contributions http://www.wisebread.com/taxonomy/term/20737/all en-US 7 Things You Should Know About Your 401(k) Match http://www.wisebread.com/7-things-you-should-know-about-your-401k-match <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-things-you-should-know-about-your-401k-match" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_with_401k_nest_egg.jpg" alt="Piggy bank with 401(k) nest egg" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you are working and have access to a 401(k) plan from your employer, you may have heard references to a &quot;company match&quot; on contributions. What does this mean? It means that your employer is helping you save for retirement by matching the money you contribute, up to a certain amount.</p> <p>These matching funds can be a very powerful way to save money over time, and it's important take advantage of a company's full 401(k) match if you can. Every company has different policies regarding these matching funds, and things can often be confusing for new investors. Here are some key things to know.</p> <h2>1. The match is free money</h2> <p>A 401(k) match is not a bonus based on your job performance. It's not a payment made in lieu of your salary. It's truly a contribution from your company to help you save for your retirement, which you can use to invest in a variety of mutual funds and other investments.</p> <p>There's only one catch, which is that you need to direct a portion of your own money into the 401(k) plan first. That's why they call it a match. Some employers will automatically sign you up for the 401(k) plan and set aside a certain percentage of your salary as a contribution each pay period. (Don't worry &mdash; you can always adjust that amount.) If you are unclear on how much you should contribute to your 401(k), try to at least put aside enough to get the maximum company match. If you miss out on the full match, you are missing out on free cash that could add up to tens of thousands of dollars or more over time. (See also: <a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one?ref=seealso" target="_blank">How to Tell if Your 401K Is a Good or a Bad One</a>)</p> <h2>2. Companies match differently</h2> <p>There is no standard or required way for employers to match 401(k) contributions. Some companies are very generous and match every dollar you contribute, no matter how much you put in. Others will match only a very small percentage. Matching contributions can change if a company is doing better or worse financially. When searching for a job, learning about a company's matching policy can help you decide whether you want to work there. Think of the 401(k) plan as part of a company's overall benefits package.</p> <p>A company's match may also offer some insight into the overall health of the firm. If a company recently stopped matching contributions, that's a red flag that the company may be in trouble.</p> <h2>3. There is often a &quot;vesting&quot; period</h2> <p>Many employers will begin matching contributions as soon as you begin working there, but you may have to give back those matching funds if you leave the company after a specific time. For example, if you've been setting aside 5 percent of your salary into your 401(k) and your company is matching that, you don't necessarily get to keep the company's contributions right away. You may have to wait one year, three years, or even longer to keep that money permanently. This is called a <em>vesting period</em>.</p> <p>About half of employers offer immediate vesting, according to one Vanguard survey. But others have different vesting schedules. Some will allow you to keep a portion of company contributions after a certain amount of time, and increase that total annually until you are fully vested. (Example: 20 percent vested in year one, 40 percent vested in year two, etc.)</p> <p>Vesting schedules and policies can be confusing and can change, so be sure to read your 401(k) plan documents carefully. And if your company does have a vesting period for its 401(k) match, try to avoid leaving before that time is up, as doing so could result in you forfeiting thousands of dollars plus any future investment gains. (See also: <a href="http://www.wisebread.com/8-critical-401k-questions-you-need-to-ask-your-employer?ref=seealso" target="_blank">8 Critical 401(k) Questions You Need to Ask Your Employer</a>)</p> <h2>4. Contribute more, get more</h2> <p>Here's a brain teaser for you: If Company A makes a dollar-for-dollar match on all employee contributions up to 4 percent, and Company B matches contributions up to 8 percent at 50 cents on the dollar, which company is contributing more?</p> <p>The answer is that they are both contributing the same amount. The difference, however, is that Company B is using its matching funds to incentivize workers to contribute more of their own money. If you take advantage of Company B's full match, you will have more money in total because your own contribution will be higher. Contributing more yourself will also save you money because those funds are deducted from your taxable income.</p> <h2>5. Matching money doesn't count against contribution limits</h2> <p>The IRS places a limit on the amount of money you can contribute to a 401(k) each year. For 2018, that limit will be $18,500. It's important to note that this limit only applies to money that the <em>individual </em>contributes. Money from the company match does not count against this total. Thus, the total amount of money from all sources going into your 401(k) each year could be much more than the IRS limit. Feel free to contribute as much as you can, take advantage of the full company match, and watch your savings grow. (See also: <a href="http://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future?ref=seealso" target="_blank">6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future</a>)</p> <h2>6. Sometimes the match comes as company stock</h2> <p>In some cases, employers will contribute all or part of a 401(k) match in the form of company stock. While free company stock is better than nothing, it's risky to have it comprise too much of your savings. Your employer already pays your salary, so your financial security is already tied to the company's success. Past employees of Enron and other failed companies can attest to the risk of having too much of their savings tied up in company stock.</p> <p>If you receive company stock in your retirement plan, consider adjusting your investment mix so company stock doesn't comprise more than 5 to 10 percent of your portfolio. (See also: <a href="http://www.wisebread.com/7-things-you-need-to-know-about-investing-in-company-stock?ref=seealso" target="_blank">7 Things You Need to Know About Investing in Company Stock</a>)</p> <h2>7. It doesn't pay to front load your contributions</h2> <p>Let's say it's January and you just got a big pay raise, a bonus, or both. You may be tempted to throw as much money as you can into your 401(k) at that point. If your employer matches based on pay period, you may miss out on matching funds if you max out your contributions early.</p> <p>So for example: Let's say you earn $200,000 annually and choose to set aside 30 percent of your income per month in the first few months of the year. And let's say your company matches all contributions up to 5 percent of your salary per pay period. Under this scenario, you will have maxed out your contributions by April and won't be able to contribute any more for the rest of the year. Meanwhile, your employer has only contributed up to the maximum company match for those first few months. In this case, your company will have put in about $3,332 when you would have received $10,000 in matching funds if you had spread the contributions out.</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-things-you-should-know-about-your-401k-match">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-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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-reasons-every-millennial-needs-a-roth-ira">6 Reasons Every Millennial Needs a Roth IRA</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/8-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</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-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</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/your-401k-in-2017-heres-whats-new-for-you">Your 401K in 2017: Here&#039;s What&#039;s New for You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions employers investing matching stocks vesting periods Wed, 17 Jan 2018 09:30:05 +0000 Tim Lemke 2085770 at http://www.wisebread.com 7 Easiest Ways to Catch Up on Retirement Savings Later in Life http://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/investing_money_for_retirement_in_piggy_bank.jpg" alt="Investing money for retirement in piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to a survey by the Employee Benefit Research Institute, three in 10 workers report that preparing for retirement causes them emotional distress. Why? Well, because most people feel they are sorely behind when it comes to retirement savings.</p> <p>The Economic Policy Institute reports that baby boomer families, on average, have just a little over $160,000 saved for retirement. With longer life spans, inflation, and increasing health care costs, it's possible that many retirees won't have enough to comfortably sustain their retirements.</p> <p>If you feel behind with your retirement savings, you may be panicking. However, there's hope for you. If you're open to suggestions, a few smart moves will help you catch up on savings even late in the game. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps Late Starters Must Make</a>)</p> <h2>1. Change your mindset</h2> <p>One of the best ways to take the pressure off catching up with retirement savings is to change your mindset.</p> <p>Rob Hill, owner of financial advisory firm R. Hill Enterprises, Inc., helps people plan for retirement and other stages of life. He says that in order to catch up with your savings, you need to first be more flexible with your idea of retirement. &quot;The first thing I would suggest is not looking at retirement as an age, but rather a financial position,&quot; he says.</p> <p>Hill explains that focus can ease anxiety and make a catch-up goal more feasible for some. He explains, &quot;The goal of retirement is not a pile of assets, it is cash flow that makes retirement possible.&quot;</p> <p>If you look at retirement in this light, you may discover you have more retirement runway than you thought and that building up your nest egg is a little more possible.</p> <h2>2. Make catch-up contributions</h2> <p>If you're over 50 years old, you can contribute more than usual to your 401(k). For 2018, employees within the age guidelines can contribute $18,500 plus a catch-up contribution of $6,000, for a total of $24,500. This approach can be even more helpful if your employer offers a match.</p> <p>Kevin Ward, of Park Elm Investment Advisors, notes another way to save: an IRA &mdash; either a traditional IRA or a Roth IRA. &quot;Aside from your employer-sponsored plan, you can save $5,500 in an IRA,&quot; he says. &quot;For those over 50, there is an additional catch-up contribution of $1,000, for a total of $6,500.&quot; (See also: <a href="http://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future?ref=seealso" target="_blank">6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future</a>)</p> <h2>3. Contribute to a health savings account (HSA)</h2> <p>Though HSAs were created as savings vehicles for health care expenses, there are some tax advantages and treatments that can make this type of account a supplemental retirement option. In order for you to open an HSA, you must have a qualified health care plan, like a high deductible health plan (HDHP).</p> <p>Shobin Uralil, founder of HSA management platform Lively, says placing money in an HSA has many benefits and &quot;loopholes&quot; that make this a great addition for retirement savings.</p> <p>&quot;You can save pretax money and then use pretax dollars to pay for qualified out-of-pocket medical expenses,&quot; he says. &quot;After the age of 65, you can use HSA funds for anything you want, not just qualified out-of-pocket medical expenses.&quot;</p> <p>It's also worth noting that HSAs have no mandatory distributions in retirement so you can save into your 70s, 80s, and beyond. This is helpful for anyone behind on retirement saving and needing more time to save. (See also: <a href="http://www.wisebread.com/how-an-hsa-could-help-your-retirement?ref=seealso" target="_blank">How an HSA Could Help Your Retirement</a>)</p> <h2>4. Be frugal</h2> <p>You might be excited about the idea of saving more money, but wondering how you'll actually achieve those higher savings rates. Your best bet is to reduce your current lifestyle expenses. Of course, you'll want to adjust your spending to a level that is comfortable for you. But keep in mind the ultimate goal of having enough money to support your retirement.</p> <p>The options for saving money are unlimited. With some creativity and motivation, you should be able to find some frugal habits that will help you make your savings goals &mdash; everything from downsizing your home, to eating out only once per month. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?Ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p> <h2>5. Postpone collecting Social Security</h2> <p>This is another strategy that can help you earn more income during retirement. The Social Security Administration reports that postponing Social Security benefits past your full retirement age can boost future payments by up to 8 percent for every year the income is deferred until age 70.</p> <p>Tom Foster, national spokesperson at MassMutual, works with financial advisers and employers to educate them about 401(k) plans. He recommends postponing Social Security benefits because the returns are pretty significant if you can hold off. He notes, &quot;Few investment strategies net such a return, never mind one with a guarantee.&quot; (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <h2>6. Keep working</h2> <p>A 2013 Georgetown University study estimates that there will be as many as 55 million job openings by 2020 due to baby boomers retiring and leaving the workforce. So the chances are, there will be plenty of demand for those who want to stick around and work longer.</p> <p>Fortunately, we live in a wonderful time where the internet allows people to work longer, under flexible conditions from almost anywhere in the world. If you can keep working longer, it will add to your potential to save up even more money. (See also: <a href="http://www.wisebread.com/4-creative-remote-jobs-that-can-supplement-your-retirement-income?ref=seealso" target="_blank">4 Creative Remote Jobs That Can Supplement Your Retirement Income</a>)</p> <h2>7. Keep investing</h2> <p>It used to be that people drastically reduced their investment portfolios in anticipation of their &quot;golden years.&quot; In order to reduce the risk of losing the principal amount of their savings, a retiree might be prompted to go with a very conservative investing strategy by keeping their assets in cash, bonds, or a combination of both.</p> <p>Nowadays, people are living and working longer and may be able to invest and save more aggressively for longer periods of time.</p> <p>Cliff Caplan, CFP at Neponset Valley Financial Partners, suggests that people needing to save more should continue to invest for growth. &quot;Establish and continually fund a growth-oriented account that can benefit from lower long-term capital gains treatment,&quot; he says. &quot;Dollar cost averaging can also be used to reduce volatility in a portfolio.