401k http://www.wisebread.com/taxonomy/term/1445/all en-US 9 Financial Moves You Will Always Regret http://www.wisebread.com/9-financial-moves-you-will-always-regret <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/9-financial-moves-you-will-always-regret" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_regret_money_000017061233.jpg" alt="Woman making financial moves she will always regret" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We all do dumb stuff with our money, especially when we're young. Most of the time, we make mistakes that won't cripple us in the long run. But there are a handful of bad financial moves that almost always come out negative.</p> <p>Nobody's perfect, but if you avoid these mistakes, you'll probably be in good shape, money-wise.</p> <h2>1. Failing to Invest When You're Young</h2> <p>If you've read Wise Bread long enough, you should know about the power of compounding investment returns. This is the notion that the earlier you invest, the better off you'll be financially because your investments will have time to grow. A $500 per month investment from age 45 to 60 will grow to about $161,000, assuming a 7% annual return. But if you start at age 30, it would represent $606,000. And if you started at age 20? $1.28 million.</p> <h2>2. Buying a House You Can't Afford</h2> <p>There are many reasons why the economy and stock market took a dive in 2007 and 2008, but one of the main culprits was the subprime mortgage crisis, which stemmed from a flurry of people who purchased expensive homes with unfavorable loan terms. People bought homes with little or no money down, with mortgage payments that began high and only got higher. This led to a massive number of foreclosures, as homeowners were left unable to make payments.</p> <p>Banks these days try to avoid lending to anyone who would have to pay more than 28% of their net income each month toward the mortgage. Lenders are also reluctant to provide home loans to those who would have an overall debt-to-income ratio of 43% or more. If you find that you may be exceeding these limits, it's likely that you are stretching yourself too thin and are putting yourself at risk of foreclosure, and possibly bankruptcy.</p> <h2>3. Racking Up Credit Card Debt</h2> <p>Debt stinks, and credit card debt may be the worst kind. That's because credit card interest rates tend to be so high that's hard to make a dent in what you owe. An interest rate on a credit card is at least 11% even for <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">low-interest cards</a>, according to Bankrate.com. That means that for every $100 you owe, you're paying an additional $11 annually. These extra payments then make it harder for you to save for other important things, and to make matters worse, high debt hurts your credit score, and a bad credit score affects your ability to get things like a home loan. So in summary, credit card debt can lead to an endless spiral of despair.</p> <p>Take heart, however. It's possible to avoid credit card debt by living within your means and paying off all credit card balances in full each month. If you do end up with credit card debt, focus on <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">paying off credit cards</a> with the highest interest rates first, then work your way down.</p> <h2>4. Choosing a College Based on Price</h2> <p>There is an assumption by some parents and students that the most expensive schools are also the best. And that's one of the reasons why members of the Class of 2015 exited with an average of $35,000 in student loan debt.</p> <p>While it's true that many of the top schools are quite pricey, it's best to evaluate colleges on overall value, not cost. This means taking into account not just the price, but also the quality of the education and the likelihood of landing a well-paying job after graduation. (Because a good job will help you pay off those student loans.)</p> <p>There's also a growing acceptance of community college as an option for students. Community colleges will offer a low-cost place for students to take the foundational classes that are common among freshmen and sophomores before going off to a major university to complete their degree.</p> <p>Student loan debt is often referred to as &quot;good&quot; debt, but it's horribly crippling to millions of young people. Worst of all, it can't be discharged in bankruptcy, so failing to make student loan payments can haunt a student for years after graduation.</p> <h2>5. Cosigning a Loan With an Untrustworthy Person</h2> <p>At one point or another, many people are approached with a request to cosign a loan. Often it's from a friend or relative who would not otherwise be able to obtain the loan on their own. Generally speaking, you should almost always say no to these requests. That's because cosigning the loan makes you responsible for paying the loan back if the other person fails to make payments. This can lead to financial hardship for you and hurt your credit score.</p> <p>If you have a loved one in need of assistance, you're almost always better off just lending or giving them money directly, or finding some other less risky way to help.</p> <h2>6. Ignoring Your Company's 401K Match</h2> <p>You may think that as long as you put some money into your company's retirement plan, you're doing fine. But are you maximizing the money you could be getting from enrolling?</p> <p>Most companies will match contributions up to a certain percentage of your pre-tax income. Usually, this means matching up to 5% of your salary, and some companies match even more. So if you're not contributing up to this level, you're leaving free money on the table. Over time, this could add up to tens of thousands of dollars missing from your retirement account.</p> <p>If you are unclear about how much to put into your 401K, make sure you at least put in enough to get the full company match. Even an additional 1% or so from your employer can make a huge difference in the size of your retirement fund later.</p> <h2>7. Not Buying Health Insurance</h2> <p>If you are young, you may feel like health insurance is a waste of money. You have no illness, you work out, you eat right. But ask about the young guy who got into a severe car accident, or tore a ligament in a pickup soccer game. No one is invincible, and <a href="http://www.businessweek.com/bwdaily/dnflash/content/jun2009/db2009064_666715.htm">62% of all bankruptcies</a> stem from from medical expenses, according to a 2007 Harvard Study.</p> <p>There's even less of an excuse to avoid health insurance now that there are reasonably priced plans available on state and federal health exchanges.</p> <h2>8. Defaulting on a Loan</h2> <p>You may find yourself in a situation where debt seems so overwhelming you decide to stop making payments altogether. You should avoid this temptation and keep making payments, even if they are the minimum.</p> <p>Quite simply, if you fail to pay a debt, it will show up as a negative event on your credit reports, and will thus impact your ability to get favorable loan terms in the future. Failing to pay a debt often leads to calls from collection agencies, and you could even be sued. If you lose a judgement, you may have your wages garnished. If you find that you owe too much, you may be able to file for bankruptcy as a last resort. But that won't help you avoid debt from student loans, which can remain on a credit report for seven years and are not discharged in bankruptcy.</p> <h2>9. Failing to Pay Taxes</h2> <p>You may hate the Internal Revenue Service, but the agency does not care about your feelings. If you owe taxes, you are expected to pay them, and there are penalties for dodging the tax man. You'll be penalized 5% of what you owe for each month your taxes are late.</p> <p>The IRS advises that you're better off filing a return and paying some taxes, even if it's not the full amount. A &quot;failure-to-file&quot; penalty is usually higher than a &quot;failure-to-pay&quot; penalty, the agency says, and it will work with you on an installment plan if you can't pay a tax bill in full right away.</p> <p>Paying your taxes late doesn't usually hurt your credit score, but if you pay nothing to the IRS, you may be subjected to a federal tax lien, which would show up on credit reports.</p> <p><em>Have you made these &mdash; or other &mdash; financial moves you later regretted?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-tax-friendly-ways-to-save-beyond-your-retirement-fund">9 Tax-Friendly Ways to Save Beyond Your Retirement Fund</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-best-free-financial-learning-tools">9 Best Free Financial Learning Tools</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/optimize-your-ira-and-401k">Optimize Your IRA and 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance 401k compound interest cosigning investing loans retirement stocks taxes Thu, 21 Apr 2016 10:30:05 +0000 Tim Lemke 1694644 at http://www.wisebread.com Which Retirement Account Is Right for You? http://www.wisebread.com/which-retirement-account-is-right-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/which-retirement-account-is-right-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_fund_money_000085578577.jpg" alt="Learning if an IRA, 401k, or 40k is right for you" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Saving for retirement is one of the most important things you can do for your future self. With so many options to choose from, how can you decide which type of account to invest your money in? There are a number of differences between an IRA, Roth IRA, and 401K. We've covered some of the most important factors below to get you started.</p> <h2>Roth IRA</h2> <p>Any contributions you make to your Roth IRA are with funds you've already paid taxes on, so your money can grow tax-free from then on. If you make more than $132,000, or $194,000 for married couples filing jointly, then you won't be eligible to contribute to a Roth IRA. There are no required minimum distributions and no age limit for contributions.</p> <p>Maximum contribution amount: $5,500 per year, $6,500 if you're age 50 or older.</p> <p>Tax advantages: Earnings grow tax-free with tax-free withdrawals in retirement.</p> <h2>Traditional IRA</h2> <p>Any contributions you make to your IRA are with funds you haven't been taxed on yet. You will be required to take a minimum distribution at age 70-&frac12;.</p> <p>Maximum contribution amount: $5,500 per year, $6,500 if you're age 50 or older; cannot contribute after age 70-&frac12;.</p> <p>Tax advantages: Contributing to your IRA can lower the amount of income you pay taxes on now. Once you retire, your withdrawals will be taxed at your ordinary income tax rate. If you make withdrawals before age 59-&frac12;, there will be an additional 10% early withdrawal penalty fee added. Certain approved purchases can be withdrawn penalty-free, such as a first home purchase and approved college expenses.</p> <h2>401K</h2> <p>A 401K is a retirement savings plan sponsored by an employer. Any contribution you make to your employer-sponsored deferred contribution retirement plan is made with funds you haven't been taxed on yet.</p> <p>Maximum contribution amount: $18,000 per year, $24,000 if you're age 50 or older.</p> <p>Tax advantages: Contributing to a 401K can lower the amount of income you pay taxes on now. Once you retire, your withdrawals will be taxed at your ordinary income tax rate. If you make withdrawals before age 59-&frac12;, there will be an additional 10% early withdrawal penalty fee added.</p> <h2>Which One Is Best?</h2> <p>If you can only open one account, or only have the funds to contribute to one retirement account, which is the one to go for? Suze Orman is a big proponent of the Roth IRA and calls it &quot;the best retirement investment you can make.&quot; There are also a number of benefits to the Roth IRA.</p> <p>For instance, you can withdraw your contributions (but not the earnings) in emergency situations, without worrying about taxes or penalties. While you don't want to ever withdraw from your retirement accounts, it can provide you with peace of mind knowing that the funds are available to you in an unexpected future emergency situation. (See also: <a href="http://www.wisebread.com/7-surprising-facts-about-roth-iras?ref=seealso">7 Surprising Facts About Roth IRAs</a>)</p> <p>If you believe you are in a lower tax bracket now than you will be in retirement (like you are just starting your career), a Roth IRA is usually the way to go. With a Roth IRA, you will be investing after-tax funds now, which means you won't be taxed later when you are in a higher tax bracket. On the other hand, if you are near your peak income now, then you will likely be at a lower tax rate in retirement, which favors a traditional IRA or 401K plan. (See also: <a href="http://www.wisebread.com/why-roth-iras-are-ideal-for-young-professionals?ref=seealso">Why Roth IRAs Are Ideal for Young Professionals</a>)</p> <p>If your employer offers contribution matching, definitely invest towards that account until you hit the company match limit so that you can benefit from the free money. With both an IRA and 401K, whatever you invest can be deducted from consideration this tax year. This means that you will be taxed on a lower amount, resulting in tax savings now.