Many athletes have come and gone. Many have made unthinkable amounts of money and many have lost unspeakable amounts of money. A lot of professional athletes, lacking time and the right advisors end up losing the fortunes they make. Oftentimes, they lose their fortunes and end up in significant debt. Their experiences serve as great lessons for the rest of us who would like to make and keep a sizeable nest egg. Professional athletes finance lessons provide a treasure trove of information. Continue reading
Retirement planning is a challenging endeavor. With so much uncertainty in life, it pays to give enough thought to retirement plans. Many events take place which we do not expect. Such events can unfold new opportunities and challenges. The right plan and execution can allow one to leverage the resources one has to improve their future. But what life changes affect retirement planning? Continue reading
Different circumstances arise that call for one to rollover their retirement plan. You may be left with little time and tough decisions to make. The decisions you make on whether you rollover your retirement plan and how you rollover your retirement plan distribution can have profound effects on several areas of your life, including how much you are taxed. Whether or not you rollover your distribution is not a decision to be taken lightly. Continue reading
With the right assets, one can ensure they have sufficient cash flow to not only fund their retirement but also to fund the lifestyles of their children and grandchildren. While 65 is a common age to retire, real estate could lower the age for many to retire. Continue reading
Fall is quickly approaching. Every October the IRS (Internal Revenue Service) releases their updated retirement limits for a number of accounts. The Roth IRA is one particular account that many will be looking at.
For 2018, the contribution limit for a Roth IRA is $5,500 with an additional $1,000 catch-up for individuals over the age of 50. The 2019 Roth IRA contribution limits will be announced by the IRS in less than two months.
The government uses inflation numbers to determine when and by how much to raise retirement limits. When it comes to IRA’s, any annual increase in contribution limits will be in $500 increments. Meaning that there are only two possibilities when it comes to the 2019 Roth IRA contribution limits.
Either the limits remain the same at $5,500 ($6,500 for individuals 50 or older) or it is increased to $6,000 ($7,000 for individuals 50 or older). It is expected that the 2019 Roth IRA contribution limits will increase to the latter amount.
So what does an increase in $500 a year for a Roth IRA account mean? Well, for starters, instead of being able to contribute an awkward $458.33 per month to the account, you will now be able to contribute an even $500. Of course this only applies to individuals under the age of 50. Contributing on a consistent basis has proven time and again the best way to invest. You can take advantage of the market when it hits various highs and lows.
Are you worried that you won’t have the additional funds to contribute an extra $500 a year to a Roth IRA? Then now is as good of a time as ever to go and create your very own free budget. The best way to see where you are spending your money every month is to track it. Although it might seem like a challenge at first, you will most likely be able to find a way to contribute the additional $41.67 per month to your Roth IRA.
Why choose a Roth IRA? There are many benefits to having one. First and foremost, the money you put into it will grow and compound tax free through the years. Additionally, when you do decide to withdraw from the account, you will not be required to pay any income taxes on the withdrawals. It’s an especially good account to have in order to help offset tax burdens brought on by 401k’s and social security.
With the official numbers for the 2019 Roth IRA contribution limits less than two months away, we will have to wait a little longer, but we can predict that more than likely the amounts will increase.
Budget Smart, Invest Wise
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Death and taxes. The two things that most say are certain in life. Well now at least when it comes to taxes you might be able to avoid some because of a recent decision by the Internal Revenue Service (IRS). The IRS recently came out with the guidelines for 2018 when it comes to tax-advantaged retirement accounts. Although none of the changes were dramatic, they made a few tweaks that will allow individuals to boost retirement savings in certain tax friendly accounts.
The 2018 401(k) contribution limit is being pushed slightly upward to $18,500 per year. This is a $500 increase on what it used to be. Individuals who are 50 and over can still save an additional $6,000 meaning some can contribute as much as $24,500 into a company 401(k) plan. While an increase in the 2018 401(k) contribution limit came about for the upcoming year, other retirement plans such as IRA’s and Roth IRA’s remain unchanged. You are still only able to contribute $5,500 per year to both traditional or Roth IRA.
IS CONTRIBUTING TO A 401(k) A GOOD IDEA?
The short answer is absolutely! While not all companies offer 401(k) plans for employees, a lot do. It is highly recommend that you put in at least the minimum amount required to get the full match your company offers. Once you have done this, see if you can contribute a little bit more and further increase your retirement savings. At my first job, I began contributing 6% which was what I needed to do to get the entirety of my company’s match; however, I began to increase it over time. Get a 3% raise? Try increasing your 401(k) contribution by 2%. This was a simple and easy method I did each time I’d receive one, and the best part was I never missed the money at all.