&quot; (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/aja-mcclanahan">Aja McClanahan</a> of <a href="http://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">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/7-roadblocks-to-retirement-and-how-to-clear-them">7 Roadblocks to Retirement (And How to Clear Them)</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-signs-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for 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/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</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-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</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-things-you-should-know-about-your-401k-match">7 Things You Should Know About Your 401(k) Match</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) catching up contributions cutting expenses HSA IRA late starters risk saving money social security stocks Tue, 16 Jan 2018 10:00:06 +0000 Aja McClanahan 2085769 at http://www.wisebread.com 5 Things Every Small Business Owner Needs to Know About Employee Retirement Accounts http://www.wisebread.com/5-things-every-small-business-owner-needs-to-know-about-employee-retirement-accounts <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-every-small-business-owner-needs-to-know-about-employee-retirement-accounts" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_hanging_open_sign_on_door.jpg" alt="Woman hanging open sign on door" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Among small businesses, employer sponsored 401(k) plans seem to have gotten a bad rap. According to the United States Government Accountability Office, between 51 and 71 percent of small business employees don't have access to a workplace retirement savings plan.</p> <p>There is a misconception that retirement plans are just for huge companies. However, this isn't true, and offering a retirement savings plan is the biggest step that a small business can take to increase workers' retirement savings. Let's review some of the many reasons why offering an employer-sponsored retirement account is a great idea for small businesses of all types. (See also: <a href="http://www.wisebread.com/8-common-myths-about-starting-a-small-business?ref=seealso" target="_blank">8 Common Myths About Starting a Small Business</a>)</p> <h2>1. Employees may prefer a retirement plan over a salary increase</h2> <p>According to a 2015 Glassdoor survey, 31 percent of workers valued a workplace retirement account, such as a 401(k) or pension plan, over an increase in pay. This makes sense; several studies have shown that workers benefit from automatic paycheck deductions to contribute to a workplace retirement plan. The Employment Benefit Research Institute found that two-thirds of employed workers not currently saving for retirement say they would be likely to start if automatic paycheck deductions ranging from 3 to 6 percent were used by their employer. By offering a retirement plan, small businesses may be able to attract more talent.</p> <h2>2. There are low-cost options available</h2> <p>Many small-business owners have the misconception that their only option to set up a workplace retirement plan for their employees is to pay an annual 1.5 to 2 percent fee to a provider. But nowadays, business owners have access to many lower cost options. Here are three examples of 401(k) providers for small businesses and their schedule of fees for employers:</p> <ul> <li> <p><a href="https://captain401.com/pricing/" target="_blank">Captain 401</a>: $499 setup fee; monthly cost starting at $120 plus $4 per employee.</p> </li> <li> <p><a href="https://www.employeefiduciary.com/401k-plan-pricing" target="_blank">Employee Fiduciary</a>: $500 setup fee for new plans; $1,500 annual fee plus a custody fee of 0.08 percent of plan assets.</p> </li> <li> <p><a href="https://www.myubiquity.com/retirement/plans/expressk/" target="_blank">Ubiquity</a>: $495 setup fee; monthly cost starting at $115 plus other transaction service charges.</p> </li> </ul> <p>Besides providing lower costs, choosing a third-party plan provider allows you to delegate certain plan responsibilities, such as implementing nondiscrimination testing for retirement plans (in layman's terms, making sure that a company isn't favoring specific employees when making contributions). This lets you focus more on core activities of your business.</p> <h2>3. Eligible small businesses can claim tax credits</h2> <p>Those fees to set up and run a retirement plan may be tax deductible. If your small business employed 100 or fewer individuals who were compensated at least $5,000 in the preceding year, and your business hasn't offered a workplace retirement plan in the past three years, it may be eligible for the Credit for Small Employer Pension Plan Startup Costs.</p> <p>Using Form 881, eligible small-business owners can claim a credit of up to $500 for qualified setup and administration fees, and costs to educate employees about the plan for each of the first three years of the plan. You can start claiming the credit in the tax year before the tax year in which the plan becomes effective, and you may carry it back or forward to other tax years if you can't use it in the current year.</p> <p>Just remember that whatever plan expenses you use toward this credit, you can't use as business expense deductions.</p> <h2>4. Employer contributions are tax-deductible</h2> <p>In 2017, the Employee Benefit Research Institute found that nearly 73 percent of workers not currently saving for retirement would be at least somewhat likely to start if contributions were matched by their employer. The good news for employers is that the IRS usually allows them to deduct these matches, subject to contribution limits on qualified employee plans (including the employer's own plan).</p> <ul> <li> <p>Defined contribution plan: An employer can deduct contributions to an employee retirement plan, up to 25 percent of the employee's annual salary. In 2017, no more than $270,000 of an employee's annual salary could be used when calculating that 25 percent.</p> </li> <li> <p>Defined benefit plans: The IRS recommends hiring an actuary to figure out your deduction limit based on the rules of your defined benefit plan.</p> </li> </ul> <p>Remember that all deferred employer contributions, including earnings and gains, are tax-free for employees until distributed by the small-business plan. This is why an employer contribution is so valuable.</p> <p>Let's assume that an employee and your small business have a 20 percent and a 10 percent tax rate, respectively. If you were to give that employee a $4,000 raise, he would only actually see $3,200 of that and your small business would pay $400 in taxes. On the other hand, with a $4,000 employer contribution to the employee's plan, the employee gets the full $4,000 now and the employer gets to deduct the $4,000 as a business expense.</p> <h2>5. Some states provide their own retirement plans</h2> <p>Across the nation, many states have launched, or are preparing to launch, state-sponsored plans to help workers save for retirement. Here are a few examples:</p> <ul> <li> <p>California: The <a href="http://www.treasurer.ca.gov/scib/" target="_blank">California Secure Choice</a> program (scheduled for soft launch in late 2018) will offer a retirement savings option to millions of workers employed by small businesses (under 100 employees) who don't have access to a retirement plan.</p> </li> <li> <p>Connecticut: Nearly 600,000 workers lack access to a workplace retirement plan in the state of Connecticut. The <a href="http://www.ctdol.state.ct.us/retirement%20authority/" target="_blank">Connecticut Retirement Security Program</a> (currently in planning stages) will aim to offer retirement plans to private sector workers without a retirement option through their employer.</p> </li> <li> <p>Oregon: <a href="https://www.oregonsaves.com" target="_blank">OregonSaves</a> launched in November 2017 and aims to offer workers employed by small businesses of less than 100 people a retirement savings plan. The program is expanding in &quot;waves,&quot; with the next wave planned for spring 2018.</p> </li> </ul> <p>Depending on the state that your small business operates in, you may have to address whether or not your small business will offer a workplace retirement plan soon.</p> <p>For example, let's say you have a small business in Oregon. OregonSaves is planning its next registration &quot;wave&quot; for spring 2018 for small businesses with 50 to 99 employees. If your business is<em> not </em>offering a retirement plan, you'll have to start enrolling employees in the state program (unless the employees opt out) on May 15, 2018. Following suit, small businesses that employ 20 to 49 workers will have to enroll on December 15, 2018.</p> <h2>The bottom line: Take action today</h2> <p>As a small-business owner, it makes sense to take a look at offering a retirement savings plan to your employees. This is a perk that employees value, is available through lower cost options, and provides tax breaks to both employees and employers.</p> <p>In the near future, your employees may have to enroll in a state-sponsored retirement plan depending on whether or not you offer a workplace retirement plan. Offering an employer-sponsored retirement plan is an effective way to attract and retain the best talent and demonstrate that you have your employees' best interest in mind.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/5-things-every-small-business-owner-needs-to-know-about-employee-retirement-accounts">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/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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-things-you-should-know-about-your-401k-match">7 Things You Should Know About Your 401(k) Match</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/8-critical-401k-questions-you-need-to-ask-your-employer">8 Critical 401(k) Questions You Need to Ask Your Employer</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-roadblocks-to-retirement-and-how-to-clear-them">7 Roadblocks to Retirement (And How to Clear Them)</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-traps-to-avoid-with-your-401k">7 Traps to Avoid With Your 401(k)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Retirement 401(k) benefits business expenses contributions employees small businesses tax deductions Thu, 11 Jan 2018 09:30:10 +0000 Damian Davila 2085310 at http://www.wisebread.com 4 Easy Ways to Get Richer In 2018 http://www.wisebread.com/4-easy-ways-to-get-richer-in-2018 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-easy-ways-to-get-richer-in-2018" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/smiling_woman_posing_with_piggy_bank.jpg" alt="Smiling woman posing with piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The new year is a great time to start practicing better financial habits. Implementing good money habits on January 1 and committing to keeping them up throughout the year will make you richer by the end of 2018 than you were at the start.</p> <p>Read on to learn just how much adopting these habits can enrich you throughout 2018.</p> <h2>1. Increase your 401(k) contribution by 1 percent: End 2018 with nearly $1,000 more</h2> <p>You are certainly aware of the importance of saving for retirement. Putting money aside when you are young will allow compound interest to do its magic and provide you with a comfortable retirement. In addition, if your employer matches some of your contributions to your retirement account, you can increase your retirement nest egg that much faster.</p> <p>But if you already feel financially squeezed, you might assume that it's not worth the trouble to put aside the little bit extra. That is simply untrue. With just a 1 percent additional contribution to your 401(k), you could end 2018 almost $1,000 richer than if you'd instead blown that money on something frivolous.</p> <p>Here's how. The average full-time wage and salary worker in the U.S. currently earns $44,668 per year, according to the Bureau of Labor Statistics. Let's say that's your salary. That means increasing your savings rate by 1 percent would add $446 more per year to your retirement account. And since $446 over 12 months is only going to result in $18.60 deducted from your bimonthly paychecks, it's unlikely you'll even notice the difference.</p> <p>If your employer matches your contribution and you have not yet maxed out the matching amount, that $446 will magically become $892.</p> <p>The average rate of return for 401(k) plans ranges between 5 and 8 percent per year. If we assume an 8 percent return on the investment of $892, that's $71.36 in growth for 2018 alone. So for a mere $18.60 per paycheck, you might end the year $963.36 richer.</p> <p>And even if you are not lucky enough to have employer matching &mdash; or you've already maxed it out &mdash; you could get the same result by increasing your 401(k) contribution by 2 percent. That would still only &quot;cost&quot; you $37.22 per bimonthly paycheck, and result in nearly $1,000 in additional wealth by the end of the year. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-boost-an-underperforming-401k?Ref=seealso" target="_blank">5 Simple Ways to Boost an Underperforming 401(k)</a>)</p> <h2>2. Reduce how often you dine out: End 2018 with $900 more</h2> <p>According to a 2016 Zagat survey on American dining, the average person eats a restaurant- or commercially-prepared meal 4.5 times a week. All that dining out adds up. The Bureau of Labor Statistics found the average American household spent $3,154 on restaurant dining in 2016.</p> <p>If you cut out one restaurant meal per week in 2018, you can end the year $455 richer. Cut out two meals per week, and you'll have $911 more in your pocket.</p> <p>Here's the math. The Bureau of Labor Statistics calculates that the average American household spent $4,049 in 2016 on groceries. Assuming those households are dining out 4.5 times per week or for 234 meals per year &mdash; we can figure out exactly how much you save by brown bagging your lunch or eating at home.</p> <p>Presuming you eat three meals a day, seven days a week, 52 weeks of the year, there are a total of 1,092 meals to account for in the year. If you're eating 234 of those meals at restaurants, you are spending $4,049 per year on 858 meals at home (1,092 meals total - 234 restaurant meals = 858 meals at home). Now, $4,049 divided by 858 meals comes to an average cost of $4.71 per meal.</p> <p>If you're spending $3,154 on 234 restaurant meals per year, you're spending an average $13.47 per meal ($3,154 / 234 meals = $13.47). That means you're saving $8.76 per meal whenever you eat at home rather than at a restaurant ($13.47 - $4.71 = $8.76).</p> <p>Let's say you reduce your dining out by one meal per week, or 52 meals total. That will save you $455.52 total ($8.76 x 52 = $455.52). Reduce your dining out by two meals per week, or 104 meals total for the year, and you'll save about $911.04 ($8.76 x 104 = $911.04). (See also: <a href="http://www.wisebread.com/are-you-eating-the-10-most-over-priced-restaurant-menu-items?Ref=seealso" target="_blank">Are You Eating the 10 Most Over-Priced Restaurant Menu Items?