</p> <h3>Employer-Sponsored Plans</h3> <p>If your employer offers retirement benefits (such as contribution matching), then take advantage of this free money; your future self will thank you for it. You'll want to invest at least as much as the company match.</p> <p>Ask about what sort of 401K, 403(b), 457, or pension plans your employer offers. This will allow you to take advantage of as much of the employer's contribution as possible. (See also: <a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s?ref=seealso">8 Steps to Starting a Retirement Plan in Your 30s</a>)</p> <h3>Self-Employed Options</h3> <p>Did you know that 28% of the nearly 15 million self-employed Americans are <a href="http://www.amtd.com/English/newsroom/research-and-story-ideas/Self-Employed-Survey/">not saving for retirement</a> at all? Sure, it can be difficult to set aside money for retirement when you can barely pay your business expenses as it is. However, it is imperative that you save what you can now to take advantage of compound interest and to ensure you are prepared for retirement.</p> <p>Self-employed individuals have <a href="https://www.irs.gov/Retirement-Plans/Retirement-Plans-for-Self-Employed-People">further retirement savings options</a>, such as the SEP-IRA, SIMPLE IRA, and Individual or Solo 401K. These have higher contribution limits so that you can have a more sizable retirement savings. These accounts will allow you to save for retirement, while enjoying an up-front tax break and tax-deferred saving.</p> <h2>When in Doubt, Ask a Pro</h2> <p>If you aren't sure about which retirement account is right for you, it's time to speak with a financial adviser. They can help you make informed decisions based on your financial situation and retirement goals. (See also: <a href="http://www.wisebread.com/do-you-need-a-financial-planner?ref=seealso">Do You Need a Financial Planner?</a>)</p> <p><em>Do you have other tips for choosing the right retirement plan? Please share your thoughts in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/which-retirement-account-is-right-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-warning-signs-youre-sabotaging-your-nest-egg">6 Warning Signs You&#039;re Sabotaging Your Nest Egg</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-sep-ira-is-how-the-self-employed-do-retirement-like-a-boss">The SEP-IRA Is How the Self-Employed Do Retirement Like a BOSS</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/does-your-kid-need-an-ira">Does Your Kid Need an IRA?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/you-dont-need-a-retirement-plan-you-need-a-financial-independence-plan">You Don&#039;t Need a Retirement Plan — You Need a Financial Independence Plan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k Roth IRA saving money self-employment traditional ira Thu, 21 Apr 2016 09:30:24 +0000 Andrea Cannon 1691583 at http://www.wisebread.com 5 Questions to Ask Before You Borrow From Your Retirement Account http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-questions-to-ask-before-you-borrow-from-your-retirement-account" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_nest_egg_000026193397.jpg" alt="Asking questions before borrowing money from retirement account" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You need a quick infusion of cash, and there's plenty of it sitting in your IRA or 401K account. Should you withdraw the needed money from these retirement accounts?</p> <p>Not surprisingly, there's no simple answer. Withdrawing from a retirement account might make sense depending on how old you are or what you need the money for. But in other cases, withdrawals from these accounts can derail your plans to save for a happy retirement. They might also leave you with a big financial penalty.</p> <p>Before you make a <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make" target="_blank">withdrawal from an IRA or 401K plan</a>, ask yourself these five questions. Your answers will tell you whether the time is right to take money from these accounts.</p> <h2>1. What Do You Need the Money For?</h2> <p>The goal of both 401K accounts and IRAs is to save money for your retirement years. If you withdraw funds before you hit retirement, you'll cut down on the money available to you after you leave the working world. When you're on a fixed income, you might truly miss those dollars. You'll also lose any interest that the money you withdrew would have generated, unless you pay it back quickly. So unless you absolutely need the money, it might be best to hold off on a withdrawal.</p> <h2>2. Can You Get the Money From Other Sources?</h2> <p>Again, you want your retirement accounts to be as full as possible when you leave the workforce. Can you find a different source for the money you're planning to withdraw? Maybe a family member can loan you the funds. Maybe a cash-out refinance on your home or a home equity loan can leave with you the money you need.</p> <h2>3. How Old Are You?</h2> <p>This is one of the bigger questions. If you withdraw money from your traditional IRA or 401K after you reach age 59-and-a-half, you'll do it penalty free, though you will still have to pay taxes on these withdrawals. The same is true for a Roth IRA, though you won't pay any taxes on most withdrawals from this kind of IRA.</p> <p>But if you are under 59-and-a-half, you'll be hit with a 10% penalty on the money you withdraw unless you are using it for specific reasons, such as buying a first home. For traditional IRAs and 401K plans, you'll also have to pay taxes on the money you withdraw, so this move is an especially big hit. The better choice? Wait to withdraw money from your retirement accounts until you hit 59-and-a-half.</p> <h2>4. Will You Face a Penalty If You Don't Make Withdrawals?</h2> <p>You'll get hit with a penalty if you withdraw money from a traditional IRA before 59-and-a-half. But did you know you'll face an even greater penalty if you don't take regular withdrawals from your traditional IRA after you turn 70-and-a-half?</p> <p>That is the age at which the owners of traditional IRAs are required to begin their minimum required distributions. If you fail to make these scheduled withdrawals you will be taxed at a rate of 50% of the distribution you were required to have made. So don't skip these withdrawals.</p> <h2>5. Are You Buying a New Home?</h2> <p>You can withdraw from your traditional IRA and Roth IRA before 59-and-a-half without any penalty if you are using the funds to buy a first home. And the definition of what makes for a first home is quite broad: Yes, a first home can be the first home that you have ever purchased. But you will also qualify for a first-home exemption if you or your buying partner haven't owned a principal residence in the last two years.</p> <p>With a traditional IRA, you can only withdraw up to $10,000 to help cover the purchase of a new home. With a Roth IRA, you might be able to withdraw a bit more because you can always withdraw your contributions to a Roth IRA without facing any taxes or penalties. The $10,000 limit, though, does hold for the earnings you've made on your Roth IRA.</p> <p>If you and your spouse or partner are buying a home together, you can both qualify for the first-time homebuyer exemption and borrow $10,000 each, giving you $20,000 to use toward your home purchase.</p> <p>Remember, though, you are still losing this money from your retirement account. You might enjoy that house you are buying, but you might miss that $10,000 when you hit retirement age.</p> <p>The rules are different for a 401K plan, which has no penalty exemption for withdrawing money before 59-and-a-half for buying a first home. You can take out a loan against your 401K, though, and use that money to help buy a home. But you will have to pay this loan back in installments and with interest.</p> <p><em>Have you ever withdrawn money from a retirement account? What questions did you ask first?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">7 Penalty-Free Ways to Withdraw Money From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-warning-signs-youre-sabotaging-your-nest-egg">6 Warning Signs You&#039;re Sabotaging Your Nest Egg</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k borrowing money buying home IRA penalties withdrawal Wed, 13 Apr 2016 10:00:12 +0000 Dan Rafter 1686647 at http://www.wisebread.com 4 Ways to Spring-Clean Your Investment Portfolio http://www.wisebread.com/4-ways-to-spring-clean-your-investment-portfolio <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-to-spring-clean-your-investment-portfolio" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/spare_chage_plant_000083910621.jpg" alt="Learning ways to spring clean your investment portfolio" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your garage isn't the only thing that could use a once-over this time of year. Your investments may be in need of some tidying up as well. Here's how to give them a good spring cleaning.</p> <h2>1. Double-Check Your Risk Tolerance</h2> <p>Since bottoming out in March of 2009, the stock market has been on a tear. It's been one of the greatest bull markets ever. But bull markets don't last forever. Eventually, the tide will turn. Will you be ready?</p> <p>I'm not predicting an imminent bear market, nor am I suggesting you try to time the market. That's a fool's errand. But I <em>do</em> believe this is a good time to review the assumptions you've used to guide your investments to date.</p> <p>Especially important here is a review of your risk tolerance. When the market is moving in a positive direction, it's easy to think of yourself as being fairly risk-tolerant. It's only when the markets turn negative that you really discover how strong a stomach you have.</p> <p>Instead of finding out the hard way that you're not as comfortable with risk as you thought you were, and setting yourself up for panic-selling in a downturn, reassess how much risk you can really handle. Vanguard has an <a href="https://personal.vanguard.com/us/FundsInvQuestionnaire">asset allocation questionnaire</a> that can help. It'll gauge your appetite for risk, factor in your investing time frame, and recommend an optimal asset allocation for you.</p> <h2>2. Double-Check Your Allocations</h2> <p>If your risk tolerance has changed, how your investments should be allocated has changed as well, and that means you probably have some work to do. First you'll need to change how your current portfolio is allocated across specific investments &mdash; mostly, what percentage of your portfolio is invested in stocks and what percentage in bonds (or stock-based mutual funds and bond-based mutual funds). Then you'll need to change how your monthly contributions are allocated as well.</p> <p>Whether your investment account is a 401K, an IRA, or a taxable account, you should be able to make these changes online, or call the broker where you have your account for assistance.</p> <h2>3. Rebalance Your Portfolio</h2> <p>Even if you're not planning to change your asset allocation, your asset allocation may have changed on its own.</p> <p>A year ago, your portfolio might have contained an 80/20 mix of stock funds and bond funds, but what does it look like now? If your stock investments have grown since you first implemented your plan and your bonds have fallen, your actual allocation may now be 90/10. Bring your portfolio back in line with what's optimal for you, given your risk tolerance and investment time horizon, by selling some of your stock holdings and buying bonds.</p> <p>It's generally a good idea to <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio">rebalance your portfolio</a> once a year. If it's been a year or so since you last took care of this chore, add it to your investment spring cleaning to-do list.</p> <h2>4. Consolidate Accounts</h2> <p>It's not uncommon these days for people to have their investments spread out among several brokers. If you've changed jobs two or three times and rolled your 401K accounts into IRAs at different brokerage houses, you may find yourself dealing with an unnecessary amount of paperwork and navigating a confusing array of rules and fees. Consolidating some of these accounts could make managing your portfolio more efficient and less expensive. That's because implementing your strategy of choice at one broker usually requires fewer trades, which lowers your investment costs.</p> <p>Choosing which broker to keep is a matter of seeing which one offers most of the investments you want to own for the lowest commissions.