Know Your Retirement Options

It is imperative that folks know as much as possible about their retirement options. Not knowing your options can have negative consequences for your retirement income. Every day you fail to educate yourself and take action can cost you thousands upon thousands of dollars in retirement dollars. There is a lot to learn about investing for retirement. This post will give you specifics on many retirement options that are available.

Below are some retirement account options for Business, Government and Nonprofit:

1) 401K  Private company employees are eligible for this retirement option. Your maximum contribution for 2016 is $18,000. Employers often offer matches that range from 1%-6%. If you are 50 or older you can catch up by contributing an extra $$6000 a year. Your usual investment choice is mutual funds.

2) 403(b)  Employees at nonprofits and state and local governments are eligible for this type of investment. The maximum annual contribution is $18000 a year. Employer match is typically 3% to 5% of pay. If you are 50 or over you can contribute $6000 more each year. Invesment options for this investment type is mutual funds or annuities.

3) 457  Some government and nonprofit workers are eligible for this investment. Maximum annual contribution is $18000 a year. It is rare to get an employer match with this type of account. If you are 50 or over you can contribute $6000 more a year. You usually get a menu of mutual funds for this investment account.

4) Thrift Savings Plan – This is for federal government employees, including the military. Maximum annual contribution is $18,000. Employer match is 5% for those in the Federal Employees Retirement System. Annual catch-up if you are over 50 is $6000. Your investment choices are 10 funds, including 5 target-date funds.

Below are some retirement options for small business employers and employees:

1) SEP-IRA  Small business employers and employees are eligible for this option. You can contribute 25% of your salary, up to $53,000 (same for all personnel). All employer match contributions come from the employer. There is no annual catch-up but contributions are also permitted after age 70 1/2. All funds offered where account is held.

2) Simple IRA Maximum annual contribution is $12,500. The match is 3% (or 2% employer contribution to all employees). Annual catch-up starting at age 50 is $3000: contributions are also permitted after age 70 1/2. You have a menu of mutual funds to choose from.

3) Solo 401K  Sole proprietors and their spouses are eligible. Maximum annual contribution is 25% of profits plus $18,000, up to $53,000. No employer match. Starting at age 50 catch up contribution is $6000. All funds are offered where account is held.

Below are some funds for individual investors.

1) Roth IRA  All earners making less than income phaseouts are eligible. The Roth IRA income phase-outs for single tax filers is $$117,000-$132,000. The Roth IRA income phase-outs for married jointly filers is $184,000-$194,000. Maximum annual contribution is $5,500. Annual catch-up starting at age 50 is $1000. All funds offered where account is held.

2) Traditional IRA  All earners are eligible for this retirement account. Maximum annual contribution is $5,500. Annual catch-up starting at age 50 is $1000. Usual investment options are all funds offered where the account is held.

I hope that the above information gives you help in knowing what retirement account options are offered with your current employment situation. Remember: Nobody should care more about your money than you. Continually educate yourself about your financial opportunities.

 

PF Roundup

There are lots of good PF posts out there in the blogosphere. Below are some gems that I happened upon recently.

http://www.frugalrules.com/mind-your-money/ shares that nobody cares (should care) more about your money than you.

http://eyesonthedollar.com/why-higher-income-doesnt-guarantee-financial-success/ reports how higher income doesn’t always equate to financial success.

http://ptmoney.com/budgeting-for-unexpected-expenses/ great read on how to conquer the financial “unexpecteds” in your life

http://www.goodfinancialcents.com/passive-income-ideas CFP Jeff Rose shares 23 ways to create passive income.

http://www.goodfinancialcents.com/5-ways-to-prevent-your-70-year-old-self-from-hating-you/ Jeff Rose shares some valuable tips on thinking about your future financial self.

5 Simple Financial Truths Smart People Tend to Forget

 

Get Off the Spending Carousel!