</a>)</p> <h2>3. Send an extra $100 to your credit card each month: Save more than $1,000 in interest</h2> <p>According to ValuePenguin, the average indebted household carrying credit card debt owes $10,955. According to CreditCards.com, the average APR is 16.15 percent, which works out to 0.013 percent per day. This means the average household will pay $3,675 in interest over the life of the loan if they make the minimum payment of 3 percent (or $329) per month, and it will take 45 months (that is, from January 2018 all the way through to October 2021) to reach the payoff date.</p> <p>But if you send just $100 more to your credit card per month, you'll save $1,117 in interest, and cut a full 13 months off your repayment schedule. You can achieve this by simply putting an additional $50 from each bimonthly paycheck toward debt repayment. That would also help you reach debt freedom a year earlier. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">The Fastest Method to Eliminate Credit Card Debt</a>)</p> <h2>4. Do more with your tax refund: End 2018 with nearly $6,500 more</h2> <p>If you're like the average American, your tax refund in 2017 was around $3,050. But too many people fritter that money away. While it's certainly exciting to get a payday from Uncle Sam every tax season, you could be doing much more with your money than blowing it as soon as the IRS check clears.</p> <p>Let's say you file your return in April and get your refund in May. If you put that $3,050 into an index fund by June and it earns 8 percent interest, you'll have $3,195 by the end of the year. That's $145 in earnings.</p> <p>In addition to that, you decide to change your withholding in January 2018 so you're not giving the IRS an interest-free loan. You keep $254 more from each paycheck ($3,050/12 = $254), and invest it in that 8 percent index fund. By the end of the year, you'll have earned $135 in interest, for a total of $3,183.</p> <p>All together, your savings and interest add up to $6,378 for 2018. That's a hefty boost to your long-term financial security in exchange for saving the tax windfall you would have otherwise spent.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F4-easy-ways-to-get-richer-in-2018&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F4%2520Easy%2520Ways%2520to%2520Get%2520Richer%2520In%25202018.jpg&amp;description=4%20Easy%20Ways%20to%20Get%20Richer%20In%202018"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/4%20Easy%20Ways%20to%20Get%20Richer%20In%202018.jpg" alt="4 Easy Ways to Get Richer In 2018" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/4-easy-ways-to-get-richer-in-2018">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/7-easy-ways-to-build-an-emergency-fund-from-0">7 Easy Ways to Build an Emergency Fund From $0</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/how-to-come-up-with-1000-in-the-next-30-days">How to Come Up With $1,000 in the Next 30 Days</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-you-can-cut-costs-right-before-you-retire-0">6 Ways You Can Cut Costs Right Before You Retire</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/youve-been-saving-money-all-wrong-heres-why">You&#039;ve Been Saving Money All Wrong. Here&#039;s Why</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/how-millennials-with-kids-may-become-the-richest-retirees-yet">How Millennials With Kids May Become the Richest Retirees Yet</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Extra Income 401(k) contributions credit card debt cutting costs expenses restaurants richer saving money taxes withholdings Mon, 01 Jan 2018 09:00:07 +0000 Emily Guy Birken 2074908 at http://www.wisebread.com 8 Critical 401(k) Questions You Need to Ask Your Employer http://www.wisebread.com/8-critical-401k-questions-you-need-to-ask-your-employer <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-critical-401k-questions-you-need-to-ask-your-employer" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/401k_retirement_plan.jpg" alt="401(k) Retirement Plan" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The 401(k) plan is one of the most popular ways for workers to build up their nest eggs for retirement. As of June 2017, 55 million Americans held an estimated $5.1 trillion in assets in 401(k) plans. Whether you're already enrolled or planning to enroll in your employer-sponsored retirement plan, there are several details that you should find out to make the most of it. Let's review some key 401(k) questions you need to ask your employer. (See also: <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make?ref=seealso" target="_blank">5 Dumb 401(k) Mistakes Smart People Make</a>)</p> <h2>1. When am I eligible to make contributions?</h2> <p>Different plans have different rules. You shouldn't assume that the same rules from your previous workplace retirement savings plan will apply to that of your current job. Some plans may require you to wait at least six to 12 months before you can contribute to your account, while others may allow you to do so right away. In a review of 4.4 million 401(k) plans in 2016, Vanguard found 67 percent of plans offered immediate eligibility for employee contributions.</p> <h2>2. Do you offer a company match?</h2> <p>America is experiencing very low unemployment levels. In October 2017, the Bureau of Labor Statistics reported the national unemployment rate stood at 4.1 percent, with some states reaching even lower rates (North Dakota and Colorado recorded 2.5 percent and 2.7 percent, respectively, that same month). Looking to retain and attract talent, more and more employers match employee contributions to their retirement accounts. In Vanguard's <em>How America Saves 2017</em> report, 94 percent of employers offered matching 401(k) contributions in 2016, up from 91 percent in 2013. After you find out how much of a match your workplace offers, be sure to contribute at least up to that amount. If you don't, you'll be leaving free money on the table.</p> <h2>3. What type of formula do you use for matching contributions?</h2> <p>In 2016, there were over 200 different ways in which employers matched their employee contributions, according to Vanguard. By far the most common formula (70 percent of plans) is 50 cents for every dollar up to 6 percent of your pay. Assuming that you make $50,000, this would mean that your employer would contribute up to $1,500 if you were to contribute $3,000 to your 401(k).</p> <p>Here are the next two most common types of matching formulas found in the study:</p> <ul> <li> <p>$1.00 per dollar on first 3 percent of pay, then $0.50 per dollar on next 2 percent of pay (22 percent of plans).</p> </li> <li> <p>A dollar cap, often set at $2,000 (5 percent of plans).</p> </li> </ul> <p>It's important to find out the matching formula used by your employer so that you know how much you need to contribute to your plan to maximize that match. In 2016, 44 percent of surveyed plans required a 6 to 6.99 percent employee contribution for a maximum employer match.</p> <h2>4. When do employer contributions become fully vested?</h2> <p>While all of your 401(k) contributions become fully vested immediately, funds contributed by your employer may take longer to actually become yours. Knowing the applicable vesting schedule is essential to know how much of your 401(k) you'd keep if you were to separate from your employer at any point in time.</p> <p>Depending on your employer, matching contributions may be immediately yours (cliff vesting) or gradually over a period of time (graded vesting). In the Vanguard study, 47 percent of plans granted immediate ownership of employer contributions, 30 percent of plans gradually granted ownership over a five- to six-year period, and 10 percent had a three-year cliff vesting waiting period. (See also: <a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one?ref=seealso" target="_blank">How to Tell if Your 401(k) Is a Good or a Bad One</a>)</p> <h2>5. Can I take hardship withdrawals?</h2> <p>In a perfect world, you would leave your 401(k) funds alone until retirement. However, life happens and it may throw you a curve ball leaving you in a major cash crunch. Some plans offer holders the ability to withdraw money early without the 10 percent IRS penalty due to hardship exemptions, such as certain medical expenses, avoiding foreclosure, and funeral and burial expenses.</p> <p>Some plans may even allow you to take hardship withdrawals for less gloomy situations, such as buying your first home and paying for college expenses for yourself, your spouse, or your children. Eighty-four percent of plans offered hardship withdrawals in the Vanguard study.</p> <h2>6. What are my investment options?</h2> <p>In 2016, 96 percent of surveyed 401(k) plans designated a target-date fund as the default investment option. There are many reasons, including high expense ratios and variable return rates, why you should look beyond target-date funds and consider all funds available in your 401(k).</p> <p>On average, 401(k) plans offered 17.9 funds to plan holders in 2016. Over recent years, more and more plans are offering a suite of low-cost index funds covering domestic equities, foreign equities, U.S. taxable bonds, and cash. In 2016, 57 percent of plans offered such an index &quot;core&quot; of funds covering at least these four asset types. Take a good look at what your 401(k) has to offer so that you can select the best funds for your unique financial goals. (See also: <a href="http://www.wisebread.com/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments?ref=seealso" target="_blank">Bookmark This: A Step-by-Step Guide to Choosing 401(k) Investments</a>)</p> <h2>7. Do you offer financial advice?</h2> <p>Plans may offer a wide variety of financial advice, ranging from access to a financial adviser a few times out of the year to fully-fledged management of your investments. These perks often come at a cost ranging from 0.25 to 1 percent of your account balance. Still, depending on your financial situation, getting professional advice may be worth every penny to maximize your nest egg or handle tricky tax scenarios.</p> <p>Besides checking for a human financial adviser, inquire about whether or not your plan offers you robo-advisers. Often charging much lower fees than human advisers, robo-advisers can offer valuable services, including automatic portfolio rebalancing and tax-loss harvesting (selling securities that have experienced a loss to offset taxes on both gains and income). (See also: <a href="http://www.wisebread.com/9-questions-you-should-ask-before-hiring-a-robo-adviser?ref=seealso" target="_blank">9 Questions You Should Ask Before Hiring a Robo-Adviser</a>)</p> <h2>8. Can I make Roth contributions?</h2> <p>If you are just starting your career, have a large upside income potential, or are expecting a big salary bump in the next few years, having the ability to make after-tax contributions to your nest egg is important. Under these scenarios, taking the tax hit early in your retirement account would make sense because you would be at a much lower tax rate now than in the future. This is why 65 percent of Vanguard 401(k) plans offered Roth 401(k) contributions in 2016. For some plan holders, a Roth 401(k) is a great way to grow contributions tax-free forever.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F8-critical-401k-questions-you-need-to-ask-your-employer&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Critical%2520401%2528k%2529%2520Questions%2520You%2520Need%2520to%2520Ask%2520Your%2520Employer.jpg&amp;description=8%20Critical%20401(k)%20Questions%20You%20Need%20to%20Ask%20Your%20Employer"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/8%20Critical%20401%28k%29%20Questions%20You%20Need%20to%20Ask%20Your%20Employer.jpg" alt="8 Critical 401(k) Questions You Need to Ask Your Employer" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/8-critical-401k-questions-you-need-to-ask-your-employer">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/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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-traps-to-avoid-with-your-401k">7 Traps to Avoid With 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/8-signs-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for 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-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions employer match financial advice hardship withdrawals IRA questions vesting period work Tue, 12 Dec 2017 09:30:15 +0000 Damian Davila 2069139 at http://www.wisebread.com 8 Signs You're Making All the Right Moves for Retirement http://www.wisebread.com/8-signs-youre-making-all-the-right-moves-for-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-youre-making-all-the-right-moves-for-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggybank_with_glasses.jpg" alt="Piggy bank with glasses" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The 2017 Retirement Confidence Survey from the Employee Benefit Research Institute made a disheartening discovery; only six in 10 U.S. workers feel confident that they'll be able to retire comfortably. That means 40 percent think they won't.</p> <p>That's grim news. But you don't have to fall into this group if you're making the right financial moves to prepare for your after-work years.</p> <p>It can be tricky to know for sure how confident you should feel about your nest egg, but some key signs can indicate that you're on your way to building a happy and healthy retirement.</p> <h2>1. You've worked out the kind of retirement you want</h2> <p>The best way to prepare for retirement? You have to plan for it. This means knowing how you want to spend your after-work years. After all, if you plan on traveling the globe after retiring, you'll need plenty of money. If you instead plan to spend more time visiting your grandchildren, reading, or playing golf, you might not need to save quite as much.</p> <p>The key is to determine what kind of retirement you want long before it arrives. That way, you can financially plan for it. And if you're in a relationship, remember that both you and your partner have to agree, and prepare for, the retirement lifestyle that suits you both. (See also: <a href="http://www.wisebread.com/how-to-find-your-new-identity-after-retirement?ref=seealso" target="_blank">How to Find Your New Identity After Retirement</a>)</p> <h2>2. You've set a retirement age</h2> <p>Do you know when you want to retire? You should. That decision can have a huge impact on your finances once you leave the working world.</p> <p>If you were born between 1943 and 1954, your full retirement age is 66. If you were born after 1959, your full retirement age is 67. You can start claiming Social Security benefits once you turn 62. But if you wait until you hit full retirement age &mdash; or beyond &mdash; the money you receive each month will be far higher. In fact, if you start claiming your Social Security benefits at 62, your monthly payment will be lowered by 30 percent compared to how much you'd get at full retirement age.</p> <p>And if you can hang on until age 70, you'll collect a monthly benefit that is 132 percent of the monthly amount you would have received if you started claiming Social Security at full retirement age.</p> <p>There's nothing wrong with claiming your benefits early, if you've planned for this. But make sure you know how much money you'll need before retiring early. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits?ref=seealso" target="_blank">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a>)</p> <h2>3. You've made a retirement budget</h2> <p>Before you hit retirement age, it's important to determine how much money you expect to spend and receive each month once that steady paycheck has disappeared. This means it's time to create a monthly retirement budget.