</p> <p>Few people enjoy the process of spring cleaning, but most enjoy the fruits of their labor once the work is done. It's simply more enjoyable to live in a clean, organized house. The same is true for your investments. Taking a few hours to double-check your risk tolerance and asset allocation, rebalance your portfolio, and consolidate accounts should set you up for a more efficient, successful, and enjoyable experience as an investor.</p> <p><em>What are you doing to tidy up your finances this spring?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/4-ways-to-spring-clean-your-investment-portfolio">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-questions-to-ask-before-you-sell-a-stock-or-a-fund">10 Questions to Ask Before You Sell a Stock or a Fund</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-biggest-myths-about-investing">The 10 Biggest Myths About Investing</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment 401k balancing portfolio IRA money management risk spring cleaning stocks Thu, 07 Apr 2016 10:01:08 +0000 Matt Bell 1683755 at http://www.wisebread.com Should You Pay Down Debt First or Invest? http://www.wisebread.com/should-you-pay-down-debt-first-or-invest <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-pay-down-debt-first-or-invest" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_000045365316.jpg" alt="Woman wondering if she should pay down debt or invest" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Should you pay down your debt before you focus on investing? This is one of the most important questions in personal finance, and the decisions you make now can greatly impact your financial future.</p> <p>The sooner you start investing, the more time your investments have to grow. The effect of compound interest creates a big incentive to start investing as soon as possible. Compound interest is responsible for the &quot;snowball effect&quot; that grows your small investment into a substantial sum over time.</p> <p>But what about paying off debt? Debt grows through the same effect of compound interest that fuels investment growth. The longer you take to pay off debt, the more it costs you due to compound interest. High interest credit cards have interest rates that likely exceed the best returns you will get in the stock market. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Credit Cards with the Lowest Interest Rates</a>)</p> <p>So what is the best money move &mdash; pay off debt or invest?</p> <h2>The Simple Answer</h2> <p>Mathematically, the best choice is to put your money where it gets the best return on investment. For example, if you have credit card debt at 12.9% interest and your stock market investment account that grows at 8%, then you are better off putting as much money as you can toward the higher interest opportunity &mdash; paying off your credit card in this example. (See also: <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt?ref=seealso">How to Save Money on Credit Card Interest with a Balance Transfer</a>)</p> <p>However, there is a complication with this simple answer right off the bat. There is no way to know the rate of return from your investment accounts ahead of time! You could get huge investment returns, even higher than your credit card interest rate, or you could even lose money in the stock market and get negative returns.</p> <p>You have to make an assumption about your rate of return to decide where to put your money. The long-term historical average return from the stock market is around 8% including booms, recessions, and even the Great Depression. No one knows what is going to happen in the stock market, so a reasonable assumption is that you will get returns consistent with the long-term average over the long run.</p> <p>So if the interest rate on your debts is higher than about 8%, you are better off paying debts down first rather than investing. If you have low interest debts such as a mortgage or student loans, you are better off making minimum payments on your debts and investing as much as possible to get the maximum return on your money.</p> <p>As I said, this is the simple answer. There are a few details that make the decision of whether to pay debt or invest a little more complicated. Let's look at some of them.</p> <h2>The &ldquo;Life Isn't Simple&rdquo; Answers</h2> <p>Even with the simple assumption that the long-term historical stock market return of around 8% will continue into the future, there are other complexities to consider in the decision between paying off debts or investing.</p> <h3>Incentives to Pay Down Debt</h3> <p>There are negative consequences of carrying debt that go beyond mathematical calculations of return on investment. Carrying debt is stressful. You have payments to make every month and face immediate severe consequences if you can't make them. If your source of income is disrupted while you have a lot of debt, you can lose everything quickly. Paying off your debts can take this sort of risk off the table.</p> <p>There are other advantages to paying off debt as quickly as possible before focusing on investment. For one thing, focusing on paying off debts is a good deterrent to borrowing more money. If you have investments that are growing, you might be more likely to take on additional debt if you have debt already and are not focusing on paying it off quickly. Paying down debt can be a good way to focus on your financial health and develop sustainable spending habits.</p> <p>So the risk of carrying debt tips the decision toward paying down debt first, but as I mentioned, life isn't simple.</p> <h3>Incentives to Invest</h3> <p>If your employer offers a 401K retirement account matching funds program, the balance tips toward investing. Many companies will match employee retirement contributions with 50% matching funds. This is free money! For example, if you contribute $500 to your retirement fund and your company has a 50% matching program, the company will add $250 to your retirement account. This can tip the balance in favor of investing. If you have $500 available per month, the choice effectively becomes $500 for debt payments or $750 for retirement contributions. This makes investing hard to beat.</p> <p>Let's not forget about taxes. Another advantage of investing in a retirement account is that you can invest pre-tax dollars in an investment program such as a 401K. When you pay debt, you are paying it with post-tax dollars. The impact of pre-tax vs. post-tax dollars is that you can effectively put more money in your retirement account at the same cost to you. For example, you could invest $665 before taxes or pay down a debt with the $500 you get after taxes. This results in an advantage for investing instead of paying off debt.</p> <p>It is true that some types of debt such as mortgages and student loans have tax advantages. You can get a tax deduction for mortgage and student loan interest, but this benefit is small compared with the tax advantages offered as incentives to fund retirement accounts.</p> <p>Another variable that you may be able to change to tip the decision toward investing is the interest rate on your debt. If you can refinance your high interest debt with a debt consolidation loan or a <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">balance transfer</a>, you will save money on interest &mdash; and investing before paying off your debt may make sense if your interest rate is lower than your investment returns.</p> <h2>Example Scenarios: Pay Off Debt vs. Investing</h2> <p>Let's say you have $20,000 of credit card debt at 12.9% interest. Are you better off paying off that debt first as fast as possible before investing, or should you pay the minimum balance on the debt so you can start investing as much as possible right away?</p> <p>If you wait to start investing until you have the debt paid off, you will miss out on years of growth of your investment account. However, the longer you leave the high interest debt around, the more it will cost you to pay back. What should you do in this scenario?</p> <p>Let's say you have $535 per month that you can use to pay a credit card debt <em>or</em> invest for a term of 25 years.</p> <h3>Option 1: Pay Off Debt First</h3> <p>A monthly payment of $535 per month will pay off the $20,000 credit card debt at 12.9% interest in 48 months, or four years. The total cost of paying it off is $25,700 due to compound interest.</p> <p>Now, after four years, you start investing the $535 per month. It grows at the historical average return of 8% for 21 years. You end up with $348,000 in your retirement account. That's pretty good!</p> <h3>Option 2: Make Minimum Payments On Debt, Start Investing Now</h3> <p>In this scenario, we will make a smaller payment on the credit card of $297 so we will be able to invest the rest of the $535 per month that we have available, or $238 per month.</p> <p>With our minimum credit card payment, it will take 10 years to pay off the credit card balance at a total cost of $35,800. It takes much longer to pay off the credit card by making smaller payments, but this move allows us to start investing right away.</p> <p>Our 10 years of investing $238 at the historical average 8% return gets us $43,500 in our investment account. We'll start with this balance and invest the full $535 per month for 15 more years. The final balance: $329,000.</p> <p>In this scenario, the high interest rate on the credit card debt <em>still </em>outweighs the lower rate of return from the investment account. With high interest debt, the best move is to pay it off before starting to invest.</p> <h3>Consider 401K Match, Pre-Tax Investment Dollars</h3> <p>The result above does not include the 401K company match or the use of pre-tax funds. Considering these investment incentives, the balance at the end of 25 years improves, but the choice between investing vs. paying off debt first does not change.</p> <p>Pay Off Debt First: $650,000<br /> Minimum Debt Payment, Start Investing: $630,000</p> <h3>Without the Debt, You Would Almost Be a Millionaire!</h3> <p>So what is the effect of having $20,000 of debt to pay off early in your investment cycle? If you didn't have debt and started investing right away, you would have $951,000 at the end of 25 years!</p> <h2>Final Answer: Should You Pay Off Debt or Invest?</h2> <p>The basic principle of putting your money into the option that gives the best rate of return leads to the best financial results. If your investments yield a higher return than the interest on your debts, then you'll be better off investing right away and making minimum payments on your debts.</p> <p>However, if the interest rate on your debt is higher than the rate of return from your investments, then you should pay off your debt first before investing. The example calculations showed results for a scenario where it would definitely be better to pay off high interest debt before starting to fund an investment account.</p> <p>One big conclusion from this analysis is how much debt impacts your investment growth. In our 25 year investment example, you could have about $300K more in your retirement account if you didn't start with $20K credit card debt. If you have high interest debt, look for opportunities to consolidate the debt or get a balance transfer and end up with a much lower interest rate.</p> <p>Ultimately the choice of whether to pay off debts before starting to invest depends on your tolerance for risk and your assessment of potential rate of return from investments in comparison with the interest rates on your debt.</p> <p><em>Are you investing or paying off debt? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-biggest-myths-about-investing">The 10 Biggest Myths About Investing</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-occasions-when-you-should-definitely-hire-a-financial-advisor">7 Occasions When You Should Definitely Hire a Financial Advisor</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-you-wasting-68000-on-gas">Are You Wasting $68,000 on Gas?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Investment 401k comparisons compound interest money decisions Paying Off Debt retirement Thu, 24 Mar 2016 09:30:23 +0000 Dr Penny Pincher 1678010 at http://www.wisebread.com Save More Money With 5 Sneaky Tricks http://www.wisebread.com/save-more-money-with-5-sneaky-tricks <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/save-more-money-with-5-sneaky-tricks" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_thinking_brainstorming_000086234205.jpg" alt="Man saving money with these sneaky tricks" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Developing a savings habit can be daunting. It might feel like enough hassle tracking your money, without going the extra mile and assigning a proportion of your income to medium or long term savings. Like many good habits, it can be tough to get started.</p> <p>If you're struggling, then try these simple and painless tricks to start building your nest egg. Not only will you quickly create a decent pot of money, you can also develop a habit which can last a lifetime.