eating for two people during retirement.  Let’s say two people eat three meals a day during retirement and each meal costs $5.  You then take that times 365 days a year, then multiply that by 20 years of retirement.  Here’s the math;

2 x 3 x 5 x 365 x 20 = 219,000

In this situation, it will cost two people $219,000 to eat during retirement. This doesn’t even factor in dessert! Throw in other costs, such as bills, transportation, travel, etc… and the number grows even greater.  One may argue that it will not cost $5 per meal for them, but even at $3 a meal, two people’s cost of eating would be $131,400!  Also, note that this is estimating for only 20 years of retirement.  With life expectancy increasing, it’s easy to raise that number another 10-15 years.

So when sitting down to determine what to do with your tax refund, it may be helpful to visit with a professional.  A financial advisor can help you reach your long term financial goals. They can assist you in making sure you get to spend your golden years eating steak instead of reverting back to the college days of ramen noodles.


A Tax Free Distribution For The Holidays


A lot of people are worried about their required minimum distribution (RMD) taking them into another tax bracket, or pushing them to a point that they are going to have to itemize their taxes. Are you or someone you know in this situation: a parent or grandparent maybe? If you’re at least 70.5 years old, you now have the option of making a tax free distribution. You have the opportunity to distribute some savings from your IRA to a charitable organization available ( When you take your RMD and donate it to a charity you don’t have to report this money as income for the year.  Another option is if you are supposed to take a $3000 RMD which may take you $1000 into your next tax bracket, and instead you could take $2000 towards your reportable income and the other $1000 given as a charitable distribution. This is an excellent opportunity for those who are interested in giving to charity. But you may want to act now, the government has designated these guidelines until December 31st, 2007 when they expire, so act quickly!Another option is to use the money from the RMD as a gift to a grandchild’s college education fund (529 plan). You’d still have to pay taxes on the RMD; however, the money can go to the grandkids income tax free.  The money is no longer in the giver’s estate and the giver of the gift still controls the spending of the money in the future. The grandchild never becomes the “owner” of the funds. 


·                    IRA owner must be age 701/2 or older

·                    Cannot exceed $100,000 per year per IRA owner

·                    Effective for distribution on or before December 31, 2007

·                    Have a check made payable to charitable organization

·                    IRA owner may hand carry the check to the charitable organization

·                    A qualified charitable distribution offsets an IRA owner’s required minimum distribution

·                    IRA owner addresses taxation on federal income tax return


*Contact the Central National Bank Trust Dept. for further information


*Info provided by Allison Gowing and Joe Karnes

How much is a 20-pack really costing you?

$$ After discussing Roth Individual Retirement Account’s (Bank Lingo Roth IRA’s) with an investment professional today, I realized I could have been a millionaire! Don’t get me wrong, I’ll take the $839,343 I will probably make off of the IRA I began at age 25. However, had I started putting three-thousand a year in at age 21, with an average return of eight percent, I would have ended up with $1.1 million.


Sure it’s hard to save when you are young, but it’s worth it if you can. How can you? You have to think about items you could cut down on or cut out of your life. I tried to think of something lots of young 21-25 year olds spend their money on. One common item could be alcohol. Now this is a hypothetical, but say you buy a 20-pack of beer every weekend at the cost of $15. If instead of investing $720 a year on beer, you invested it in a Roth IRA. After 40 years your beverage investment of $28,800 would be worth $201,442.32. That is at a conservative eight percent return. The stock market, on average, over any 10 year period since 1926, has had an average return of 10%.


I’d strongly recommend meeting with a financial planner and discussing investment options. They can plug in all kinds of numbers and tell you what various amounts over various time periods can yield you. Nobody likes to think about being 65, but if you have to be 65, why not be 65 and Rich? $$