</p> <p>For income, you can include any pensions, Social Security payments, disability payments, rental income, or annuity income you plan on receiving. You can also include the amount of money you expect to draw from your retirement savings. For expenses, include everything that you'll spend money on each month, including groceries, eating out, mortgage, auto payments, health care expenses, and utility bills.</p> <p>Once you know how much you'll be spending and how much you'll be earning in retirement, you can better prepare for it. (See also: <a href="http://www.wisebread.com/heres-how-you-should-budget-your-social-security-checks?ref=seealso" target="_blank">Here's How You Should Budget Your Social Security Checks</a>)</p> <h2>4. You've paid off your debts</h2> <p>The best way to increase the odds of a happy retirement is entering your post-work years without any debt. That means paying off your credit cards, paying off your mortgage, and making sure you don't owe any money on your car once you've retired.</p> <p>Paying off debt isn't easy. It's why so many of us are struggling under mountains of credit card debt. Before your retirement hits, though, start funneling money toward your debt. The more you pay off, the less financial stress you'll face in retirement. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p> <h2>5. You've maximized your retirement savings contributions</h2> <p>You should be contributing to an IRA, 401(k) plan, or a combination of both. But as retirement gets closer, make sure you are contributing the maximum amount to these retirement savings vehicles. Doing so will leave you with the greatest financial cushion for retirement.</p> <p>It might seem like a financial sacrifice to devote, say, 15 percent of your regular paycheck to a 401(k) account. But by saving that much, as opposed to 5 percent or 10 percent, you can dramatically increase the amount of money you'll have when retirement arrives. (See also: <a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement?ref=seealso" target="_blank">10 Signs You Aren't Saving Enough for Retirement</a>)</p> <h2>6. You're playing catch-up</h2> <p>Once you hit your 50th birthday, you can contribute even more money each year to your 401(k) plan or IRAs. Take advantage of this benefit to provide a late-in-life boost to your retirement savings.</p> <p>For the 2017 tax year, you are allowed to contribute up to a maximum of $18,000 in a 401(k) plan. But if you're 50 or older, you can make what are known as catch-up contributions and contribute an extra $6,000 &mdash; meaning that you can put a total of $24,000 into your 401(k) this year. For the 2018 tax year, 401(k) contribution limits will be raised to $18,500, which means those age 50 or older can contribute up to a total of $24,500 per year. (See also: <a href="http://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future?ref=seealso" target="_blank">6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future</a>)</p> <p>Traditional and Roth IRAs also have catch-up policies for investors 50 or older. For the 2017 tax year, you can contribute up to $5,500 in either form of IRA. But if you are 50 older, you can contribute an additional $1,000, meaning that you can save up to $6,500 this year in a Roth or traditional IRA. This will be remaining the same in the 2018 tax year.</p> <h2>7. You've prioritized your spending &mdash; even when it comes to your kids</h2> <p>It's not easy telling your kids no, even when both they and you are adults. But when it comes to saving for retirement, you might have to do just this.</p> <p>You might want to help your children pay for their college tuition. And hopefully, you've already saved for this. But if you didn't, you shouldn't be putting off saving for retirement to help your adult children pay for college.</p> <p>Your children have other options when it comes to college: They can find a less expensive school, attend community college for two years, or apply for loans and grants. If you can't afford to save for both retirement and your children's college tuition, you absolutely must put saving for retirement first.</p> <p>If you don't? You might just become a financial burden for your adult children when you can't afford to maintain a healthy retirement lifestyle. (See also: <a href="http://www.wisebread.com/are-you-ruining-your-retirement-by-spoiling-your-kids?ref=seealso" target="_blank">Are You Ruining Your Retirement by Spoiling Your Kids?</a>)</p> <h2>8. You've tinkered with your savings formula</h2> <p>Early in your working days, it's a sound strategy to invest in a riskier mix of stocks, bonds, and other investment vehicles. The potential rewards are higher, and you have more years to recoup whatever losses you might suffer from a potentially more volatile portfolio.</p> <p>But once you get closer to retirement, it's time to rebalance your investments to eliminate much of the risk. When you're 10 or five years from retirement, you want a safer investment mix because time is running short. You won't have as many years to recover from the downs that sometimes come with a high-risk, high-reward savings portfolio.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F8-signs-youre-making-all-the-right-moves-for-retirement&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Signs%2520Youre%2520Making%2520All%2520the%2520Right%2520Moves%2520for%2520Retirement.jpg&amp;description=8%20Signs%20Youre%20Making%20All%20the%20Right%20Moves%20for%20Retirement"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/8%20Signs%20Youre%20Making%20All%20the%20Right%20Moves%20for%20Retirement.jpg" alt="8 Signs You're Making All the Right Moves for Retirement" width="250" height="374" /></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/8-signs-youre-making-all-the-right-moves-for-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-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/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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/half-of-americans-are-wrong-about-their-retirement-savings">Half of Americans Are Wrong About Their Retirement Savings</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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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/8-critical-401k-questions-you-need-to-ask-your-employer">8 Critical 401(k) Questions You Need to Ask Your Employer</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-roadblocks-to-retirement-and-how-to-clear-them">7 Roadblocks to Retirement (And How to Clear Them)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions debt family full retirement age IRA nest egg saving money social security benefits Tue, 05 Dec 2017 09:00:07 +0000 Dan Rafter 2066271 at http://www.wisebread.com It's So Simple: 6 Steps to a Stable Retirement http://www.wisebread.com/its-so-simple-6-steps-to-a-stable-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/its-so-simple-6-steps-to-a-stable-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/senior_couple_dancing.jpg" alt="Senior couple dancing" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you are new to personal finance, you might find yourself thinking that reaching retirement is sort of like reaching a mythical place like Hogwarts. In both cases, the process required for entry is never adequately explained &mdash; and getting there yourself feels more like fantasy than reality.</p> <p>While it's unlikely that an owl will ever arrive to welcome you to a magical school, retirement is actually attainable for each and every muggle. In fact, the rules for reaching a stable retirement are relatively simple and require absolutely no financial wizardry on your part,</p> <p>Here are the only six things you need to do to achieve a stable retirement &mdash; no magic wands required.</p> <h2>1. Always spend less than you earn</h2> <p>No matter how much you make, you need to live on less than you earn. This is the kind of so-simple-it-feels-obvious advice that many personal finance experts take for granted, but keeping your expenses below your income is the cornerstone of saving for a stable retirement. Many people assume that they need to make a certain level of income before they can afford to start saving for retirement, but that's not true. As long as you always spend less than you earn, you can always save toward your retirement.</p> <p>If you're not sure how to go about reducing your expenses so that you're no longer spending everything that comes in, start by tracking your spending. This will help you better understand where your money is going so you can cut back on unnecessary spending. (See also: <a href="http://www.wisebread.com/save-more-and-spend-less-by-increasing-your-mental-transaction-costs?ref=seealso" target="_blank">Save More and Spend Less by Increasing Your &quot;Mental Transaction Costs&quot;</a>)</p> <h2>2. Max out your retirement contributions</h2> <p>Both your employer-sponsored 401(k) and your individual retirement account (IRA) have yearly contribution limits that you should strive to meet every year. The 2017 contribution limits are $18,000 for 401(k) plans (plus an additional $6,000 in catch-up contributions if over age 50), and $5,500 for IRAs ($6,500 if over age 50). The traditional versions of these investment vehicles are tax-deferred, which means you are funding your accounts with pretax dollars. Roth 401(k) plans and IRAs are funded with money you have paid taxes on, but they, like the traditional vehicles, grow tax-free.</p> <p>Many people can't afford to meet the full contribution limit for their 401(k) plan, plus maxing out an IRA as well. However, getting as close to the maximum contribution as you can for both of these vehicles will put you well on your way to retirement stability. In addition, many employers offer a 401(k) contribution match &mdash; and not maxing out this kind of matching program is akin to leaving free money on the table. (See also: <a href="http://www.wisebread.com/how-much-should-you-have-saved-for-retirement-by-30-40-50?ref=seealso" target="_blank">How Much Should You Have Saved for Retirement by 30? 40? 50?</a>)</p> <h2>3. Work at least 35 years</h2> <p>While retiring early is a common dream among many workers, leaving the workforce before putting in 35 full years of employment could damage your bottom line in retirement. That's because your Social Security benefits are calculated using the 35 highest earning years in your career. If you have less than 35 years of work experience, the Social Security Administration uses zeros to create your benefit calculation, lowering your average earnings and your payout. If you don't have 35 years of employment history, it's a good idea to keep working to get those zeros replaced in your Social Security calculation.</p> <p>Doing whatever you can to increase your monthly benefit will make a big difference in your bottom line once you retire. The most important increase you can make is to work at least 35 years total &mdash; although waiting as long as you can to take Social Security benefits is also an important strategy for increasing your monthly Social Security check. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?Ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <h2>4. Avoid debt</h2> <p>We live in a society that tells us we can have it all right now and pay for it later. The problem is that we <em>will</em> indeed pay for it later &mdash; with an impoverished retirement. While it may be possible to finance the lifestyle you want with debt, you will have no money available to save for retirement or otherwise invest. In addition, the added interest expense of borrowing money to pay for your lifestyle just makes it that much more expensive and unsustainable. (See also: <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=seealso" target="_blank">5 Ways to Pay Off High Interest Credit Card Debt</a>)</p> <h2>5. Invest for the long-term with index funds</h2> <p>While the movies show investing as a kind of game that you win by figuring out when to buy low and sell high, the best way to make sure your money grows is to follow a long-term buy-and-hold strategy.</p> <p>A 2016 DALBAR study on investment behavior revealed that investors routinely underperform the market despite solid annualized returns. For example, at the end of 2015, the S&amp;P 500 was averaging a return of 8.19 percent. That same year, investors saw returns top out at a measly average 4.67 percent &mdash; and this pattern is not new. Why such a discrepancy? Simple; rather than employing a buy-and-hold strategy, investors routinely try (and fail) to time the market. Year after year, their returns suffer as a result.</p> <p>You can use statistics and a long investment term to your advantage by investing in index funds. These funds aim to replicate the movement of specific securities in a target index, which means an index fund is going to do about as well as the target securities will do. (See also: <a href="http://www.wisebread.com/want-your-investments-to-do-better-stop-watching-the-news?ref=seealso" target="_blank">Want Your Investments to Do Better? Stop Watching the News</a>)</p> <h2>6. Take care of your health</h2> <p>Your health can have an enormous impact on your financial stability in retirement. That's because health care costs are a major concern in your older years, especially since this is one aspect of your retirement budget that you may not have control over. According to a 2016 Fidelity study, a 65-year-old couple retiring in 2016 will need about $260,000 to cover their medical and health care costs for the rest of their lives.</p> <p>While kale smoothies and daily kettlebell workouts cannot ensure your good health in retirement, taking good care of yourself throughout your life does improve the odds that you'll stay healthier as you age. You can consider each jog and healthy meal as an investment in your future. (See also: <a href="http://www.wisebread.com/dont-let-poor-health-kill-your-retirement-fund?ref=seealso" target="_blank">Don't Let Poor Health Kill Your Retirement Fund</a>)</p> <h2>Reaching retirement, one step at a time</h2> <p>Achieving a stable retirement doesn't require any magic. Instead, it's a matter of following some simple rules that will ensure you have the money you need to retire comfortably.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fits-so-simple-6-steps-to-a-stable-retirement&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIt%2527s%2520So%2520Simple_%25206%2520Steps%2520to%2520a%2520Stable%2520Retirement.jpg&amp;description=It's%20So%20Simple%3A%206%20Steps%20to%20a%20Stable%20Retirement"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/It%27s%20So%20Simple_%206%20Steps%20to%20a%20Stable%20Retirement.jpg" alt="It's So Simple: 6 Steps to a Stable Retirement" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/its-so-simple-6-steps-to-a-stable-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-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/8-signs-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for 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-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</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/7-things-you-should-know-about-your-401k-match">7 Things You Should Know About Your 401(k) Match</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/why-saving-money-is-harder-today">Why Saving Money Is Harder Today</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/i-am-doing-well-financially-now-what">I Am Doing Well Financially. Now What?