</p> <h2>1. Get the Mindset Right First</h2> <p>The key to developing a savings habit is your mental approach. The barrier usually is not so much about making the changes needed to save, but about getting sucked into the mindset of feeling deprived. Once you get to this stage, you are more likely to splurge, and blow the savings on something you may later regret. If you're trying to develop a daily or weekly habit, of ditching the morning coffees or paying bills on time, for example, then a habit tracking app like <a href="https://www.coach.me/">coach.me</a> might help. Set your own personal goals, which you check off every day in your phone, and get reminders, encouragement, and a way of watching your new practice become a daily habit.</p> <p>If you feel that you're making progress towards solid goals, saving is much easier. Have savings goals you agree on with your family, and use trackers, either online or using a pen and paper, to watch your money grow. Your bank might offer savings tracking apps and online tools, or try Mint, as a great way to keep all your goal setting and money tracking in one (secure) place.</p> <h2>2. Use the Tools You Have</h2> <p>Depending on your employer, there may be very simple ways you can get into a savings habit by having money assigned at source to various types of savings, rather than physically needing to manage it yourself.</p> <p>401K plans are especially good to help you squirrel away some savings for later &mdash; with the added advantage of removing temptation by having the cash taken from your pay before you ever see it. Check out whether your employer will match contributions to make your money go even further. If your workplace offers an ESOP (Employee Stock Ownership Plan) scheme, for example, this can be an efficient way to save &mdash; although you should be wary of sinking too much into a single asset, even if you do really rate your employer!</p> <p>Ask your manager or your HR department what policies they have that can help you &mdash; from reimbursements on tuition fees, mobile phone bills, commuting, or parking costs, you may find the answer to your savings problem buried in your company benefits handbook.</p> <h2>3. Reframe It</h2> <p>If you're struggling to convince yourself (or a family member) that it's worth saving, then it may help to reframe what you're trying to do. Think of your progress in terms of percentage changes, for example. If you're saving $500 for a holiday, and can manage to stash away $25 a week, then every week you're 5% closer to your goal. Quite quickly you will be a quarter of the way there, then half way, and so on. Sometimes seeing progress expressed in this way can help motivation.</p> <p>Another approach is to think about the time value of what you can save. If I told you that you needed to start saving 20% of your income, you might tell me that it was impossible, or that that amount was much too high. However, if you think of this as of it as working a day a week towards your family's future, or that dream home or holiday, it may become more palatable. For that one day a week, mentally picture the money you're earning going not into a generic pot to pay bills or rent, but as a step closer to your savings goal. Even if you can only manage a half day a week, or less, it will make the work during those few hours feel somehow more valuable than the rest of the week.</p> <h2>4. Make It Non-Negotiable</h2> <p>One tactic some people claim works for them is freezing their credit cards in a large block of ice &mdash; meaning that any spending has to wait until the card has defrosted, and you have a good chunk of &quot;cooling off&quot; time to stop impulse purchases.</p> <p>If this is too extreme, then there are, of course, other ways to be strict with yourself. One of the basic principles of personal finance is to pay yourself first. If you have some money that could be used as savings, but somehow find that by the end of the month it has evaporated, then arrange an automatic payment of your chosen amount into savings on payday. Automating your savings habit means you can't conveniently forget your personal commitment.</p> <p>You could also consider banking any pay rise you get &mdash; if you get a raise of a certain amount per month, then set up a direct debit for the equivalent into savings. You will never get a chance to get used to having it, and so won't miss it when it's gone!</p> <h2>5. Don't Forget the Little Things</h2> <p>Not all of the ideas here will suit everyone, depending on your personal preference and financial situation. However, whatever your cash flow, don't forget the little things that add up. Keep a coin jar for spare change, or else for money you have mentally saved &mdash; for example, by <a href="http://www.wisebread.com/15-ways-to-make-brown-bagging-it-better-than-buying-lunch">brown-bagging it instead of buying lunch</a> at work. Or choose a specific coin to save every time you spot one in your change. Even just saving all the quarters you come across adds up, and helps the savings habit to develop without you even noticing it.</p> <p>There's an old saying which reads: &quot;The best time to plant a tree was twenty years ago. The second best time is now.&quot; If you're putting off saving, then these simple tricks might be enough to get you building some momentum.</p> <p>Developing a routine of saving is one thing we can all do. Whether it is to spend on a specific holiday or event, or to help fund a secure long term future &mdash; it is one habit that you won't want to quit.</p> <p><em>How have you tricked yourself into saving more money?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/claire-millard">Claire Millard</a> of <a href="http://www.wisebread.com/save-more-money-with-5-sneaky-tricks">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-have-a-great-wedding-if-you-havent-saved-enough">How to Have a Great Wedding if You Haven&#039;t Saved Enough</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-the-right-way-to-save">What&#039;s the Right Way to Save?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-more-is-less">When More is Less</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/flashback-friday-the-95-best-ways-to-get-fit-for-free">Flashback Friday: The 95 Best Ways to Get Fit for Free</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Frugal Living 401k budgeting good habits mind tricks retirement saving money tricking yourself Thu, 17 Mar 2016 11:30:07 +0000 Claire Millard 1673872 at http://www.wisebread.com 6 Warning Signs You're Sabotaging Your Nest Egg http://www.wisebread.com/6-warning-signs-youre-sabotaging-your-nest-egg <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-warning-signs-youre-sabotaging-your-nest-egg" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_breaking_piggybank_000048408258.jpg" alt="Man learning signs he&#039;s sabotaging his nest egg" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Depending on how old you are, retirement may seem like a vague, distant goal. Still, <em>even if</em> it's many years off, it's important to pay attention to your retirement savings because the decisions you make now &mdash; whether good or bad &mdash; will be magnified by the power of time. Review the list below to see if you're making any of these mistakes.</p> <h2>1. You Haven't Calculated How Much You Will Need</h2> <p>If you don't know how much you'll need to retire, you probably also don't know how much you'll need to invest right now. There are many simple-to-use, free online retirement planning calculators that can help you calculate these figures easily. Fidelity's <a href="http://personal.fidelity.com/planning/retirement/content/myPlan/index.shtml">myPlan Snapshot</a>, for example, requires just five bits of information to generate a rough estimate of your retirement needs and the monthly contributions needed to achieve your goal.</p> <h2>2. You're Not Saving Enough</h2> <p>If you work for a company that matches some of your 401K plan contributions, you absolutely must take advantage of what basically amounts to free money. (In fact, it's likely the easiest money you'll ever make.) And yet, about 25% of workers who are eligible for a match do not take full advantage of the benefit.</p> <p>Many of today's large employers also use various forms of automation with their retirement plans &mdash; automatic enrollment, automatic investment selection, and more. Having to opt-<em>out </em>if you don't want to participate has proven to generate higher participation levels than opt-<em>in </em>programs. The problem is, those programs tend to use relatively low contributions to start, and most workers never increase that amount.</p> <p>Don't be lulled into a false sense of confidence by automated contributions. Base your contributions on what you feel capable of contributing &mdash; it's likely higher than the automatic contribution amount.</p> <h2>3. You're Not Investing Wisely</h2> <p>The most common investment choice in 401K and similar plans is a target-date retirement fund (TDF). Their popularity is understandable since TDFs take care of some of the most complicated investing decisions for you. Investors simply choose a fund with the year closest to their intended retirement date as part of its name (the Fidelity Freedom 2055 fund, for example, is designed for people who plan to retire between 2053 and 2057). The fund is invested in a way the mutual fund company believes is best for someone with that much time until retirement. Another benefit of target-date funds is that they automatically alter how they invest over time, becoming more conservative as the investor nears retirement age.</p> <p>Still, not all TDFs intended for similar target retirement dates are the same. Some are more aggressive than others. During the financial crisis of 2008&ndash;2009, many people who were invested in 2010 target-date funds, those intended for people right on the cusp of retirement at the time, <a href="https://www.soundmindinvesting.com/articles/view/how-well-do-target-date-funds-perform-in-a-downturn">lost a lot of money</a>. Allocating all of your retirement contributions to a single fund can be risky. At the very least, understand how the target date fund you're considering is designed and make sure you're comfortable with its assumptions.</p> <h2>4. You Haven't Chosen the Right Tax-Advantaged Plan</h2> <p>If you're eligible to participate in a 401K plan, you may have a choice between a traditional or a Roth 401K. If you don't have access to a workplace plan, you probably qualify for an IRA. Again, you'll have your choice between a traditional or a Roth IRA.</p> <p>The key difference has to do with taxes. With a traditional 401K or IRA, the money you contribute is immediately tax-deductible. If you make $50,000 and contribute $5,000, your taxable income becomes $45,000. When you take money out of the account in retirement, you'll owe taxes.</p> <p>With a Roth, it works the other way around. Money you contribute is not tax-deductible. If you make $50,000 and contribute $5,000, your taxable income remains $50,000. However, when you take the money out in retirement, no taxes are due.</p> <p>Choosing the best approach comes down to trying to pay taxes when your income is lowest. So, if you're in the early stages of your career, your income is probably relatively low. Paying taxes on the contributions now by using a Roth would likely make the most sense. If you're at a stage in your career when you are earning a lot, gaining a tax deduction now may make the most sense, pointing you toward a traditional 401K or IRA.</p> <h2>5. You've Taken a Loan, Hardship Withdrawal, or Early Distribution</h2> <p>The main point of building a nest egg is to have to have enough money to live on when you're older. However, IRS rules make it surprisingly easy to take money out of retirement accounts well before retirement.</p> <p>Participants in a 401K plan can typically borrow against their balance or may qualify for a hardship withdrawal. Those using a Roth IRA can withdraw their contributions at any time without penalty, and they can access their earnings if their account has been open for at least five years and the money is used for certain purposes, such as a first-time home purchase or education.</p> <p>However, accessing retirement account money early can be harmful to your financial health. If you have a loan from your 401K and you leave your employer &mdash; whether by your choice or your employer's &mdash; you'll have to repay the full amount of the loan very quickly. And taking money out of any retirement account for any reason other than retirement means that's less money that can avail itself of the <a href="http://www.wisebread.com/2-investing-concepts-everyone-should-know">power of compound interest</a>.