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How To Start Retirement Savings

January 26, 2021September 14, 2020 by Finance Gourmet

One of the things that comes up in financial planning is that getting all of the information and facts can be difficult. This, all too often, leads to financial paralysis where you don’t end up doing anything at all, because you don’t understand all the details. Ironically, a lot of the information that ends up being “too much,” is for edge cases that don’t affect the average American saving for retirement. How To Start Saving For Retirement Now Retirement savings, investing, and planning is one area where complicated topics can needlessly paralyze people from taking action. Occasionally, financial companies themselves accidentally cause this confusion. Not long ago, I was talking with someone about retirement savings. The issue, for this particular person was the commercial talking about “Your Number.” If you remember this commercial, the point was that you should know how much money you will need when you retire. The goal, was to get you to schedule an appointment with one of their financial advisors or brokers to find your number. Since the person I was talking to didn’t know his number, he was stuck on what to do for retirement. The ironic part is that you don’t need to …

Stock Market Highs Main Street Lows?

September 11, 2020August 19, 2020 by Finance Gourmet

stock market highs catching falling knife

The stock market is hitting new highs. These market highs erase all previous coronavirus lows. Many are wondering how can the stock market be doing great while many Americans are still out of work, and experts worry about the potentially large numbers of evictions that may be coming. The Stock Market Looks Forward Many people forget, or don’t understand, that the stock market is a leading indicator. That means that the markets don’t really care about today per se. Rather, the markets look to the future. Knowing what IBM is trading at today, for example, is worthless to an investor. Knowing , or predicting, what the price of IBM stock will be in a month, or a year, is what allows investors to profit. So, why is the stock market racing to new highs? There are several reasons the stock market is rising. First, the return on non-market investments is abysmal. Every article you read about the mortgage rates falling to new lows, also means that U.S. Treasuries are also falling. The rate on a current 10-year treasury bond is around 1/2%. Would you be willing to lock up your money for 10-years in exchange for half a percent? Neither …

Is SquareTrade a Good Deal

August 22, 2022August 10, 2020 by Finance Gourmet

SquareTrade has been bought by Allstate. Allstate is an insurance company that does auto, home, and life insurance. They now do item protection plans like SquareTrade used to do. I first wrote about SquareTrade back in 2009. At the time, I was overjoyed at the concept of warranties from Square Trade. If you don’t remember, 2009 was the era of incredibly overpriced extended warranties from electronics stores. It turns out that companies like Circuit City were selling merchandise at a tiny profit, and making all of their money by having their salespeople push high cost extended warranties on anything. Even worse, when you tried to collect on that coverage, it turned out that your warranty wasn’t actually from the company you bought it from, but some business you never heard of, and that didn’t really care what you thought about them, their service, or their coverage. Is SquareTrade a Scam? First off, SquareTrade is a legitimate company. It is now part of Allstate and they seem to be doing away with the name in favor of Allstate Protection plans. They’ve been in business for a long time now and have plenty of satisfied customers. However, there are some complaints about …

Is myFICO Worth It?

August 11, 2022June 22, 2020 by Finance Gourmet

Don’t waste your money on services that allow you to constantly get your credit score. Use a little insder knowledge to get a free credit score and check it only when it makes sense.

Negative Interest Rates and The Fed

June 15, 2020 by Finance Gourmet

Like any type of news, sensational, click-bait news draws in a lot of clicks for financial websites. Unfortunately, this can lead to a lot of confusion, especially for folks who only read the headlines. I can often tell when this happens because my questions fill up with vaguely understood concepts and concerns about unlikely situations and issues. This is happening more and more with the topic of negative interest rates. Negative Interest Rates What are negative interest rates? Let’s start with what are negative rates. The concept is simple on its face. Interest rates are normally, “positive.” The borrower pays a (positive) interest rate on a loan to the lender. Or, in the case of a savings account, the bank pays a (positive) interest rate to the account holder. In a world of negative interest rates, this would theoretically reverse. The lender would pay the borrower to take out a loan, and the account holder would pay the bank to keep their money. If this sounds bizarre, you are right, and it wouldn’t really happen. — We’ll get to that in a moment. More abstractly, The Federal Reserve Bank pays banks a small amount of interest to hold deposited funds …