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Retirement buy and hold contributions debt health care index funds investing returns social security benefits stable retirement Tue, 31 Oct 2017 09:00:06 +0000 Emily Guy Birken 2041362 at http://www.wisebread.com 5 Ways to Get the Most From Your Employer’s Automated Retirement Plan http://www.wisebread.com/5-ways-to-get-the-most-from-your-employer-s-automated-retirement-plan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-get-the-most-from-your-employer-s-automated-retirement-plan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/arrows_pointing_in_positive_direction_on_401k_statement.jpg" alt="Arrows Pointing In Positive Direction On 401(k) Statement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>An increasing number of companies are automating their 401(k) plans &mdash; automatically enrolling new hires and even automatically choosing investments for employees. If that's true of your employer, don't be lulled into a false sense of confidence. Just because many decisions are being made for you doesn't necessarily mean they're the <em>right</em> decisions. Here's what you need to know.</p> <h2>1. Stay in</h2> <p>The starting point of automated retirement plans is automated enrollment. To not participate, you have to opt <em>out. </em>Don't do that. For the vast majority of employees, participation is a good thing.</p> <h2>2. Invest enough</h2> <p>Most automated plans set employee contributions at very low rates, such as 3 percent of salary, at least initially. Many employees, perhaps assuming that's how much they <em>should</em> be investing, never change their contribution rate.</p> <p>However, 3 percent of salary is almost certainly not enough &mdash; not enough to get the full company match if that's available, and not enough to save adequately for retirement. So, use a free online retirement planning calculator to find out how much you should be saving and set your contribution rate accordingly.</p> <p>If you can't afford to contribute enough right away, see if your company's plan offers <em>auto-escalation</em>, which will automatically increase your contribution rate over time. If it does, signing up would help you follow through on your good intentions.</p> <h2>3. Choose the right investment(s)</h2> <p>Your plan may automatically invest your contributions in a target-date fund. Such funds have many benefits, but also a few features you should watch out for. The primary benefits are that they come with preset asset allocations based on the year of your intended retirement, and they automatically become more conservatively invested as you near your target retirement date. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-about-the-easiest-way-to-save-for-retirement?ref=seealso" target="_blank">What You Need to Know About the Easiest Way to Save for Retirement</a>)</p> <p>The primary thing to watch out for is that not all target-date funds are created equal. Funds from different fund companies all designed with the same target retirement date in mind can have very different stock/bond allocations.</p> <p>It would be best to determine your optimal asset allocation using a tool such as Vanguard's free <a href="https://personal.vanguard.com/us/FundsInvQuestionnaire" target="_blank">Investor Questionnaire</a>. Then choose the target-date fund that most closely matches that allocation. It might be one with an earlier or later target retirement date than your actual planned retirement date, depending on your optimal asset allocation.</p> <h2>4. Don't pay too much in fees</h2> <p>If a target-date fund is the default investment in your 401(k) plan, and if you like the idea of using a target-date fund, you should still check the fund's expense ratio. The lower, the better. For example, with a fund charging an expense ratio of 0.75 percent, you'll pay $7.50 in fees each year for every $1,000 you have invested. If the expense ratio is 0.25 percent, you'll pay $2.50 per year for every $1,000 invested.</p> <p>If the default fund's expense ratio is on the high side (to give you a point of reference, Vanguard charges just 0.16 percent for its 2040 target-date fund), see if your plan gives you access to a brokerage window. If so, you should be able to choose a target-date fund from among many fund companies, which should enable you to choose a lower-cost fund. (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso" target="_blank">Watch Out for These 5 Sneaky 401K Fees</a>)</p> <p>Another option is to see if your plan offers index funds, which typically have very low expense ratios. If so, consider using such funds to build a portfolio that matches your optimal asset allocation. You may be able to do so using as few as three funds.</p> <h2>5. Keep your hands off the money</h2> <p>Some companies with automatic retirement plans are finding that many participants are surprised by how quickly money has built up in their accounts. Surprise is quickly followed by a desire for that money, which is then followed by a loan.</p> <p>It would be far better to remember what the money is for (retirement!) and keep your hands off. One of the key ingredients for successful investing is time. Pulling money from your account, even temporarily, gives it less time to compound. Plus, if you borrow against your account and then leave your employer &mdash; whether by your choice or your employer's &mdash; you'll have to repay the entire loan, usually within 60 days.</p> <p>Automation has been very effective at driving up participation rates in 401(k) plans, which has been beneficial for thousands of people. However, to get the most out of your employer's automated plan, make sure the automated choices are truly the best choices for you. If they're not, don't be afraid to make some manual changes.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-ways-to-get-the-most-from-your-employer-s-automated-retirement-plan&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Ways%2520to%2520Get%2520the%2520Most%2520From%2520Your%2520Employers%2520Automated%2520Retirement%2520Plan.jpg&amp;description=5%20Ways%20to%20Get%20the%20Most%20From%20Your%20Employers%20Automated%20Retirement%20Plan"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Ways%20to%20Get%20the%20Most%20From%20Your%20Employers%20Automated%20Retirement%20Plan.jpg" alt="5 Ways to Get the Most From Your Employer&rsquo;s Automated Retirement Plan" width="250" height="374" /></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/5-ways-to-get-the-most-from-your-employer-s-automated-retirement-plan">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/7-traps-to-avoid-with-your-401k">7 Traps to Avoid With 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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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/bookmark-this-a-step-by-step-guide-to-choosing-401k-investments">Bookmark This: A Step-by-Step Guide to Choosing 401(k) Investments</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-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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-things-you-should-know-about-your-401k-match">7 Things You Should Know About Your 401(k) Match</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) automated retirement plans contributions expense ratios fees loans target date funds Wed, 18 Oct 2017 08:30:06 +0000 Matt Bell 2037239 at http://www.wisebread.com Yes, You Can Pay for Education With an IRA http://www.wisebread.com/yes-you-can-pay-for-education-with-an-ira <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/yes-you-can-pay-for-education-with-an-ira" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/education_fund_coins_652348714.jpg" alt="Education fund in jar" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When most people think of saving for a college education, they usually think of 529 savings plans or Coverdell Education Savings Accounts (ESA). These accounts allow you to grow your money by investing in select mutual funds, much like a typical retirement account does. (See also: <a href="http://www.wisebread.com/5-smart-places-to-stash-your-kids-college-savings?ref=seealso" target="_blank">5 Smart Places to Stash Your Kid's College Savings</a>)</p> <p>While both of these accounts are great investment tools to pay for a college education, there's another option you may not have considered. A Roth IRA can also be used for educational expenses. There are pros and cons for each way to save for college. Here's a brief rundown:</p> <table> <tbody> <tr> <td> <p><strong>Coverdell ESA</strong></p> </td> <td> <p><strong>529 savings plans</strong></p> </td> <td> <p><strong>Roth IRA</strong></p> </td> </tr> <tr> <td> <p>No tax deduction from contributions.</p> </td> <td> <p>No tax deduction from contributions.</p> </td> <td> <p>No tax deduction from contributions.</p> </td> </tr> <tr> <td> <p>Withdraw your contributions tax free.</p> </td> <td> <p>Withdraw your contributions tax free.</p> </td> <td> <p>Withdraw your contributions tax free. (If you withdraw interest, it will be taxed.)</p> </td> </tr> <tr> <td> <p>Annual contribution limit: $2,000 per beneficiary.</p> </td> <td> <p>No annual contribution limit but most states limit total contributions to $300,000.</p> </td> <td> <p>Annual contribution limit: $5,500, or $6,500 if age 50 or over.</p> </td> </tr> <tr> <td> <p>Anyone can contribute but the amount they can contribute is limited by their modified adjusted gross income. Ability to contribute phases out once modified AGI reaches $220,000.</p> </td> <td> <p>&nbsp; Anyone can&nbsp; &nbsp; &nbsp; contribute.</p> </td> <td> <p>Must have income in order to contribute. People with high incomes ($181,000 for married couple) are prohibited from contributing.</p> </td> </tr> <tr> <td> <p>Can be used for higher education and qualified K-12 expenses. Beneficiary must use account by age 30.</p> </td> <td> <p>Can only be used for higher education expenses.</p> </td> <td> <p>Can be used for higher education, first home purchase, qualified medical expenses, and retirement.</p> </td> </tr> <tr> <td> <p>Account under guardian's name won't impact beneficiary's FAFSA.</p> </td> <td> <p>Account under guardian's name won't impact beneficiary's FAFSA.</p> </td> <td> <p>Withdrawals will increase your earned income and can affect beneficiary's FAFSA.</p> </td> </tr> </tbody> </table> <h2>Roth IRAs</h2> <p>A Roth IRA differs from a traditional IRA in that the income you contribute is already taxed. The beauty of a Roth IRA is that the distribution you take from your contributions is <em>not </em>taxable (as long as the use is approved).</p> <p>Let's say your child is a college freshman. You withdraw $15,000 from your Roth IRA for their first year of school. None of this money will be taxed, as long as it is from your own contributions and not from the interest earned. Withdrawals are considered returns of contributions initially, for tax purposes. They are considered interest earnings second.</p> <p>Now, you are likely thinking, &quot;But aren't IRA withdrawals subject to penalties if you withdraw them early?&quot; Generally, yes. Normally, you must be age 59 &frac12; or older, and have had the account for at least five years to withdraw without incurring a 10 percent tax penalty. Why? Well, all IRAs are retirement funds, primarily. They are designed to be withdrawn only as folks approach retirement.</p> <p>But no penalty applies if the withdrawal is for qualified educational purposes (or a first home purchase, or qualified medical bills). Even if your child or grandchild has a scholarship for full tuition, it's no problem. Roth IRAs can be used for any qualified educational expense, including room, board, books, and supplies.</p> <p>If your child or grandchild ends up not going to college, or not needing all the money, you can simply keep the money to continue funding your retirement. Note that to place money back into a Roth IRA, it will be subject to annual contribution limits ($5,500 if under age 50, and $6,500 if age 50 or older).</p> <h2>Traditional IRAs</h2> <p>You can also use traditional IRAs to pay for college. Essentially, traditional IRAs reverse the tax advantage of a Roth. You get a tax deduction upfront for all money contributed to a traditional IRA &mdash; but all withdrawals will be taxed at the federal and state level.</p> <p>As with a Roth IRA, if traditional IRA distributions before age 59 &frac12; are used for qualified educational expenses, they are not subject to the 10 percent penalty. However, they will be subject to tax. The IRS will get its money whenever you withdraw from a traditional IRA, regardless of what you withdraw it for.</p> <p>Because of the tax implications, while it is <em>possible </em>to use a traditional IRA for educational expenses, it may not be the most prudent move. If you want to tap into IRAs for college expenses, a Roth IRA is the better bet financially.</p> <h2>An important caveat</h2> <p>Realistically, tapping your IRA to pay for your child's education should rarely be your first choice. It can be a smart move if you have a considerable amount saved and a lot of time left before retirement to pay it back. Otherwise, you'll be draining the account of funds you very much need. It may be wiser to use an educational savings account to save for your child's education instead. (See also: <a href="http://www.wisebread.com/why-saving-too-much-money-for-a-college-fund-is-a-bad-idea?ref=seealso" target="_blank">Why Saving Too Much Money for a College Fund Is a Bad Idea</a>)</p> <p>However, there are still benefits of using an IRA over an educational savings account if you know your retirement will still be secure. For example, by combining the funds into one account, you will have more flexibility in choosing whether to spend your savings on education &mdash; and how much &mdash; or to continue to hold it for your retirement.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fyes-you-can-pay-for-education-with-an-ira&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520To%2520Pay%2520For%2520Your%2520College%2520Education.png&amp;description=Yes%2C%20You%20Can%20Pay%20for%20Education%20With%20an%20IRA"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20To%20Pay%20For%20Your%20College%20Education.png" alt="Yes, You Can Pay for Education With an IRA" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/anum-yoon">Anum Yoon</a> of <a href="http://www.wisebread.com/yes-you-can-pay-for-education-with-an-ira">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-9"> <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-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</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-alternatives-to-a-401k-plan">5 Alternatives to a 401(k) Plan</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/which-retirement-account-is-right-for-you">Which Retirement Account Is Right for You?</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-smart-places-to-stash-your-kids-college-savings">5 Smart Places to Stash Your Kid&#039;s College Savings</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/should-you-save-for-college-using-a-529-prepaid-tuition-plan">Should You Save for College Using a 529 Prepaid Tuition Plan?