</p> <h2>6. You Haven't Named Beneficiaries</h2> <p>Failing to name a beneficiary for your 401K account or IRA means that money will become part of your estate upon your death, costing your heirs needless time and money. Simply naming a beneficiary will get the proceeds where you want them to go without the need for probate. Name your beneficiaries properly and your heirs could even turn your account into <em>a </em><a href="https://www.soundmindinvesting.com/articles/view/stretching-your-iras-benefits"><em>stretch IRA</em></a> or 401K, which can greatly maximize the value of your account while minimizing taxes.</p> <p>Even if you're young and retirement is set somewhere in the distant future, when that day comes, you will be glad to have taken care of these details <em>way back when.</em></p> <p><em>Are you making any of these retirement investing mistakes?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/6-warning-signs-youre-sabotaging-your-nest-egg">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/which-retirement-account-is-right-for-you">Which Retirement Account Is Right for You?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account">5 Questions to Ask Before You Borrow From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k IRA nest egg retirement calculators Roth IRA Tue, 08 Mar 2016 11:00:13 +0000 Matt Bell 1666378 at http://www.wisebread.com 7 Investment Accounts All 30-Somethings Should Have http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-investment-accounts-all-30-somethings-should-have" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_tablet_000065136353.jpg" alt="30-something learning which investment accounts she should have" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're in your 30s now. If you're finally looking to get settled in your financial life, you may want to consider ways to build wealth over the long term. But that checking account alone isn't gonna cut it. It's time to examine the options out there for someone in their 30s who finally has a little bit of money to invest.</p> <p>Here are seven essential investment accounts all 30-somethings should have.</p> <h2>1. 401K, If Available to You</h2> <p>If you're employed full-time, your company may offer a retirement plan that gives you access to a number of mutual funds and other investments, plus the great tax advantages that come with it. Under a 401K, 403B, or similar plan, contributions are deducted from your pre-tax income, and most employers will match a certain percentage of what you put in. Now that fewer employers are offering pensions, the 401K has become the primary vehicle for saving for retirement. Pumping cash into this account while you're still relatively young gives your investments plenty of time to rise in value and give you a sizable nest egg. Even better, your investment is tax-deferred until you begin making withdrawals.</p> <h2>2. Traditional IRA</h2> <p>You don't necessarily need a traditional Individual Retirement Account if you have a 401K with an employer match. But if you have 401K from an old employer, it might make sense to roll it into an IRA, because you have a much broader choice of investments to choose from &mdash; many with lower fees. With an IRA, you can invest in practically anything, including individual stocks, mutual funds, bonds, and even commodities. Traditional IRAs are also great for people who are self-employed or otherwise don't have access to a 401K. Like a 401K, your contributions are deducted from your taxable income. You can open an IRA at most discount brokers such as Fidelity, TD Ameritrade, and E*TRADE.</p> <h2>3. Roth IRA</h2> <p>This account is a little bit like a 401K in reverse. The tax advantage is on the back end, when you can withdraw money upon retirement without paying tax on the earnings. That's because contributions to a Roth IRA come from earnings after tax, unlike 401Ks, which draw on pre-tax income. Under a Roth IRA, you can contribute up to $5,500 annually, and you can withdraw contributions (but not your gains) before retirement age without paying a penalty.</p> <h2>4. Taxable Brokerage Account</h2> <p>While your main focus should be investing in tax-advantaged accounts that are designed for retirement, it's good to have some investments available in this type of account due to the flexibility. You don't need to wait until retirement age to access funds in this account, for one thing. That means you can use it to boost your income now, through the sale of stock or the gain of dividends. If you hold on to investments in a taxable account for a long time (generally over a year), you'll pay only the long-term capital gains tax (mostly likely 15%) when you sell.</p> <h2>5. 529 College Savings Plan (If You Have Kids)</h2> <p>College is pricey, so nearly every state enables people to save for college by investing money for education in a tax-advantaged way. A 529 plan is similar to a Roth IRA, in that investments will grow tax-free until they're withdrawn, as long as they are spent on higher education. In many states, you also get a tax break from the contributions. It's possible to open a 529 for your child as soon as they have a social security number. Even if you don't have kids yet, you can designate a beneficiary now &mdash; such as a niece or nephew &mdash; and change it to your own child later. (See also: <a href="http://www.wisebread.com/the-9-best-state-529-college-savings-plans?ref=seealso">The 9 Best State 529 College Savings Plans</a>)</p> <h2>6. High-Interest Savings Account</h2> <p>Everyone knows you need a basic bank account, but if you want to boost your savings, it's helpful to have a savings account with a higher-than-average interest rate. These days, interest rates are extremely low, but you can still find returns of above 1% in money market accounts and online banks such as <a href="http://www.wisebread.com/capital-one-360-review">Capital One 360</a>. (See also: <a href="http://www.wisebread.com/5-best-online-checking-accounts?ref=seealso">Best Online Checking Accounts</a>)</p> <h2>7. Peer-to-Peer Lending Account</h2> <p>In addition to making it easier to invest in stocks, the Internet age has also made it possible for individuals to invest in other people's debt. There are thousands of people who have hopped onto sites such as LendingClub and Prosper and report consistently solid returns. These sites generally work in the same way as banks, except that those in need of money are borrowing from individuals, who are seeking to make money on the interest. In most cases, people can invest based on the risk level of each borrower; those who aren't as creditworthy promise a potentially higher return &mdash; but more risk &mdash; to the investor. Popular personal finance blogger Mr. Money Moustache has reported more than an 11% annualized return since 2012, and many others report similar gains. (See also: <a href="http://www.wisebread.com/how-to-make-money-with-peer-to-peer-lending-service-prosper?ref=seealso">How to Make Money with Prosper</a>)</p> <p><em>How many of these accounts do you have?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-spring-clean-your-investment-portfolio">4 Ways to Spring-Clean Your Investment Portfolio</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Investment 30s 401k IRAs lending mutual funds retirement Roth savings accounts stocks Thu, 03 Mar 2016 10:30:34 +0000 Tim Lemke 1665768 at http://www.wisebread.com 403B vs. 401K: How Are They Different? http://www.wisebread.com/403b-vs-401k-how-are-they-different <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/403b-vs-401k-how-are-they-different" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/people_volunteering_charity_000064214269.jpg" alt="Learning how a 401k and 403b are different" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've just taken a job as an administrator at a nonprofit hospital. Or maybe you've found a solid job at a tax-exempt religious organization. Now you're ready to start saving a portion of every paycheck for your retirement.</p> <p>There's a wrinkle here, though: You won't be able to <a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">save in a 401K</a> like employees of for-profit corporations can. Nonprofit, tax-exempt institutions don't offer 401K plans to their workers. Instead, they offer what are known as 403B plans.</p> <p>The good news? These plans work much like 401K plans. And if you do set aside a portion of each of your paychecks for your 403B plan, you'll dramatically increase the odds of a financially stable retirement.</p> <h2>The Big Difference</h2> <p>The main difference between a 401K plan and a 403B plan is who offers them. Traditional for-profit corporations offer 401K plans. These are the retirement savings vehicles with which most U.S. workers are familiar: You set aside a percentage of each paycheck, and that money is deposited in your retirement account.</p> <p>The money in that account can be invested in mutual funds or other investment vehicles. The money grows &mdash; hopefully &mdash; tax-free until employees withdraw their funds. Only then do they pay income taxes on it.</p> <p>A 403B plan works the same way &mdash; only for-profit corporations don't offer them. Instead, these savings vehicles are only offered by institutions that are nonprofit and enjoy tax-exempt status. This usually means hospitals, public education providers, charities, and religious institutions.</p> <h2>Other Differences</h2> <p>There are some smaller differences between the two savings vehicles, too. Usually the biggest, and the most important to employees is that employers offering 401K plans often offer matching incentives.</p> <p>An employer, for instance, might decide to match 50% of the first 6% of the salaries that employees contribute to their 401K plans each year. Say a typical worker with such an employer makes $50,000 a year and that worker has decided to contribute 6% of his or her annual salary to a 401K plan. The employer will match 50% of this worker's contributions, but only up to 3% of the employee's annual salary.</p> <p>So each year, this worker would invest $3,000 to the 401K plan, 6% of this worker's $50,000 salary. The company would invest an additional $1,500 to the 401K plan as a match.</p> <p>Company matches are a good way to boost retirement savings. But companies that offer 403B programs, though not prohibited from doing so, rarely offer matching benefits.</p> <p>Corporations can also offer profit-sharing as part of their 401K programs. Under a profit-sharing arrangement, employers once a year can make a voluntary bonus contribution to their employees' 401K plans. This contribution can vary each year, often going up or down depending on how successful the company was.</p> <p>Institutions offering 403B plans, though, can't offer a profit-sharing bonus. That's because the organizations offering these plans don't generate a profit.</p> <h2>Both Are Worthwhile</h2> <p>There is another big similarity between 401K and 403B programs: For both 401K and 403B plans in 2016, you can contribute a maximum of $18,000 if you have not yet hit your 50th birthday. If you are 50 or older, federal law allows you to contribute even more to these retirement accounts. You can make a yearly catch-up contribution of up to $6,000, meaning that if you are at least 50, you can contribute a total of $24,000 to your 403B or 401K plan.</p> <p><em>Are you invested in a 401K or a 403b?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/403b-vs-401k-how-are-they-different">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-warning-signs-youre-sabotaging-your-nest-egg">6 Warning Signs You&#039;re Sabotaging Your Nest Egg</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/which-retirement-account-is-right-for-you">Which Retirement Account Is Right for You?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k 403b charity contributions employer matching nest egg nonprofits Tue, 01 Mar 2016 10:30:33 +0000 Dan Rafter 1664146 at http://www.wisebread.com 5 Ways to Strengthen Your Finances Before Retirement http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-strengthen-your-finances-before-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/thrifty_woman_money_000033605098.jpg" alt="Woman finding ways to strengthen her finances before retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If retirement is only a few years down the road, hopefully you already have the right <a href="http://www.wisebread.com/how-much-should-you-have-saved-for-retirement-by-30-40-50">retirement savings</a> in place. And nothing can beat a well-funded retirement account that was started early in your career.</p> <p>There <em>are</em> a few more moves you can make before you close the door on your career for good, though. Doing these five things will ensure you have a more comfortable retirement and help stretch your nest egg a little further. (See also: <a href="http://www.wisebread.com/6-retirement-products-that-arent-worth-your-money?ref=seealso">6 Retirement Products That Aren't Worth Your Money</a>)</p> <h2>1. Get Rid of Debt</h2> <p>How much debt do you have right now besides a mortgage? If you have any credit card or other loan debt, now is the time to take serious steps to getting rid of it. Once you move to a fixed income, you do not want your precious savings to fund debt repayment or to be <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">wasted on interest payments</a>.