IRA

Understanding How Beneficiaries Work

by

As a financial advisor, I used to review client’s paperwork when they came in for an appointment. Among many other things, I always made sure to go over was to review beneficiaries of my client’s accounts. Or, more to the point, I TRIED to review the beneficiaries on my client’s accounts. All too often, they had no idea who the beneficiaries were, or how to find out. Even worse, they often just decided to assume that they knew the beneficiaries on their accounts. Out of date beneficiaries is one of the most common financial problems people have when they start financial planning. What Are Beneficiaries When someone dies, there are a series of laws that determine exactly how your assets get dispersed among the living. These laws are long and complex. They are collectively referred to as estate law, and it is complicated enough to be an entire specialty for attorneys. The primary instrument for distributing your assets as you see fit, rather than as how the law dictates, is your will. However, there are several kinds of accounts that do not fall under this process, unless you do not properly designate your beneficiaries. In this context, a beneficiary is the …

Read More

2017 Finances and Money Issues

by
investing in hsa account calculator

Welcome to 2017! Relax. Take a deep breath. There. Feel better? Good. Then let’s jump in. Finances Updated in 2017 With a new year, come some new numbers. There will be updates to the maximum 401k contributions, income limits for Roth IRAs, and others. Plus, there will be adjustments to the 2017 income tax brackets, the 2017 standard tax deduction, and more. And, of course, there is a new IRS mileage rate for 2017 as well. What about 529 plans? There aren’t a lot of updates to those numbers each year, primarily because most facets of 529 college savings plans are administered through the states, who aren’t always as keen on changing and updating everything. You’ll want to re-evaluate your financial plan for the new year, and you’ll want to review how your financial plan did in 2016. Plus, you’ll want to rebalance your portfolio, if you didn’t do it at the end of 2016. Retirement Plans 2017 A big part of most retirement plans are tax-advantaged savings accounts like your 401k plan, IRA accounts, and, for some of you, 457 plans, 403(b) plans, and various differed compensation plans. All of those need adjusted and reviewed for 2017 as well. …

Read More

What Is a Roth IRA?

by
roth ira forms

What is a Roth IRA? Is a Roth IRA the best way to save for my retirement? Even the basics in financial planning aren’t always so basic. The basics of IRA plans, is one of those times. IRA stands for Individual Retirement Account. Tthat means it is an account for an individual to use  to save for retirement. As an enticement to save for your own retirement, the government gives you tax advantages for using an IRA for retirement planning. As a way to keep you from pulling money out for things besides retirement, there is a penalty if you use IRA money for something else. Roth IRA versus Traditional IRA With a traditional IRA, or just IRA, you get a deduction from your taxes today, unless your income is too high. You also get tax deferred growth on the money in the account. When you start taking the money out, you owe taxes on both the contribution and the gains. If you earn too much money to take the tax deduction on your contributions, then you do not have to pay taxes on those funds again when you withdraw them. With a Roth IRA, you get no tax deduction …

Read More

Fast Retirement Math

by
retirement income

Want to make a quickie calculation about how much money you’ll need for retirement? I’ve talked before how, for most people, knowing “your number,” or whatever you want to call it isn’t really all that helpful. The simple reason is that most people cannot save as much for retirement as they should be, so they should just be saving as much as they can. Simple. But, what if you are getting ready to retire, or if you just want to know how much retirement income you have stored away? Quick Retirement Income Calculation The quickest way to calculate your current retirement income is to take the amount of money you have saved, and multiply it by 4%. That’s your current “safe” annual income in retirement. As in, if you have $1 million stashed away in your 401k plan, you can count on $40,000 per year in income. Sucks, doesn’t it? Before we get to some info that might help you feel better, let’s take a look at where the 4% comes from. Check out my review of Credit Karma here. A chimp with a hammer can get you 4% income without ever running you out of principal. In fact, at …

Read More

myRA IRA Review – Safe and Legit

by
myRA Roth IRA review

No matter how helpful the government could potentially be to its citizens, it typically won’t/can’t get involved in finance because there are huge lobbying dollars behind financial services companies. For example, it would be relatively trivial for the IRS to create a free, online, auto-filing system that would work for most taxpayers, increase tax collections, and be a win-win for everyone involved. Everyone, that is, except for TurboTax, who, obviously, spend millions of dollars each year keeping such a system away from its lucrative tax software business. This is why I was surprised to find out about myRA, a no-cost government Roth IRA program aimed at people who might otherwise have a hard time getting started saving for retirement. What Is myRA and Is It Safe and Legitimate? The myRA account is a government run Roth IRA. As such, it follows all of the same rules as a regular IRA. There is a maximum Roth IRA contribution amount allowed each year. This year, it’s $5500, with an additional $1,000 “catch-up” contribution allowed for people 50 or older. So, what’s the benefit of using the myRA program?   The myRA IRA has no start up cost, no IRA annual fees, and just …