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Retirement college contributions distributions higher education qualified expenses Roth IRA saving money traditional ira Wed, 04 Oct 2017 08:00:07 +0000 Anum Yoon 2029157 at http://www.wisebread.com This One Thing Could Be the Key to Retiring Rich http://www.wisebread.com/this-one-thing-could-be-the-key-to-retiring-rich <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-one-thing-could-be-the-key-to-retiring-rich" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/beautiful_young_woman_at_home_0.jpg" alt="Beautiful young woman at home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Writing things down is a powerful exercise. Productivity experts and personal growth coaches have long known this truth, and frequently promote writing down goals and priorities as a way to take control of life and achieve more. Does the power of writing apply to your financial life, as well? Turns out that it does in a very significant way.</p> <h2>Written plans lead to more retirement savings</h2> <p>A recent report from Charles Schwab makes it clear that writing down your financial goals can have a huge effect on how well you do in reaching them. According to the report, people with a written retirement plan are almost twice as likely to increase their 401(k) contributions and rebalance their portfolio. And that's not all a written plan can do for you: You're also twice as likely to stick to your savings goals if you've written down your plan.</p> <p>Despite the obvious power of a written financial plan, most people don't have one. According to the Schwab report, even though about two-thirds of Americans have a financial plan, only a quarter of us have that plan in writing.</p> <p>Is it really a plan if it's not in writing? Maybe, but it's certainly not as powerful.</p> <p>Writing things down makes them seem more real and helps you understand clearly how to reach the goals you're setting. A survey from Wells Fargo found that folks with a <a href="https://newsroom.wf.com/press-release/wells-fargogallup-survey-us-investor-optimism-rises-highest-level-16-years" target="_blank">written retirement plan</a> felt much more secure about reaching their financial goals for retirement. It isn't that the amount needed for retirement changes, but that a written plan helped these individuals understand exactly what they needed to do to reach their retirement goals.</p> <h2>Start getting your plan on paper</h2> <p>How do you get your financial plan written down? Start simple and start right now: Get a piece of paper or open up a computer document, and start writing down your goals. Focus on three main areas: an income goal, a budget goal, and a long-term savings goal.</p> <p>The key is to just get started and remember that you can adjust your plan as you gain more information. Until you have everything written down, you don't really know what you're aiming for or if your goals are even possible. (See also: <a href="http://www.wisebread.com/half-of-americans-are-wrong-about-their-retirement-savings?ref=seealso" target="_blank">Half of Americans Are Wrong About Their Retirement Savings</a>)</p> <h2>Get some professional help to improve your plan</h2> <p>Once you've gotten some basic ideas down on the page, consult a professional financial adviser to help you turn those basic thoughts into a viable financial plan. Over two-thirds of the people who do have a written financial plan got help from a financial professional.</p> <p>Getting professional help is a good idea for two reasons: First, it helps you to actually finish that plan you started. Second, having professional advice will result in a better financial plan. An adviser can help you ask questions, look at issues, and develop solutions you might have missed on your own. (See also: <a href="http://www.wisebread.com/7-things-financial-advisers-wish-you-knew-about-retirement?ref=seealso" target="_blank">7 Things Financial Advisers Wish You Knew About Retirement</a>)</p> <h2>Turn your plan into actions</h2> <p>Once you have your plan written down, you need to translate it into regular actions.</p> <p>For example, if you set a savings goal that you want to meet in five years, you'll divide that into a monthly savings amount. Now you have a monthly savings target (and we know that, with a written plan, you're much more likely to reach it). When you turn the goals on your plan into actions, you can quickly assess whether you're making progress or not.</p> <h2>Automate your financial actions</h2> <p>As much as possible, automate the actions that you derive from your financial plan. Set up automatic transfers into your savings account, for example, or have a certain percentage of your paycheck deposited into your savings account rather than your checking account.</p> <p>Those small automations take the work out of reaching your financial plan. The easier you make it on yourself, the more likely you are to stick to your plan. (See also: <a href="http://www.wisebread.com/5-ways-to-automate-your-finances?ref=seealso" target="_blank">5 Ways to Automate Your Finances</a>)</p> <h2>Review your financial plan regularly</h2> <p>A written plan is not a static thing, so you need to review it regularly and adjust it as needed. Perhaps you get a salary increase or an unexpected windfall; how will you apply it? Review your plan, decide where to apply your wealth increase, and adjust your plan as needed.</p> <p>It's a great idea to set an annual appointment with your financial adviser; you can use that time to review your plan together. Then you can apply that professional insight to any adjustments you make to your plan, and move forward with even greater financial efficiency.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthis-one-thing-could-be-the-key-to-retiring-rich&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThis%2520One%2520Thing%2520Could%2520Be%2520the%2520Key%2520to%2520Retiring%2520Rich.jpg&amp;description=This%20One%20Thing%20Could%20Be%20the%20Key%20to%20Retiring%20Rich"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/This%20One%20Thing%20Could%20Be%20the%20Key%20to%20Retiring%20Rich.jpg" alt="This One Thing Could Be the Key to Retiring Rich" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/annie-mueller">Annie Mueller</a> of <a href="http://www.wisebread.com/this-one-thing-could-be-the-key-to-retiring-rich">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/7-things-financial-advisers-wish-you-knew-about-retirement">7 Things Financial Advisers Wish You Knew About 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/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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/8-signs-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for 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/yes-you-can-pay-for-education-with-an-ira">Yes, You Can Pay for Education With 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/8-questions-financial-advisers-hear-most-often">8 Questions Financial Advisers Hear Most Often</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement advice contributions financial advisers money goals saving money strategy writing things down written plan Fri, 29 Sep 2017 08:00:06 +0000 Annie Mueller 2028009 at http://www.wisebread.com How to Save for Retirement When You Are Unemployed http://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-save-for-retirement-when-you-are-unemployed" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/latin_american_woman_saving_in_a_piggybank.jpg" alt="Latin American woman saving in a piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you're unemployed, saving for retirement may be the last thing on your mind. It may seem impossible to save for the future when you have no steady income to even pay basic bills.</p> <p>But depending on your situation, it may still be possible to build your nest egg even if you're not working full-time. Here are some tools and suggestions for keeping an eye on the future during a period of joblessness.</p> <h2>Familiarize yourself with IRAs</h2> <p>Individual retirement accounts (IRAs) are great for people who don't have access to employer-sponsored retirement plans like 401(k) accounts. A traditional IRA is similar to a 401(k), in that any contributions are deducted from whatever taxable income you have. With a Roth IRA, on the other hand, earnings are taxed up front, but any gains you have won't be taxed when you withdraw money at retirement age.</p> <p>IRAs are useful for people who are self-employed, or who earn money inconsistently through part-time or freelance work. So if you're not employed full-time but still have some earned income, these accounts can help you save.</p> <h2>Think of retirement savings as a necessary expense</h2> <p>When you're unemployed, it's important to get a handle on all of your expenses so that you know where you need to cut. You may find that there are a lot of costs (luxury purchases, eating out, cable TV) that can be taken out of your household budget, while other expenses (food, electricity, debt payments) are more necessary. If you think of retirement savings as a necessity, you will be forced to cut spending elsewhere.</p> <h2>Roll over your old 401(k)</h2> <p>If you've been laid off from a job, you will no longer be able to contribute to the 401(k) you may have had from your employer. But the account will still exist and the money is still yours. You can let the old 401(k) account sit, but it's better to roll it into a traditional individual retirement account (IRA). The IRA will give you more flexibility and investment options, and may also have lower fees. And you can begin contributing to it once you have any earned income at all.</p> <h2>Focus on rebalancing</h2> <p>You may not be able to add much to your retirement accounts, but you can work to make sure they are optimized. This means making sure you have the right mix of investments based on your retirement date, and getting the optimal blend of stocks in various industries and asset classes. It's always smart to examine your portfolio to ensure you are not over- or underinvested in any one area.</p> <h2>Look for higher bank interest rates</h2> <p>If you're not taking in much income for the time being, you need to have your cash savings working for you. That means any cash savings you have should generate as much income as possible. Interest rates are still quite low, but many online banks offer interest rates on CDs and savings accounts that are higher than average.</p> <h2>Avoid the temptation to cash out</h2> <p>It may be tempting to take money out of your retirement funds, but you should avoid it if at all possible. One of the best ways to see your retirement savings grow is to let your investments do their thing. You can see a meaningful increase in your retirement savings just from market gains, even if you're not contributing for the time being.</p> <p>Withdrawing from retirement accounts, however, has consequences. First, any money you take out has no chance to grow and help you expand your overall retirement savings. Second, there are penalties and taxes associated with taking money out of retirement accounts early. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account?ref=seealso" target="_blank">5 Questions to Ask Before You Borrow From Your Retirement Account</a>)</p> <h2>Continue to focus on growth, if you can</h2> <p>If you are unemployed and have some investments in a taxable brokerage account, you may be tempted to shift them to dividend stocks or other income-producing investments. This can give you extra income at a time when you may need it. But making this kind of adjustment could have a long-term negative impact on the overall growth of your portfolio. If dividends, bonds, or other income-focused investments will help you keep the lights on, fine. But it's best to focus on finding other sources of income, or reduce your spending first before going this route.</p> <h2>Reinvest dividends, if you can</h2> <p>If you do have dividend stocks already, you can still contribute to your retirement portfolio by reinvesting any dividend income you get from stocks. You may be tempted to use that investment income to pay bills and help get through your unemployed period, but if you can get by without it, direct the dividends to buy more stocks and other investments instead. Even small contributions added to your retirement accounts can add up to considerable savings over time.</p> <h2>Get your spouse involved</h2> <p>Perhaps you never thought to include your spouse in retirement planning because you felt it wasn't necessary while you were working. Now his or her income can be directed to help you save. This may be a challenge, since they are now also working to help pay more of the bills. But there are some ways to use your spouse's income for your own retirement accounts. If you have a traditional or Roth IRA, your spouse's earned income can go toward your account. (Note: This is only allowed if you file your taxes jointly.)</p> <h2>Plan to pay into accounts later</h2> <p>If you are unemployed but expect to be working in short order, you can postpone contributions to your IRA and add money later, even if it's after the end of the year. In fact, you can contribute to an IRA all the way up until April 15 of the following year. So for example, let's say you planned to max out your IRA by making monthly payments. (This would be about $458 monthly for a total of $5,500 for the year &mdash; the maximum amount allowed by the IRS for people under 50.) But let's say you are out of work from August through October of that year. You can hold off on contributing during that time and make up the difference in later months, even the first few months of the following year, if necessary.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-save-for-retirement-when-you-are-unemployed&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Save%2520for%2520Retirement%2520When%2520You%2520Are%2520Unemployed.jpg&amp;description=How%20to%20Save%20for%20Retirement%20When%20You%20Are%20Unemployed"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20to%20Save%20for%20Retirement%20When%20You%20Are%20Unemployed.jpg" alt="How to Save for Retirement When You Are Unemployed" width="250" height="374" /></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/how-to-save-for-retirement-when-you-are-unemployed">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/5-alternatives-to-a-401k-plan">5 Alternatives to a 401(k) Plan</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-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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/yes-you-can-pay-for-education-with-an-ira">Yes, You Can Pay for Education With an IRA</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-things-you-should-know-about-your-401k-match">7 Things You Should Know About Your 401(k) Match</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/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401(k) contributions dividends interest rates job loss loss of income rebalancing Roth IRA saving money stocks traditional ira unemployment Wed, 12 Jul 2017 09:00:14 +0000 Tim Lemke 1979037 at http://www.wisebread.com 10 Reasons an HSA Is Actually Worth Having http://www.wisebread.com/10-reasons-an-hsa-is-actually-worth-having <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-reasons-an-hsa-is-actually-worth-having" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/male_medicine_doctor_wearing_blue_tie_holding_piggybank.jpg" alt="Male medicine doctor wearing blue tie holding piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I put off signing up for an HSA for years because it was confusing and seemed to have a lot of rules and restrictions. You need to have an HDHP (high deductible health plan) in order to get an HSA. HSA funds can only be spent on qualified medical expenses &mdash; or else you can be hit with a 20 percent penalty and have to pay income tax on the withdrawal. I was hesitant to contribute funds into an account when I was worried it would be complicated to get the money back out.