HSA Contribution Limits 2020 and 2021

January 29, 2021June 12, 2020 by Finance Gourmet

A health savings account, or HSA, is a great way to save money for medical expenses. If you qualify for an HSA, you get to deduct every dollar in contributions up to the HSA contribution limit. If you pay your medical expenses with an HSA, it ends up that you can deduct every single dollar of medical expenses, instead of just the amount over 10% of your income. In addition, over time, your money grows tax-free inside of the account. HSA Contribution Limits 2020 The 2019 HSA Contribution limit is $3,550 for an individual, or up to $7,100 for a family. Remember to qualify for an HSA, you have to have a qualifying HDHP (High-Deductible High Health Plan). HSA Contribution Limits 2021 The IRS recently released the information regarding contributions to an HSA in 2021. Each year, the contribution limit for HSA accounts is adjusted for inflation. This year, inflation was slightly higher for the year, so there was a small increase in the contribution limits for HSA accounts. For 2021 HSA contributions, the limits will be $3,600 for an individual, or “self-only” high deductible health plan. For someone with family coverage, the limit rises to $7,200, up from $7,100 …

Step by Step Guide to Open 529 Plan Online

December 12, 2022June 9, 2020 by Finance Gourmet

Have you opened that 529 plan account yet? A while back, while discussing whether or not you need a financial advisor, I talked about how just knowing what to do isn’t always enough. As an example, I pointed out that just knowing you need a 529 plan for your college savings account, doesn’t mean that you are necessarily actually ready to just open a 529 account online or otherwise. There can be a lot of small decisions along the way that end up derailing the most determined person’s individual financial plan. Recently, I revisited this train of thought and figured, I could show step-by-step how to open 529 accounts online for the Colorado 529 plans as an example of exactly what it takes to actually implement those financial decisions you make after doing your online financial planning research. 529 Plan Colorado Example If you have ever looked for this kind of step by step directions financial planning guide, you know they can be hard to come by. There are several reasons, but one of the main ones is that going through every possible exception can be very time consuming. Even covering the basics can turn into a big project when …

Restarting The Economy

May 26, 2020 by Finance Gourmet

How do you restart the economy? The reality is that no one really knows. The mostly shutdown of most of the economy for a couple of months is unprecedented. Sure, some parts have shutdown for various reasons (usually natural disasters), but the whole U.S. basically turning off businesses at the same time has never really happened. What Is “The Economy?” Part of the trick to understanding reopening the economy is knowing what we are talking about. In a real way, the economy itself never shut down. Money still changed hands, bills were still paid — or unpaid — stocks still traded, shoppers still bought things online, and certain businesses, like grocery stores, never shut down at all. So, what are we talking about? Most states restricted various in-person businesses. The cliche is hairdressers and barbers. However, there were a lot of other, much bigger, sections of the economy that were shut down. Shopping malls, gyms, and perhaps most importantly, restaurants. Are Restaurants The Economy? Although we take them for granted, restaurants make up an enormous part of the economy, as well as the tax base for cities and states. Unlike a hair salon that employs a few people, restaurants can …

Should I Skip My RMD This Year?

May 20, 2020 by Finance Gourmet

As part of the economic relief legislation passed to help with the coronovirus, Congress removed the requirement that people age 70 1/2 and older take their required minimum distribution this year. This leaves many taxpayers wondering, should I skip my RMD this year. Tax Benefits of Skipping RMD This Year Usually anyone above the age of 70 1/2 years old is required to withdraw a minimum amount from their tax-advantaged accounts each year. The amount is calculated based upon an IRS provided actuarial table, and the amount of money in the taxpayer’s accounts. The calculated amount must be withdrawn from the accounts, and becomes taxable income. Higher taxes are the result for most people. The main benefit of skipping the required minimum distribution is lower taxes for the 2020 tax year. Distributions from non-Roth IRA, tax-advantaged accounts such as IRAs and 401ks are taxable income. Not only do taxpayers have to be taxes on the distribution, but the money withdrawn increases the taxpayers overall taxable income. The higher taxable income may reduce or eliminate certain tax deductions or credits that are limited to taxpayers with lower incomes. The $1,200 stimulus payment itself was limited to taxpayers with incomes under $75,000 …

New 2020 Tax Numbers Released By IRS For Filing 2020 Income Taxes in 2021

September 22, 2020May 20, 2020 by Finance Gourmet

Now that the April 15th deadline is behind us, the best personal finance advice you can take is to start planning for your 2020 Income Taxes now. That way, you will be ready to take advantage of all the 2020 tax tricks, tips and deductions you can. Sure, last minute tax advice and finding those hidden tax deductions during crunch time is great, but to really save money on taxes, you have to plan all year long. Start watching now for expenses that you can deduct from your taxes and start keeping records and receipts for all of those possible tax deductions that might be usable to lower your taxes if you meet certain requirements or minimum thresholds. Most importantly, start keeping your contemporaneous records of important deductible expenses like business mileage, unreimbursed expenses, training and education expenses, and medical expenses. IRS 2020 Standard Mileage Deduction Rate The standard mileage rate for 2020 is 57.5 cents per mile for business reasons. The 2020 standard mileage rate for miles driven for charitable purposes is 14 cents per mile. You can deduct all unreimbursed mileage driven for business reasons and most charitable reasons as long as you have written documentation of the …