Read More

How To Start Saving for Retirement

by
easy retirement plan

If you’ve done some research on retirement savings, you know that there are a lot of options out there and a lot of various factors to worry about and navigate correctly. But, the reality is that if you haven’t really started saving for retirement yet, then every one of those ifs, ands, buts, and maybes apply to people with a lot more retirement savings than you have. Stop reading. Get started now. When To Start Saving for Retirement There is an old saying that the best time to plant a tree was 20 years ago. The second best time is now. Retirement savings works the same way. The best time to start saving for retirement is the day you started earning a paycheck. The next best time is now. If you read up on retirement planning strategies and investing for retirement, you may develop paralysis about your retirement savings plan. This delay is way more costly than any “retirement planning mistake” you might make. So, stop researching. Start Saving for Retirement Now Plan If your employer offers a 401(k) plan, then we are done talking. Walk down to human resources, or better yet, go on the company website and fill …

Read More

Personal Finance Index Card Advice

by

Back in 2013 on a show, a professor named Harold Pollack made the suggestion that everything the average person actually needed to know about personal finance could fit on an index card. He “proved” his theory by handwriting a list of personal financial advice on an index card, which then made the internet rounds. Now, he’s back with a co-author, and a $25, 256-page book called The Index Card. Wow. Could this be the most cynical book ever written?   Free Financial Advice and Reality It always seems that when finance experts are talking about OTHER finance experts, that THOSE guys are over-priced crooks who you don’t need. THEY are just out to take your hard earned money. THEY don’t want you to know that finance is actually super easy and that you don’t need THEM. Funny, how that always changes dramatically when the opportunity for money or notary for their own self comes up. Back when I was a professional financial advisor, Susie Orman would stand up in front of as many people as she possibly could and say that all financial planners and advisors were crooks and you knew it because we took money from companies that offer financial products …

Read More

New Year Finance Checklist

by
annual personal finance checklist

It’s a new year. Contrary to popular opinion, for the most part, when it comes to money, finances, banking and investing, it doesn’t really matter if the year is new or not. That being said, plenty of people take the opportunity of a fresh calendar to take a fresh look at things like personal finance and their financial plans. So, here is a checklist of things to start thinking about to make sure you personal finances are lined up for 2016. 2016 Personal Finance Checklist Don’t get overwhelmed. Not all of this stuff needs to be done at once. Put a section on your calendar each week or two, and by the end of the first quarter, your finances will be reviewed, tuned-up, and ready for the year ahead. Banking Checklist Review your checking account statements and make sure your bank isn’t charging you fees just for having a checking or savings account. If you are paying monthly fees, or minimum balance fees, find a new account. Check with your current bank first, you might just be signed up for the wrong account. Remember, at today’s interest rates, there is no way having a higher rate compensates for having to …

Read More

Money Investing and Personal Finance End of Year

by
end of year december finance money

Here comes the end of 2015, are you ready? Are your finances and investments ready? On the one hand, the end of the year means absolutely nothing to your money. Those twenties in your wallet don’t care what year it is, and your bank accounts don’t either. The stock market goes up and down before December 31st, just like it will after January 1st. That being said, there are some end of year tax issues to be aware of, as well as some smart money moves to make before the end of the year. What To Do With Money Before Year Ends Step One: Don’t Panic. Seriously. Too many people get all wrapped up in the end of the year and the start of a new year. I think that some of that comes from the added stress of the holidays, or the vacuum left behind when they end. The reality is that you and your money are probably fine, even if you don’t do anything at all before the year ends. Yes, tax deductions matter, but probably not as much as you might think. And, yes, there are deadlines, but many of them may not apply to you. With that …

Read More

Basic Retirement Plan Simple

by

Retirement planning is actually incredibly simple and straightforward for most people. However, it can quickly sound complex because of all the edge cases, exceptions, and possibilities that really only affect a small number of people. If you eliminate all of that noise, however, there really isn’t much to the average American’s financial plan. Follow the following information and there really is no reason you can’t make your own simple retirement plan. Obviously, every situation is different. If you have unusual circumstances such as a coming inheritance, money in trusts, or other legal situations, this plan won’t work for you. If you have regular income, a family, and just need a plan, this is perfect for you. Do It Yourself Financial Plan One of the things that quickly complicates financial planning is the idea that you have to predict how much income you will need in retirement. This step is a waste of time for 90 percent of people. Why? Because, for most people retirement saving and investing is about how much they can save, not how much they will need. To put it another way, consider this. If I tell you that if you can save $10,000 per month, you …

Read More