</p> <p>But participating in an HSA turned out to be a lot easier than I expected, and it has saved me a lot of money. If you do not anticipate having a lot of health care expenses, a high deductible health plan plus an HSA may be a good move. (See also: <a href="http://www.wisebread.com/how-an-hsa-saves-you-money?ref=seealso" target="_blank">How an HSA Saves You Money</a>)</p> <h2>1. Convenient access to HSA funds</h2> <p>You can conveniently access your HSA funds using a credit card tied to the HSA account at the doctor's office or pharmacy. You can also pay medical expenses with a check or credit card, and then withdraw funds from your HSA account to put back into your checking account.</p> <h2>2. Use HSA funds for a variety of medical expenses</h2> <p>HSA spending is not limited to only doctor and hospital bills &mdash; you can also <a href="http://www.wisebread.com/11-surprising-things-your-hsa-will-cover" target="_blank">use HSA funds</a> for medication, eye care, dental care, and other health-related expenses including bandages and prescription sunglasses. The IRS offers a complete list of <a href="https://www.irs.gov/pub/irs-pdf/p502.pdf" target="_blank">qualified medical expenses</a>.</p> <h2>3. HSAs offer plenty of tax advantages</h2> <p>You'll contribute pretax dollars to an HSA from every paycheck, without paying income tax on those contributions. This means you can save around 25 to 30 percent on health care expenses, depending on your tax rate. In addition, you can earn interest on the funds in your HSA account. With some HSA providers, you can even invest your HSA funds for more potential growth. Gains on HSA funds are tax-free.</p> <p>For qualified medical expenses, you can also withdraw funds from your HSA tax-free.</p> <h2>4. HSA funds roll over from one year to the next</h2> <p>One of my concerns with putting money into an HSA was the fear that it was a &quot;use it or lose it&quot; proposition like some flexible spending accounts I have previously used for health expenses. But funds in an HSA roll over from one year to the next, so you never lose your money if you don't spend it.</p> <h2>5. An HSA builds funds for future medical costs</h2> <p>An HSA is not only a way to pay for current medical expenses, it is also an ideal vehicle to build savings for future medical expenses. You can deposit money on a pretax basis, enjoy growth on invested HSA funds without paying taxes, and then withdraw funds years later when medical expenses arise with no tax obligation. No other investment vehicle provides this combination of benefits to grow savings for medical costs.</p> <h2>6. You can use your HSA as an IRA at age 65</h2> <p>When you reach age 65, you can continue to draw funds for qualified medical expenses tax-free. Or, you can use your HSA funds for any purpose you wish, without penalty (but you will pay income taxes if it's for non-health spending). An HSA effectively functions as an individual retirement account (IRA) when you reach 65, with the added benefit of tax-free dollars for medical expenses.</p> <h2>7. Your HSA is portable</h2> <p>When you move from one employer to another, or even opt to pursue freelance work, you get to keep your HSA and all of your funds.</p> <h2>8. Free HSA funding</h2> <p>Some employers contribute funds to employees' HSA accounts as a benefit. If you don't have an HSA, you might be missing out on free money!</p> <h2>9. You don't need an employer to have a HSA</h2> <p>Although the easiest way to take advantage of an HSA is to simply sign up for a program offered by your employer, you can open your own HSA if you are self-employed. You will need to find your own HSA provider such as a bank, credit union, insurance company, or investment broker. Look for an HSA provider with low fees, that provides access to HSA funds via a credit card, and that provides investment options for HSA funds.</p> <h2>10. Significant tax savings</h2> <p>The maximum annual HSA contribution amount is $3,350 for individuals, or $6,750 for families. Let's say your federal plus state income tax rate is 25 percent. Since contributions are tax-free, if you contribute the maximum to your HSA, you would save $837.50 for an individual or $1687.50 for a family on taxes on current or future qualified medical expenses.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F10-reasons-an-hsa-is-actually-worth-having&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F10%2520Reasons%2520an%2520HSA%2520Is%2520Actually%2520Worth%2520Having.jpg&amp;description=10%20Reasons%20an%20HSA%20Is%20Actually%20Worth%20Having"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/10%20Reasons%20an%20HSA%20Is%20Actually%20Worth%20Having.jpg" alt="10 Reasons an HSA Is Actually Worth Having" width="250" height="374" /></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/10-reasons-an-hsa-is-actually-worth-having">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-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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/why-saving-money-is-harder-today">Why Saving Money Is Harder Today</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-easy-ways-to-get-richer-in-2018">4 Easy Ways to Get Richer In 2018</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-couples-are-shortchanging-their-retirement-savings">4 Ways Couples Are Shortchanging Their Retirement Savings</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-signs-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Health and Beauty Taxes contributions health care health spending account HSA IRA medical expenses saving money tax advantages tax-free Fri, 30 Jun 2017 08:30:18 +0000 Dr Penny Pincher 1974217 at http://www.wisebread.com These 17 Companies Will Help You Repay Your Student Loan http://www.wisebread.com/these-17-companies-will-help-you-repay-your-student-loan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/these-17-companies-will-help-you-repay-your-student-loan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/saving_for_education.jpg" alt="Saving for education" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Student loans can dampen the ability of new grads to get on their feet financially, causing stress at home and at work. According to Student Loan Hero, the graduating class of 2016 had an average student loan balance of $37,172 &mdash; up six percent from the year before.</p> <p>While it's daunting to see that number rise, the good news is that, in an effort to recruit and retain the best hires, a growing number of employers have started programs to help employees pay back those hefty student loans. Here are a few of those companies helping workers get out of debt.</p> <h2>1. Chegg</h2> <p>In April 2015, tutoring and study services company Chegg announced its college loan reduction plan for full-time employees in partnership with Tuition.IO, a company that provides a web-based platform for tracking and managing student loan payments. This benefit has an annual cap of $1,000 (less taxes), but has no cap on the total amount an employee can receive.</p> <h2>2. ChowNow</h2> <p>ChowNow has found this perk so useful in hiring talent that the company decided to double it from when it first started offering it to employees. The Los Angeles-based online food ordering company has an employer-paid student loan assistance program that matches up to $1,000 a year of employee payments.</p> <h2>3. CommonBond</h2> <p>Since December 2015, this lending marketplace platform has been granting $100 per month to its employees to pay down student loans. While CommonBond limits the perk at $1,200 per year, the company continues helping its employees until they fully pay off their student loans. Employees also have the option to refinance their student loans with CommonBond. On average, student borrowers save over $24,000 when refinancing through CommonBond, according to the company.</p> <h2>4. Credit Suisse</h2> <p>The financial services company doesn't offer a lump sum benefit to its employees, but instead provides a 0.25 percent discount on interest rates to workers that refinance their student loans with online lender SoFi.</p> <h2>5. Connelly Partners</h2> <p>Boston-based ad agency Connelly Partners works with Gradifi to offer a student loan repayment plan that improves the longer the employee stays with the company. Like a 401(k) plan, the agency matches up to $100 per month of its employees' debt payments. Employees who stick around for at least six months receive a $1,000 student loan payment bonus. Those who work for the company for five years receive another $1,000 bonus for the sixth year.</p> <h2>6. Fidelity Investments</h2> <p>The financial services firm makes an annual $2,000 direct payment to employees' student loan servicers, up to a total of $10,000. If your career with Fidelity requires you to continue your education, then Fidelity will reimburse you 90 percent of qualifying costs (up to $10,000 per year) of a work-related degree or certification program. You must have worked for the company for at least six months to qualify.</p> <h2>7. Kronos</h2> <p>Based in Chelmsford, Massachusetts, the workforce management software provider has partnered with solutions provider Student Loan Genius to pay up to $500 per year to help employees pay down student debt.</p> <h2>8. LendEDU</h2> <p>Since February 2016, the online marketplace for student loan financing has paid $2,400 per year ($200 per month) to employees with student loan debt.</p> <h2>9. Martin Health System</h2> <p>Employees working in the nursing field at Martin Health System in Florida can receive up to $2,000 per year to help pay down their student loans. In addition to this benefit from Martin Health System, Florida nurses can also work in areas with staff shortages to qualify for the state's Nursing Student Loan Forgiveness Program or the federal Perkins Loan Cancellation for Nurses and Medical Technicians.</p> <h2>10. Moonlite Bunny Ranch</h2> <p>In 2015, Dennis Hof, the owner of the legal brothel Moonlite Bunny Ranch in Nevada, promised to match 100 percent of his employees' student loan payments for two months, up to the full amount that they made during that period.</p> <h2>11. Natixis Global Asset Management</h2> <p>All Natixis employees receive an annual $1,000 student loan repayment benefit, up to $10,000 over a 10-year period. The company used to require that workers reached five years of employment in order to receive a lump sum benefit of $5,000, but did away with the requirement in July 2016.</p> <h2>12. Nvidia</h2> <p>This computing giant offers comprehensive student loan repayment options. First, employees working at least 20 hours per week who graduated within the previous three years can apply for a reimbursement of $6,000 a year for qualifying student loan payments, up to $30,000. Second, employees who successfully refinance their student loans with SoFi receive a bonus ranging from $200 to $500 and pay no loan origination fees. Third, employees who need to go back to college can receive a reimbursement of up to $5,250 each year for qualified job-related educational expenses, including tuition and books, as long as they earn at least a B average.</p> <h2>13. Powertex</h2> <p>The clothing design company was among the first businesses in Wisconsin to partner with Gradifi to offer a student loan repayment assistance program. Powertex gives eligible employees $100 per month for student loan payments for up to six years.</p> <h2>14. PricewaterhouseCoopers (PWC)</h2> <p>Associates and senior associates at the consulting firm receive $100 per month ($1,200 a year) toward student loan payments for up to six years.</p> <h2>15. SoFi</h2> <p>Many employers partner with SoFi to offer a student loan repayment assistance program. The online lender also offers its own eligible employees $200 per month to help them fully pay back student loans.</p> <h2>16. Staples</h2> <p>The office supply retailer offers top-performing full-time employees $100 a month for three years, for a total of $3,600 in student loan assistance. To maintain their eligibility, employees must meet set criteria throughout the entire three years.</p> <h2>17. Aetna</h2> <p>As of January 2017, the health care company matches employees' student loan payments of up to $2,000 per year, with a lifetime maximum of $10,000. The program is available to employees who have graduated within the previous three years from an accredited institution.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/These%2017%20Companies%20Will%20Help%20You%20Repay%20Your%20Student%20Loan_0.jpg" alt="These 17 Companies Will Help You Repay Your Student Loan" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/these-17-companies-will-help-you-repay-your-student-loan">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/8-ways-to-get-student-loan-debt-forgiveness">8 Ways to Get Student Loan Debt Forgiveness</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/10-things-you-didn-t-learn-in-college-but-you-should-have">10 Things You Didn’t Learn in College (but You 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/how-to-stop-student-loans-from-ruining-your-life">How to Stop Student Loans From Ruining Your Life</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/what-to-do-if-you-didnt-save-for-your-childs-college">What to Do If You Didn&#039;t Save for Your Child&#039;s College</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-ways-to-make-money-during-a-semester-abroad">7 Ways to Make Money During a Semester Abroad</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Education & Training Job Hunting college companies contributions education employee benefits jobs loan repayment plans student loans Thu, 22 Jun 2017 09:00:10 +0000 Damian Davila 1968233 at http://www.wisebread.com 6 Reasons Every Millennial Needs a Roth IRA http://www.wisebread.com/6-reasons-every-millennial-needs-a-roth-ira <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-reasons-every-millennial-needs-a-roth-ira" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/her_company_and_savings_are_growing.jpg" alt="Her company and savings are growing" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're young. You're earning a bit of money. You know you need to start saving for retirement. So what's the easiest way to get started?</p> <p>One of the best vehicles for retirement savings for millennials is a Roth IRA, which is a type of account that offers a great selection of investment options and tax advantages. You contribute to a Roth with money that's <em>already </em>been subject to income tax, but when you withdraw it in retirement, everything you've earned in the fund is tax-free. In comparison, you don't pay tax on 401(k) or traditional IRA contributions until you take out the money in your later years. Both have benefits, but there are reasons you might particularly want to consider a Roth while you're young.</p> <p>It's easy to open a Roth IRA through most popular online brokerage firms, and you don't need a lot of money to get started. (See also: <a href="http://www.wisebread.com/5-retirement-accounts-you-dont-need-a-ton-of-money-to-open?ref=seealso" target="_blank">5 Retirement Accounts You Don't Need a Ton of Money to Open</a>)</p> <p>Here are some reasons why a Roth IRA is an essential part of any millennial's investment plan.</p> <h2>1. You may not have a 401(k)</h2> <p>If you work for a company, you may be offered a 401(k) plan, which allows you to invest in a variety of mutual funds and deduct any contributions from your taxable income. In many cases, your company will match a portion of any contributions you make.