</p> <p>Treat your debt seriously. Taking debt into retirement is like entering a marathon with a broken leg. You will exert too much energy dragging your bad leg around, and might not even cross the finish line.</p> <p>First things first: calculate how much debt you have. Consider transferring your high-interest credit card debt to a promotional credit card that offers 0% APR and <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% balance transfers</a>. This will allow you to pay more towards your debt without wasting money on interest payments. A word to the wise, however: Only transfer as much debt onto our 0% APR card as you can pay off during the promotional period. Otherwise, you'll find yourself in the same position again once the 0% APR promotional period ends and your rate rises.</p> <h2>2. Rethink Your Mortgage and Home</h2> <p>Take a look at your current home and assess it. How much do you still owe on it &mdash; and is it too much house for your retirement needs? Will this be a good home for you when you are in your 80s and have difficulty going up and down stairs?</p> <p>Before you retire, consider the benefits of downsizing your home and mortgage. A smaller home will be less work to maintain and cost less to live in. Not only do smaller houses generally come with smaller mortgages, but they also cost less to heat and cool.</p> <p>If your home is the right fit for your retirement needs, then focus on the mortgage. Paying off your mortgage before retirement is not a small task, but it will free your budget significantly each month.</p> <h2>3. Build an Emergency Fund</h2> <p>Just because you're retired doesn't mean you don't have a need for an emergency fund any longer. Your Social Security benefits, retirement savings, and/or pension are meant to cover your daily living expenses. But how will you pay for an emergency, such as an unexpected hospital visit or car expense? Even a $1,000 emergency can derail your budget and land you into debt if you aren't careful.</p> <p>While you're still working, start saving money in a separate account for emergencies. This money should be easily accessible for small financial disasters that occur before and after retirement.</p> <h2>4. Boost Your Retirement Savings</h2> <p>If you have five to 10 years left until you retire, you still have the special opportunity to boost your retirement savings. Of course, your retirement savings will have seen the most benefit from investing in your 20s and 30s, but taking advantage of catch-up contributions are also wise.</p> <p>Once you turn 50, you become eligible to make additional catch-up contributions to your retirement plan of up to $6,000 more per year. Take advantage of this opportunity to correct for lackluster retirement savings.</p> <p>Remember, temporary cutbacks now can mean a more comfortable and worry-free retirement. Don't forget that contributing the full $24,000 each year after you turn 50 allows you certain tax benefits that can make the extra contributions less burdensome on your budget.</p> <h2>5. Draw Up a Budget and Do a Trial Run</h2> <p>When you first enter retirement, $1&ndash;$2 million dollars can seem like a luxurious amount. But retirement isn't the time to throw out your budget. In fact, your should stick closely to your budget to ensure you don't outlive your money.</p> <p>Once you draw up a realistic retirement budget, try adhering to that budget before you actually need to. Work out your budget kinks before you retire.</p> <p>While many individuals have established retirement savings funds, many have also underestimated what their financial needs will be during the last 20&ndash;30 years of their life. Applying these principles before entering retirement can ensure that your finances stay strong and healthy.</p> <p><em>What are your plans to better yourself before you retire? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-warning-signs-youre-sabotaging-your-nest-egg">6 Warning Signs You&#039;re Sabotaging Your Nest Egg</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account">5 Questions to Ask Before You Borrow From Your Retirement Account</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k budgeting debt emergency funds IRA mortgages savings Fri, 26 Feb 2016 10:00:12 +0000 Ashley Eneriz 1661857 at http://www.wisebread.com Stop Making These 10 Bogus Retirement Savings Excuses http://www.wisebread.com/stop-making-these-10-bogus-retirement-savings-excuses <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stop-making-these-10-bogus-retirement-savings-excuses" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000018814419.jpg" alt="Realizing it&#039;s time to stop making bogus retirement savings excuses" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Saving for retirement can often feel like a drag, and many of us come up with excuses for avoiding it. After all, who wants to think about finances at age 70 when you're decades away and enjoying life <em>now</em>?</p> <p>But no matter what excuse you come up with, there's no denying that putting as much money aside as you can &mdash; as early as you can &mdash; will help you maintain your lifestyle even after you stop working.</p> <p>Here are some of the top excuses people use to avoid saving for retirement, and why they're way off-base. (See also: <a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a>)</p> <h2>1. &quot;I Have a Pension&quot;</h2> <p>If your company is one of the few remaining organizations that offers a defined benefit plan, that's great. But it should not be a reason to refrain from saving additional money for retirement. Having additional savings on top of your pension can make retirement that much sweeter. And pensions have been under assault in recent years, with companies and governments backing off of promises to retirees due to financial troubles. Protect against this uncertainty by opening an individual retirement account (otherwise known as an IRA).</p> <h2>2.&quot;I'm Self-Employed&quot; or &quot;My Company Doesn't Offer a Retirement Plan&quot;</h2> <p>You may not have access to an employer-sponsored retirement plan, but that does not mean you can't save a lot for retirement. Any individual can open a traditional IRA or Roth IRA and contribute up to $5,500 annually. With a traditional IRA, contributions are made from your pre-tax income. With a Roth IRA, you pay taxes up-front, so that you won't have to pay them when you withdraw the money at retirement age. In addition, the federal government now offers a &quot;<a href="https://myra.gov/">myIRA</a>&quot; plan, which works like a Roth IRA and allows anyone to invest in treasury securities with no startup costs or fees.</p> <h2>3. &quot;I Won't Be at This Company for Very Long&quot;</h2> <p>One of the key advantages to 401K plans offered by employers is that they are portable. This means that any money you contribute to a plan will follow you wherever you go. In some cases, contributions from your company need to &quot;vest&quot; for a certain amount of time before you get to keep the them, but usually only for a year or so. There's no real downside to contributing to a company retirement plan, even if you don't plan to be there for very long.</p> <h2>4. &quot;The Expenses Are High&quot;</h2> <p>It's very true that many investment products, including mutual funds, have high costs tied to them. It's annoying to buy funds and notice an expense ratio of more than 1%, thus reducing your potential profits. But fees are not a good enough reason to avoid investing, altogether. Over the long haul, your investments will easily rise in value and more than offset any costs. And if you direct your investments to low-cost mutual funds and ETFs, you'll likely find the fees aren't so objectionable. Look for mutual funds with expense ratios of less than 0.1%, and for those that trade without a commission.</p> <h2>5. &quot;I Need to Fund My Kids' College Education&quot;</h2> <p>Putting money aside to pay for college is a wonderful idea, but it should not be done at the expense of your own retirement. Your kids can always work to pay for college or even take out loans, if necessary. But you can't borrow for your own retirement, and you don't want to find yourself working into old age because you didn't save for yourself. In an ideal world, you can save for both college and your own retirement, but you should always think of your own retirement first.</p> <h2>6. &quot;My 401K Plan Isn't Very Good&quot; or &quot;My Company Doesn't Match Contributions&quot;</h2> <p>I'll occasionally hear someone say that they won't contribute to their retirement plan because it's a bad one. No employer match, bad investment options, or high fees can kill any motivation to save. But contributing to even a bad 401K is better than not saving at all. And if you're not thrilled with the offered 401K plan, you can take a look at traditional or Roth IRAs, or even stocks and mutual funds in taxable accounts. There are many bad retirement plans out there, but they are almost all better than nothing.</p> <h2>6. &quot;I Don't Understand Investing&quot;</h2> <p>There's no question that investing can be a very intimidating thing. It takes a while to grasp even the basics of how to invest, and the number of investment products can be bewildering. Don't let fear hold you back from achieving your dreams in retirement. These days, there's a lot of great free information about investing that can help you get started. And many discount brokerages, such as Fidelity, offer free advice if you have an account. Certified Financial Planners are also plentiful &mdash; and often reasonably priced &mdash; and can help you establish a plan to save for retirement and keep you on track.</p> <h2>7. &quot;I Don't Earn Enough&quot;</h2> <p>It's definitely hard to think about retirement when you're having trouble making ends meet now. But it's important to recognize setting aside even a modest amount of money each month can help you achieve financial freedom. Consider that even $25 a month into an index fund can grow to tens of thousands of dollars after 30 years.</p> <h2>8. &quot;I'm Young &mdash; I Have Plenty of Time&quot;</h2> <p>If you're not saving for retirement when you're young, you are costing your future self a lot of money. Thanks to the magic of compound interest and earnings, someone who begins saving in their early 20s can really see big gains over time. If you have $10,000 at age 20 and begin setting aside $200 a month until age 65, you'll have nearly a million dollars, based on an average market return. But if you wait until age 35, you'll end up with barely one-third of that.</p> <h2>9. &quot;It's Too Late for Me&quot;</h2> <p>It's true that the earlier you start investing, the more money you'll likely end up with. But hope is not entirely lost for those who are approaching retirement age but have not saved. Even five to 10 years of aggressive saving and the right investments can result in a nice nest egg. Older people can take advantage of higher limits on contributions to retirement plans including IRAs and 401Ks.</p> <h2>10. &quot;I'll Get Social Security&quot;</h2> <p>You've been contributing to Social Security all your life, but that doesn't mean it guarantees a comfortable retirement. A typical Social Security benefit these days is about $1,300 a month. That's enough to keep you from starving, but you won't be able to do much else. Moreover, concerns over federal budget deficits suggest there is no guarantee of Social Security funds being available when you retire. For certain, there is constant talk by lawmakers of entitlement reform, which could mean to lower benefits or other changes.</p> <p><em>What's your excuse for not saving for retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/stop-making-these-10-bogus-retirement-savings-excuses">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-14"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-guarantee-income-in-retirement">6 Ways to Guarantee Income in Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k compound interest excuses IRA pensions savings social security Mon, 08 Feb 2016 18:00:05 +0000 Tim Lemke 1649873 at http://www.wisebread.com 7 Things Your Financial Advisor Wishes You Knew http://www.wisebread.com/7-things-your-financial-advisor-wishes-you-knew <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-things-your-financial-advisor-wishes-you-knew" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_thinking_money_000035721100.jpg" alt="Woman realizing what her financial advisor wished she knew" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The cat's out of the bag: You don't need boatloads of money to invest like the super rich &mdash; you just need to understand the ins-and-outs of investing well enough. And who better than financial advisors to share the secrets that can help you succeed as an investor? Read on for the coveted tricks of the trade that your financial advisor wishes you already knew. (See also: <a href="http://www.wisebread.com/investment-advice-you-should-never-hear-from-your-financial-advisor">Investment Advice You Should Never Hear From Your Financial Advisor</a>)</p> <h2>1. Start Early and Stick With It</h2> <p>Believe it or not, the best time to start investing is during your 20s. Yes, it's true that you probably won't have much money to speak of during these years, as you're just getting your feet wet. Nonetheless, your 20s are the ideal decade to start building your wealth, because the compounding power of time is on your side. You may not have access to much in terms of disposable income during these years, but odds are that you have access to something. Even if the spare change you have to work with totals no more than $100 a month, invest it. By the time you're ready to retire, you well may have racked up close to $200,000, assuming a 6% return.