The media in our culture invites us to spend money every hour of every day. Banks and businesses compete aggressively for your money. Billions of dollars are spent in marketing and advertising. We’ve all fallen prey to the media pressure to buy that newer model of whatever we desire. Below are some tips to help you get off the spending carousel.

1) Pay Cash – When you pay cash you spend less. Watching that cash leave your hand makes a lasting impression on your brain. Research says that we spend less spending cash than plastic.

2) Don’t go to the mall – If you don’t go there you can’t spend there.

3) Research your purchases – Stop buying things on impulse. There are good deals out there if you’ll be patient and weigh all your options. Sometimes a ‘slightly used’ item can be just as good as brand new (with less expense).

4) Try out a No Spend Weekend. Commit to spending no money on anything for a 3 day period. You might actually eat food off of your shelf. Isn’t that what you bought it for?

5) Don’t Compare Yourself to Others. There will always be someone that has more than you. Did you ever stop to think they may earn more than you? Did you ever stop to think they may be over their head in debt? Spend based on your needs and goals, not those of someone else.

The mantra of “I gotta have more” is ever present in our culture. Have you been listening and acting on this pressure? You can get off the spending the carousel. It begins with choice. Dave Ramsey shares that winning with money is 20% knowledge and 80% behavior. Are you ready to behave better with your money? I hope the tips I shared will help you begin to make necessary changes. If you have a tip you would like to add please share it in comments.

 

Win With Money? Have a Plan.

Ever wondered where all your money goes? Ever wondered why you end up with more month than money? It’s because you have no plan. A plan plain and simple is a budget. As much as some people hate the word it is a proven way to win with money. You tell every dollar where to go before the first dollar is spent. Do you want access to a great budget system with no cost? Go to http://www.everydollar.com All you need is an email address and a password any you are ready to go. The program already has categories available for you to use. You can add or delete categories as your needs change. Your budgets carries over to the next month automatically. You don’t have to reset when a new month begins. Remember: Those that fail to plan, plan to fail. Get yourself on a budget. Make your money behave.

Investing for Your Child’s College

Practically every parent wants to help their child with college expenses. Of course, the earlier you begin investing the greater risk you can take with investment options. You need to know your time horizon when evaluating your college funding options. Below are some suggestions to consider when planning for your child’s college education.

1) Put Tax Breaks to Work

In a 529 savings plan, your investment grows tax-free and can be withdrawn tax-free as long as the money goes toward tuition or other qualified higher-education costs like books and housing. Not all plans are created equal. You have a broad menu of investment options. Almost every state has a pre-packaged, age-based portfolio that shifts over time from a heavier stock allocation to more bonds and cash. You should also stay in state if your state has a tax benefit. If it’s at or below 5% your state’s plan is a winner. The Utah Educational Savings Plan, administered by Vanguard, has among the lowest fees in the country and gets top marks from both Morningstar and savingforcollege.com. When setting up the account title it in your name. That way, colleges will count the money as a ‘parental asset,’ meaning those dollars will lower your child’s potential financial aid by a maximum of 5.64% a year.

2) Sprint Out of the Gate

As a brand-new parent you should have 3 goals: 1) Start investing immediately; 2) Put aside as much as you can manage; 3) Load up on stocks.

3) Shift Gears for Tweens

Once your kids enter their second decade it’s time to recalibrate. You still need stocks for growth, but you’ll still want to shift at least some money into bonds for stability. If your automated plan’s allocation seems wrong for you, don’t be afraid to tweak it. If you’re in good shape but you’re using an aggressive path, check whether your state’s plan has a more conservative allocation.

4) Ratchet Down Risk
For the final years of high school, your 529 portfolio needs to get far more conservative. By the time your child is 16, you will want to have cut equities (stocks) to 20 to 30%, with your balance moved into bonds and cash.

Once your child is in college, you can move everything to cash and start spending down the balance. It’s important to weigh all your options when funding your child’s college education.

Note: This information was taken from Money magazine, Jan/Feb 2016 issue.