</p> <p>But these days, an increasing number of millennials are performing a variety of contract or &quot;gig&quot; jobs, rather than working full-time with a single company. A Roth IRA is not tied to an employer, so anyone can invest as long as they have earned income. If you are earning income but don't have access to a 401(k) plan, a Roth IRA may be your next best option.</p> <h2>2. You have a 401(k), but it's lousy</h2> <p>If you have a 401(k), it's wise to take advantage of it, especially if your company offers a match. But be aware that your 401(k) plan may not offer a wide range of things to invest in, and there may be high fees. This is why many financial planners suggest contributing to a 401(k) up to the company match, and then placing any additional savings in a Roth IRA, which may offer lower costs and more investment choices.</p> <h2>3. There are some tax advantages over a 401(k)</h2> <p>The key feature of a Roth IRA is that any investment gains can be withdrawn tax-free anytime after age 59&frac12;. If you are a millennial, this is a big deal &mdash; because unless you're making big bucks already, there's a good chance you will be in a higher tax bracket when you are older. This tax advantage is in contrast to a traditional IRA or a 401(k) plan, in which the tax advantages come upfront.</p> <h2>4. You can use it to pay for education</h2> <p>Typically, if you withdraw from an IRA before age 59 &frac12;, you must pay a 10 percent penalty on the withdrawal, plus any income tax. But the one big exception involves qualified higher education expenses.</p> <p>If you use a Roth IRA to pay for education, and limit your withdrawal to your contributions but not your earnings, there are no penalties or taxes. If you do decide to include Roth earnings in your withdrawal, those funds will be subject to income tax. This is a helpful feature for millennials, who may consider going back to school. Parents can also use a Roth IRA to pay for educational expenses for their children. Keep in mind that money from a Roth IRA could impact financial aid calculations. And of course, any money taken out for college means less money in the account for retirement.</p> <h2>5. You can get cash quickly in an emergency</h2> <p>It's not the best idea to withdraw money from a retirement account, because you'll lose out on the potential investment gains from the cash you take out. But, you are permitted to take out <em>your contributions</em> from a Roth IRA without penalty at any time. This makes them potentially useful as emergency savings accounts.</p> <p>Just remember it's only the money you put into the account, not the gains, that can be taken out penalty-free. When you're young and not earning much, it helps to have funds that you can tap whenever a crisis arises. Just don't get in the habit of using a Roth IRA this way too often; the account is meant for long-term investment gains and will benefit you the most if you leave your money alone to grow. (See also: <a href="http://www.wisebread.com/using-your-roth-ira-as-an-emergency-fund-ever-a-good-idea?ref=seealso" target="_blank">Using Your Roth IRA as an Emergency Fund &mdash; Ever a Good Idea?</a>)</p> <h2>6. You can keep contributing for as long as you want</h2> <p>If you are a millennial, it's impossible to know when you will retire. You may choose to retire at age 60, or keep working until you're 100. Thus, it makes sense to have an investment account that will let you contribute for as long as you want.</p> <p>One of the nice things about a Roth IRA is that you will not be forced to make withdrawals at any time. This is in contrast to traditional IRAs, which require you to begin pulling out money by age 70&frac12;. (This assumes, of course, that rules don't change between now and then.)</p> <p><em>(Editor's note: An eagle-eyed reader pointed out that any Roth earnings used to pay for education would be subject to income taxes. We've corrected the text to reflect that.)</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/6-reasons-every-millennial-needs-a-roth-ira">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/using-your-roth-ira-as-an-emergency-fund-ever-a-good-idea">Using Your Roth IRA as an Emergency Fund — Ever a Good Idea?</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-things-you-should-know-about-your-401k-match">7 Things You Should Know About Your 401(k) Match</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/this-one-thing-will-get-you-to-1-million-tax-free">This One Thing Will Get You to $1 Million (Tax-Free!)</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-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</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-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions emergency funds investing millennials Roth IRA self employed tax advantaged withdrawals Thu, 01 Jun 2017 09:00:11 +0000 Tim Lemke 1957901 at http://www.wisebread.com How to Face 4 Ugly Truths About Retirement Planning http://www.wisebread.com/how-to-face-4-ugly-truths-about-retirement-planning <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-face-4-ugly-truths-about-retirement-planning" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-155373418.jpg" alt="Learning ugly truths about retirement planning" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Most working Americans still have a long way to go to ensure a comfortable, financially secure retirement. But, with consistency and dedication, retirement planning can be a feasible project. Let's review some of the ugly truths of retirement planning, and the strategies you can use to conquer them. (See also: <a href="http://www.wisebread.com/7-things-financial-advisers-wish-you-knew-about-retirement?ref=seealso" target="_blank">7 Things Financial Advisers Wish You Knew About Retirement</a>)</p> <h2>1. Employer matches require work</h2> <p>While people often like to think of employer matches as free money, the truth is that you do need to do some &quot;work&quot; to earn those matches.</p> <p>First, your employer may require a minimum period of employment or contribution to your retirement account before you become eligible for employer contributions. According to a Vanguard analysis of 1,900 401(k) plans with 3.6 million participants, 27 percent of employers <a href="http://money.usnews.com/money/retirement/articles/2015/06/29/how-does-your-401-k-stack-up" target="_blank">require a year of service</a> before providing any matching contributions. And that waiting period may be on top of the waiting period to be eligible for an employer-sponsored 401(k) in the first place.</p> <p>Second, once you're eligible for the employer match, you may have to contribute a minimum percentage from each paycheck yourself to get it. According to Vanguard, 44 percent of employers required a 6 percent employee contribution to get the entire 401(k) match on offer.</p> <p>Third, only 47 percent of surveyed employers provide immediate vesting of employer contributions. Since only moneys in your retirement account that are fully vested truly belong to you, you may have to wait up to six years to get to keep it all. If you part ways with your employer earlier than that, you may have to say goodbye to some or all of those employer contributions. (See also: <a href="http://www.wisebread.com/15-retirement-terms-every-new-investor-needs-to-know?ref=seealso" target="_blank">15 Retirement Terms Every New Investor Needs to Know</a>)</p> <h3>How to handle it</h3> <p>Find out the applicable rules for employer contributions under your employer-sponsored retirement account. Ask about the waiting period for eligibility, how much you should contribute to get the full employer match, and what is the applicable vesting schedule for employer contributions. This way you'll know how to make the most (and keep the most!) of any employer contributions.</p> <h2>2. Full retirement age is higher than many of us think</h2> <p>According to the 2016 Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI), one in every two American workers expected to retire <a href="https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf" target="_blank">no later than age 65</a>.</p> <p>The problem with that plan is that only those with born in 1937 or earlier have a full retirement age of 65. Your full retirement age is the age at which you first become entitled to full or unreduced retirement benefits from the Social Security Administration (SSA). Retiring earlier than your full retirement age decreases your retirement benefit from the SSA.</p> <p>For those born 1960 or later, full retirement age is 67. If this were your case, retiring at age 62 or age 65 would <a href="https://www.ssa.gov/planners/retire/retirechart.html#chart" target="_blank">decrease your monthly benefit</a> by about 30 percent or 13.3 percent, respectively. (See also: <a href="http://www.wisebread.com/13-crucial-social-security-terms-everyone-needs-to-know?ref=seealso" target="_blank">13 Crucial Social Security Terms Everyone Needs to Know</a>)</p> <h3>How to handle it</h3> <p>If you're one of the 84 percent of American workers expecting Social Security to be a source of income in retirement, then you need to keep track of your retirement benefits. There are two ways do this.</p> <p>First, since September 2014, the SSA mails Social Security statements to workers at ages 25, 30, 35, 40, 45, 50, 55, and 60 and over, who aren't yet receiving Social Security benefits and don't have an online &quot;my Social Security&quot; account. Here is a <a href="https://www.ssa.gov/myaccount/materials/pdfs/SSA-7005-SM-SI%20Wanda%20Worker%20Near%20retirement.pdf" target="_blank">sample of what those letters look like</a>. Second, you could sign up for a my Social Security account at <a href="http://www.ssa.gov/myaccount" target="_blank">www.ssa.gov/myaccount</a> and have access to your Social Security statement on an ongoing basis.</p> <p>Through either one of these two ways, you'll get an estimate of your retirement benefit if you were to stop working at age 62 (earliest age you're eligible to receive retirement benefits), full retirement age, and age 70 (latest age that you can continue delaying retirement to receive delayed retirement credits). That way you can plan ahead for when it would make the most sense to start taking your retirement credits.</p> <h2>3. Retirement accounts have fees</h2> <p>One of the most common myths about 401(k) plans is that they don't have any fees. The reality is that both you and your employer pay fees to plan providers offering and managing 401(k) plans. One study estimates that 71 percent of 401(k) plan holders <a href="http://www.aarp.org/work/retirement-planning/info-02-2011/401k-fees-awareness-11.html" target="_blank">aren't aware that they pay fees</a>.</p> <p>While an annual fee of 1 to 2 percent of your account balance may not sound like much, it can greatly reduce your nest egg. If you were to contribute $10,000 per year for 30 years in a plan with a 7 percent annual rate of return and an 0.5 percent annual expense ratio, you would end up with a balance of $920,000 at the end of the 30-year period. If the annual expense ratio were to increase to 1 percent or 2 percent, your final balance would be $840,000 or just under $700,000, respectively.</p> <h3>How to handle it</h3> <p>One way to start minimizing investment fees is to pay attention to the annual expense ratio of the funds that you select.</p> <ul> <li>When deciding between two comparable funds, choose the one with the lower annual expense ratio. Research has shown that funds with a lower expense ratio tend to better performers, so you would be minimizing fees <em>and </em>increasing your chances of higher returns.<br /> &nbsp;</li> <li>Explore index funds. For example, the Vanguard 500 Index Investor Shares fund [<a href="https://finance.yahoo.com/q?s=vfinx" target="_blank">Nasdaq: VFINX</a>] has an annual expense ratio of 0.14 percent, which is around 84 percent lower than the average expense ratio of funds with similar holdings. The Admiral version of this equity index fund has an even lower annual expense ratio of 0.05 percent.<br /> &nbsp;</li> <li>Check the prospectus of your funds for a schedule of fees. From redemption fees to 12b-1 fees, there are plenty of potential charges. Review the fine print of any fund that you're considering investing in and understand the rules to avoid triggering fees. For example, you may need to hold a fund for at least 65 days to prevent triggering a redemption fee. (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso" target="_blank">Watch Out for These 5 Sneaky 401(k) Fees</a>)</li> </ul> <h2>4. 401(k) loans are eating away nest eggs</h2> <p>According to the latest data from the EBRI, 23 percent of American workers <a href="https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf" target="_blank">took a loan</a> from their retirement savings plans in 2016. On top of the applicable interest rate on your loan, you'll also be liable for an origination fee and an ongoing maintenance fee. Given that origination fees range from <a href="http://www.nber.org/papers/w17118.pdf" target="_blank">$25 to $100</a> and maintenance fees can go up to $75, 401(k) loans are one expensive form of financing. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account?ref=seealso" target="_blank">5 Questions to Ask Before You Borrow From Your Retirement Account</a>)</p> <p>Additionally, when you separate from your employer, the full unpaid balance is due within 60 days from your departure. If you don't pay back in time, that balance becomes taxable income, triggering potential penalties at the federal, state, and local level. One penalty that always applies is the 10 percent early distribution tax for retirement savers under age 59-1/2.</p> <h3>How to handle it</h3> <p>Don't borrow from your retirement account. Studies have shown that 401(k) borrowers tend to come back for additional loans, increasing their chances of default. One study found that 25 percent of 401(k) borrowers came back for a <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html" target="_blank">third or fourth loan</a>, and 20 percent of 401(k) borrowers came back for <em>five </em>or more loans. Borrowing from your retirement account should be a very last-resort option because there are few instances when it's worth it. (See also: <a href="http://www.wisebread.com/this-is-when-you-should-borrow-from-your-retirement-account?ref=seealso" target="_blank">This Is When You Should Borrow From Your Retirement Account</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/how-to-face-4-ugly-truths-about-retirement-planning">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/7-traps-to-avoid-with-your-401k">7 Traps to Avoid With 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/8-signs-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for 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/5-ways-to-get-the-most-from-your-employer-s-automated-retirement-plan">5 Ways to Get the Most From Your Employer’s Automated Retirement Plan</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-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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-critical-401k-questions-you-need-to-ask-your-employer">8 Critical 401(k) Questions You Need to Ask Your Employer</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions employer match fees full retirement age loans nest egg social security ugly truths Fri, 07 Apr 2017 08:00:13 +0000 Damian Davila 1922316 at http://www.wisebread.com