</p> <h2>2. Think Long-Term</h2> <p>Generally speaking, wealth generates slowly. So don't pass up opportunities to win small gains. The road to riches will have ups and downs, but there will always be ways to turn around your losses. The trick is to create and maintain a financial safety net, and play within those means. It will take time to build. But your safety net should ultimately be large enough to cover the risk you take on. It's true that big risk leads to big rewards. But it's important to refrain from taking on any risk that's bigger than your safety net. As your safety net grows, you'll be able to shoulder increasingly bigger risks responsibly.</p> <h2>3. Don't Panic</h2> <p>You're playing the long game, remember? Ignore Wall Street's daily temper tantrums. Avoid knee-jerk investments. And, above all, know your risk tolerance. The market recovers from even the biggest of crashes. Just keep your eye on the end game, and don't put all your eggs in one basket. Selling during a market panic is a financial mistake most advisors warn against.</p> <h2>4. Watch Out for Fees</h2> <p>There are few certainties in the world of investment &mdash; one of them is fees. Brokerage fees. Financial advisory fees. Investment service fees. Think of them as money out the window. And, while largely unavoidable, it is indeed within your power to monitor the fees you're paying for investment products and services and make sound decisions based on them. A good advisor will help you minimize these, by selecting low-fee investments and avoiding trading too frequently. The less you spend on fees, the more money you'll have invested that's actually working for you.</p> <h2>5. Don't Get Suckered by Big Names</h2> <p>Don't invest in companies simply because they are well-known as great companies. Invest in those that are great companies and also have stock shares selling at a great price. A good advisor knows that ideally, you want the stocks you buy to be under-priced &mdash; or at least priced fairly. This will give you the leeway you need to actually turn a profit.</p> <h2>6. Max Out Your Retirement Contribution</h2> <p>You can now invest more money into your 401K than ever. The IRS last year raised the maximum limit to $18,000, plus another $6,000 in annual catch-up contributions if you're older than 50. That means you could save for retirement while saving thousands on federal income taxes. But most Americans won't take advantage of it. In 2013, just 12% of folks with 401K plans contributed up to <a href="https://pressroom.vanguard.com/content/nonindexed/How_America_Saves_2014.pdf">the maximum limit</a>. Even if you can't afford to make the maximum contribution, you can still reduce your taxes by boosting your contribution by any amount. Investing in your 401K may not be sexy. But it's smart. And if your employer matches your contribution, you've just doubled your money.</p> <h2>7. Bolster Your Investment Income</h2> <p>The average American worker pays $16,000 a year in federal and state <a href="http://taxfoundation.org/blog/average-us-worker-pays-over-16000-income-and-payroll-taxes">income and payroll taxes</a>. That's a huge and (largely) unavoidable tax burden of 31%! But there's another type of income &mdash; investment income &mdash; that's generally taxed at a lower rate than employment income. Investment income is also exempt from state and local taxes, which means you can rack up significant savings if you live in a high-tax state or municipality. It can be intimidating to think that a significant portion of your total income can be derived from investments. But even if you start small, over time, it can.</p> <p><em>How many of these truths do you stick to?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brittany-lyte">Brittany Lyte</a> of <a href="http://www.wisebread.com/7-things-your-financial-advisor-wishes-you-knew">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-investing-tips-you-wish-you-could-tell-your-younger-self">11 Investing Tips You Wish You Could Tell Your Younger Self</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-spring-clean-your-investment-portfolio">4 Ways to Spring-Clean Your Investment Portfolio</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment 401k advice contributions fees financial advisors Secrets wealth building Tue, 02 Feb 2016 14:00:15 +0000 Brittany Lyte 1649367 at http://www.wisebread.com 11 Finance Tips You Wish You Could Tell Your Younger Self http://www.wisebread.com/11-finance-tips-you-wish-you-could-tell-your-younger-self <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/11-finance-tips-you-wish-you-could-tell-your-younger-self" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/child_holding_cash_000073924377.jpg" alt="Learning finance tips you wish you could tell your younger self" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you could impart some of your current financial wisdom on your younger self, what would you say? Take more risks? Concentrate more on saving? Choose a less expensive education? All of us would do something differently. Perhaps one of these tips would have paved an easier financial path from then to now.</p> <h2>1. Start Contributing to Your 401K as Soon as You Can</h2> <p>When you landed your first job straight out of college, the last thing on your mind was retirement. But even a couple years' delay can defer your retirement to later than expected, or force you to tighten the purse strings mid-career to make up the difference. You're not alone. According to new research from Fidelity Investments in collaboration with the Stanford Center for Longevity, 36% of retirees <a href="http://www.businesswire.com/news/home/20151027006025/en/Drives-People-Retire-Isn%E2%80%99t-Fidelity-Research-Busts">wished they had saved more</a> during their working years, and 33% wished they had started saving earlier &mdash; a statistic that isn't exactly comforting in hindsight.</p> <p>To make the most of your 401K right now, max out your employer-match contribution &mdash; don't let that free cash go to waste &mdash; and negotiate to be vested sooner and/or receive a higher match opposed to $1K to $2k more annually. This is a strategy that will pay off more in the long run.</p> <h2>2. Never Say &quot;I'll Pay Myself Back Later&quot; Because You Won't</h2> <p>There are times when we're younger that we need to dip into our personal savings or 401K (which should always be a last resort) for emergencies or something recreational (like a bad-idea road trip with your buddies to Fort Lauderdale &mdash; not that I'm speaking from personal experience, of course). We convince ourselves that we'll pay ourselves back for the deduction so that we feel less guilty about it, but nine times out of 10, that never happens. That was then. Hopefully you've put those costly impulse decisions behind you &mdash; like you have the cargo shorts and keg stands.</p> <h2>3. Credit Cards Aren't Free Money</h2> <p>This tip is very personal to me because I was targeted by credit card companies as soon as I turned 18, and I fell right into their trap. I took whatever they were willing to throw at me &mdash; because, <em>hahaha, I was going to beat the system!</em> &mdash; but the joke was on me. I <a href="http://www.wisebread.com/do-this-if-you-have-too-much-credit-card-debt">maxed out those cards</a> in less than two months, and because I was a student without a job, I was unable to pay the bills. I missed payments for <em>years</em> until the debt was in such dire straits that I was offered payoff deals. The debt, and the indelible mark it left on my credit score, followed me for years, making it difficult to buy a car, purchase a home, or even build my savings. In this case, I'd tell my younger self to run for the hills &mdash; and keep your nose out of the J.Crew catalog.</p> <h2>4. You Don't Need to Impress Your Friends</h2> <p>As soon as you get that first high-paying job, you want to do two things &mdash; buy shiny stuff and take your friends out for dinner and drinks. Why? Because you made it, and now it's time to show it off! But guess what? Your friends don't give a lick. These are the people who enjoyed your company when you were poor; there's no need to impress them now. And if that's not the case, they're not really your friends. Instead, save your money and pretentiousness for more important things.</p> <h2>5. Pay Your Bills First, Yourself Second, and Everything Else After That</h2> <p>Cash your check and divide it into three parts every time you get paid. The largest part should pay all your bills for the month &mdash; I mean everything. Second, pay yourself. Funnel money into savings and set aside cash for budget items like groceries, gas, and rent. Lastly, if you have any left over, you can use a little for the extra things you'd like to do, like eat out, see a movie, or other non-essentials. It's not the most exciting way to live, but it is the smartest.</p> <h2>6. If You Don't Have the Cash for it, You Can't Afford It</h2> <p>This sort of goes hand-in-hand with steering clear of credit cards if at all possible. And it's as simple as the strategy suggests. If you can't pay for whatever it is you want in cash, you don't need it. Obviously that exempts major life purchases &mdash; a new car, home, etc. &mdash; but it applies to almost everything else, including fancy flat-screen TVs, expensive makeup, the hottest sneakers, or whatever your vice is that you can totally live without.</p> <h2>7. Stop Eating and Drinking Yourself Poor</h2> <p>Fifty-cent wing nights and dollar shots will not get your bills paid, but they will get you fat and house poor. Print out that motivational speech and keep it in your wallet, young buck. In general, eat healthier &mdash; and at home more often. Your 30-year-old body (and bank account) will thank you.</p> <h2>8. Carefully Consider the Debt-to-Income Ratio of Student Loans</h2> <p>Personally I don't regret my costly private college education, despite that I still have eight more years of loan to pay off. Still, I do have plenty of friends who wish they had chosen a less expensive school. Thus, carefully consider how much college will cost, the debt you'll rack up as a result, and the income earning potential of a career in your chosen field. If there's an imbalance between those variables that you don't think you can live with, choosing a cheaper school may be the right move for you.</p> <h2>9. Master the Money-Saving Art of Negotiation</h2> <p>If you can buy it, chances are you can negotiate the price down. From clearance clothing and your first new car to insurance premiums and bank fees (yep, you can even negotiate those, too), you can save a bundle if you learn how to drive a hard bargain.</p> <h2>10. Invest in Real Estate as Soon as You Can</h2> <p>If you search hard enough, you can find anything on the Internet. But I don't believe that, and my younger self didn't either &mdash; which is why I bought property as soon as I could. I'm not alone in this thinking either. Many of my friends who bought early stand by their decisions, even though it set them back financially at first. That sacrifice by way of real estate investment has paid off over the years, because instead of paying someone else a fee to live under a roof, we've paid ourselves in the form of equity that we can now use to continue to purchase real estate as a means of earning passive income. This is probably one of the most lucrative tips on this list, and one everybody should research more in depth.</p> <h2>11. If You Want to Be Reckless, Now's the Time to Do It</h2> <p>While you should have been smarter with your money when you were younger, all is not lost. Truth is, it's better to be a dummy about your finances in your 20s when you don't have much to lose than to make stupid money moves in your 30s and 40s when mismanagement can be costly. So save, spend smartly, but also have some fun &mdash; you may not have the financial freedom later in life, especially if you want nice things.</p> <p><em>Now it's your turn. What financial tips would you tell your younger self? I'd love to hear some of the things you would change about your money management skills from 10 years ago to today.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/11-finance-tips-you-wish-you-could-tell-your-younger-self">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-tax-friendly-ways-to-save-beyond-your-retirement-fund">9 Tax-Friendly Ways to Save Beyond Your Retirement Fund</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-not-buy-something-just-because-you-can-afford-it">Do not buy something just because you can afford it</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-does-being-rich-mean-to-you-anyway">What Does Being Rich Mean to You Anyway?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8000-housing-tax-credit-can-now-be-turned-into-cash-at-closing-according-to-fha">$8000 housing tax credit can now be turned into cash at closing according to FHA</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/could-your-city-go-bankrupt">Could Your City Go Bankrupt?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance 401k life lessons money real estate younger self Tue, 08 Dec 2015 18:00:02 +0000 Mikey Rox 1618967 at http://www.wisebread.com The 10 Biggest Myths About Investing http://www.wisebread.com/the-10-biggest-myths-about-investing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-10-biggest-myths-about-investing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_thinking_newspaper_000053925278_0.jpg" alt="Man learning biggest myths about investing" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There's a lot of information about investing floating around. There are also a lot of bad opinions, misconceptions, and flat-out lies.</p> <p>Knowing the difference between myth and reality is your ticket to hitting your investing goals. Here are 10 of the biggest myths about investing:</p> <h2>1. It's Hard to Get Started</h2> <p>If you've never invested money before, it can seem intimidating &mdash; and you may not even know where to begin. But the reality is that it's never been easier to get started with investing. It's simple to open a brokerage account or Individual Retirement Account (IRA) online, and there's a wealth of great information available to investors for free on the web. If you work for a company that offers a 401K plan, you are usually automatically enrolled. All you have to do is read up on the investment choices and decide how much money you want to put aside.</p> <h2>2. You Need a Lot of Money to Make a Lot of Money</h2> <p>There were days when stock brokers wouldn't even take your calls unless you were willing to invest thousands of dollars. Nowadays, it's possible to open a brokerage account and invest just a share at a time. Granted, transaction fees can make it worthwhile to invest larger sums at a time, and some investment accounts have minimum requirements &mdash; but you generally don't need to be rich to get started. A modest amount of cash set aside at regular intervals can result in a big nest egg upon retirement. Consider that even a person making $30,000 a year and setting aside 5% of their income over 30 years will end up with more than $150,000, based on a 7% annual return.</p> <h2>3. It's Overly Risky</h2> <p>Investing is not without risk, but you are fully in control of how much risk you want to assume. If you're the skittish type, there are plenty of investments, such as bonds and dividend stocks, that will allow you to make money without much risk. And it's important to remember that while stocks can go down in value quickly, they have historically always rebounded. Since the Great Depression, there have been fewer than two dozen down years for stocks.</p> <h2>4. The System Is Rigged</h2> <p>You will often hear this from critics of our financial system. I won't suggest that our system is perfect, but to call something &quot;rigged&quot; is to suggest that the average person can't succeed. The truth is that for the average person, it's easy to buy stocks, bonds, and other investments in a straightforward and transparent way, and make money doing it.</p> <h2>5. Past Performance Indicates Future Returns</h2> <p>It's tempting to buy an investment because it has done well in the past. And it's generally true that if a stock has generated a solid return over a very long period of time, it's a good bet moving forward. But there's absolutely nothing to prevent an investment from tanking even after years of great returns. And it certainly doesn't make sense to invest in something based on the performance of the previous few months.</p> <h2>6. Investment Professionals Know a Lot More Than You</h2> <p>I don't want to disparage fund managers and analysts, but there is a growing body of evidence that no one, not even the most experienced professionals, can consistently beat the performance of the overall stock market. If you put money in an index fund that tracks the overall stock market, there's a good chance you'll do as well or better than the hotshots on Wall Street.</p> <h2>7. You Should Try to Get Stocks During an IPO</h2> <p>Initial public offerings get a lot of headlines, and it may seem desirable to get in at the ground floor. Examples abound, however, of companies that failed to come out of the gate strong. In fact, many companies have seen share prices dip well below IPO levels. (Facebook is the most recent prime example of this.) For most investors, it makes sense to wait after an IPO to see how things go. If you're investing for the long haul, waiting won't hurt you too much. In fact, you may even get a better bargain.</p> <h2>8. You Need to Have [Insert Investment Here] in Your Portfolio</h2> <p>You'll get a lot of advice from people telling you that you need a specific type of investment to optimize your returns. But there is rarely a single investment that should be considered a must-have. There are a million ways to build a collection of investments that will help you get rich; the best advice is to diversify and have a long investment horizon.</p> <h2>9. Gold Is Always Great</h2> <p>You may assume that gold is an amazing investment. I mean, it's <em>gold</em> right? And there has to be some reason there are advertisements for gold on TV all the time. The truth is that gold <em>can</em> be a great investment, but only at certain times. It's worth having some in your portfolio to stay diversified, but gold has taken a beating recently. Shares of the SPDR Gold Trust are down nearly 15% in the last three years.</p> <h2>10. $1 Million Is a Magic Number</h2> <p>One would think that becoming a millionaire means you're set for life. Not these days, however. Thanks to inflation and longer life expectancies, a million bucks may not be enough for most people to live long and retire comfortably. It's a good sum of money, but if you want your money to last 25 to 30 years, you're probably going to want double that &mdash; or even more, if possible. This means saving as much money as you can, as early as you can.</p> <p><em>Do you adhere to these &mdash; or other &mdash; myths about investing?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/the-10-biggest-myths-about-investing">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-spring-clean-your-investment-portfolio">4 Ways to Spring-Clean Your Investment Portfolio</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment 401k emergency funds IRA retirement Mon, 07 Dec 2015 10:02:20 +0000 Tim Lemke 1618546 at http://www.wisebread.com 5 Important Things to Know About Your 401K and IRA in 2016 http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-important-things-to-know-about-your-401k-and-ira-in-2016" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2016_money_finances_000078468345.jpg" alt="Learning important changes coming to your 401K in 2016" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We can all agree that investing in a 401K, IRA, or Roth, while being a scary proposition at times, is quite frankly the best use of our money for saving long term. Retirement might be a long way off for you, but it's important to stay on top of the changes that take place for these accounts each year. They could shift your overall direction of planning for your financial future.</p> <p>Here is a list of what will and won't change for your 401K and IRA in 2016.</p> <h2>No Change</h2> <p>Before we look at what's new, let's look at what's staying the same.</p> <h3>1. Contribution Limits</h3> <p>&quot;No change&quot; usually implies something good is happening because it's consistent. In this case, no change for contribution limits means that you are limited to the same amount of money you could put away in 2015 for 2016. In 401K plans, that is $18,000 for people under the age of 50 &mdash; and in IRA and Roth plans, the contribution max will remain at $5,500 for those age 50 or younger.</p> <p>This may not seem like a big deal, but over time the ability to put away less for your retirement means that you will need to earn more on your money that is already invested. According to Vanguard 401K data, only about 10% of participants put away the max every year. There's no escaping the truth that the more you put away, the better off you are going to be in the long run.</p> <h3>2. 401K/IRA Combo</h3> <p>Many people believe that you can only have a 401K or an IRA, but not both. That simply isn't true. In fact, having a separate IRA and a 401K can be a smart financial strategy. The downside of having both is that depending on your income, you may or may not be phased out of deducting your contributions to both plans.</p> <p>In 2016, the income limitations will stay the same. If your adjusted gross income is between $61,000&ndash;$71,000 for single and head of household, or between $98,000&ndash;$118,000 for married couples, your deductible amount for contributions to your IRA will be phased out. If your income is lower, you will receive the full deduction. If your income is over those limits, you won't be able to deduct any portion of your contributions.</p> <h2>Change</h2> <p>And here are the details set to change &mdash; make sure you update your contributions to match.</p> <h3>3. Roth Income Threshold Limits Increase</h3> <p>Roth plans are very popular, especially with the Millennial demographic. They work in reverse of an IRA. Your contributions are made on an <em>after-tax</em> basis, but your distributions in retirement are tax-free. The objective is that you will be in a higher tax bracket when you retire, hence why you will ultimately save money on taxes that would've been due if you had an IRA. Roth plans have their own contribution income limits and are quite generous. In 2016, the contributions income threshold limits will increase by $1,000.</p> <h3>4. IRA for Non-Working Spouse</h3> <p>What about those spouses that don't work, but still want to contribute to an IRA? In 2016, IRA income limits will increase for spouses without retirement accounts by $1,000.</p> <p>If your spouse contributes to a <a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">retirement account</a> at work, but <em>you</em> don't work, you can set up your own IRA and contributions will be tax deductible up to $184,000 for couples filing jointly. Your contributions begin to phase out from $184,000&ndash;$194,000, and are completely phased out above that income level (meaning they wouldn't be tax deductible). You can always still contribute up to the IRA contribution max, but you just wouldn't receive the deduction.</p> <h3>5. Saver's Credit</h3> <p>The saver's credit is arguably one of the most overlooked tax credits. It rewards lower income individuals and families for saving for their retirement in any retirement plan. If you qualify for this credit, it is worth anywhere from 10%&ndash;50% of the contributed amount &mdash; up to $2,000 for individuals and $4,000 for couples. The credit is available to singles with an income under $30,750, and for couples, under $61,500.</p> <p>Make sure your accountant is aware if you qualify for this credit so you can take advantage of this great benefit. Consider it the government's matching program for your retirement contributions.</p> <p><em>How's your 401K doing?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/shannah-game">Shannah Game</a> of <a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-choose-a-roth-401k-or-a-regular-401k">Should You Choose a Roth 401k or a Regular 401k?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/optimize-your-ira-and-401k">Optimize Your IRA and 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-you-must-open-a-roth-ira-before-april-15">4 Reasons Why You Must Open a Roth IRA Before April 15</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-easy-steps-to-take-for-a-better-401k">3 Easy Steps to Take for a Better 401k</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401k contributions IRA Roth saver's credit taxes Tue, 01 Dec 2015 14:00:24 +0000 Shannah Game 1617390 at http://www.wisebread.com