IS IT EVEN POSSIBLE TO CONTRIBUTE $18,500 OR $24,500 TO A 401(k)?
Yes again. Is it hard? Sure it can be, but is it doable? Absolutely. How do I know it’s possible? Because I myself max out my retirement account for my 401(k). I never see the money. It’s taken directly out of my paycheck, so I never miss out on spending it. The recent increase of the 2018 401(k) contribution limit is something that I will take advantage of. A small percentage bump can make a lasting impact during one’s retirement.
In closing, the increase of the 2018 401(k) contribution limit won’t have much of an impact on most people. Very few actually max out their retirement accounts. But if you’re like myself, then you welcome the news with open arms. While 2018 saw an increase to the 401(k) contribution limit, 2019 has a very good chance to see an increase for contribution limits to both traditional and Roth IRA’s. Only time will tell.
Budget Smart, Invest Wise
20 years ago, if you were interested in planning your retirement you had to sit down with a financial professional. Back in the 90’s and early 2000’s, meeting with someone with such financial experience was commonplace and expected. Fast forward to today and now people planning for retirement have a plethora of options to choose from. You can sit at your desk and pick stocks, you can set up an online investment profile, you can open a retirement account in as little as five minutes! With the ease of picking a retirement plan simplified, you can also simplify the math through several apps and online calculators. This FIRECalc review will show you that you, the investor, now have access to almost all of the tools that were once reserved for professional money managers.
What is FIRECalc?
FIRECalc is a new type of retirement calculator that factors in historical volatility into one’s retirement projection. Many used to think of retirement projections as the following: I have a $1,000,000 portfolio which I draw 4% from on an annualized basis, therefore I have $40,000 I am withdrawing. Unfortunately, retirement projections like this don’t always pan out. Think of the most recent financial disaster where many portfolios were slashed in half. What FIRECalc does is allow you to see all of the possible outcomes of your portfolio, whether it’s a market rally or another collapse.
The Benefits of FIRECalc:
FIRECalc can let you see a projected path of possibilities for retirement. The picture below uses the following example: Bob has a portfolio balance of $1,000,000. He needs to withdraw $50,000 a year for 30 years in retirement. The lines below indicate the vast array of possibilities that his money will last through all 30 years. With the red line signifying “Zero” you can see that the majority of lines end above. This means that based on historical factors, Bob more than likely will have enough funds to cover his spending requirement in his retired years.
What Else Can FIRECalc Do?
The premise that FIRECalc was built on was in dealing with historical market averages. FIRECalc uses this basis and expands it to many other calculator offerings. Around a third of all Americans rely on social security as their main source of income in retirement. Will your social security payments be enough for your retirement? FIRECalc will let you know what your chances of success are. Other calculators they have include ones for people who are looking to set up a future retirement, various spending models, along with a portfolio allocation model.
I hope this FIRECalc review shows you the many benefits the site can offer. While it is not entirely user friendly (it looks very simple and plain), it does provide you with something all other retirement calculators lack. Most retirement calculators assume a specific return every year during the duration of your investment horizon. FIRECalc is different in that it presents you all of the possibilities. Markets can go up by 20% in a year, and they can also go down over 30%. There are many fluctuations to take into account and that is exactly what FIRECalc does.
Reduce your taxes and increase your savings. Sounds almost a little too good to be true right?
It’s possible, it’s easy, and I just did it and so can you.
Today is the final day for you to file your taxes for this year. Did you pay more in taxes than you would have liked? Do you want to lower your tax bill for next year? If so, then here is how to do it:
Increase your 401k contribution to your company’s plan. What percentage of your salary are you contributing to your 401k currently? Bump it up. By increasing your pre-tax 401k contribution to your plan you are in effect reducing the amount of income you take home, thus reducing your tax burden.
I recently increased my pre-tax contribution percentage by 8% and found that I will save roughly $1700 this year on my taxes. It’s that simple. Increase your savings, reduce your tax burden. This offers 3 key benefits.
You lower the amount of taxes you will be paying for the year.
You increase the amount of savings you will have at retirement. The more you save now, the more you will have later.
Because you don’t see the additional money you put into your 401k plan on your paycheck, you won’t spend it, and most likely you won’t miss it.
Budget Smart, Invest Wise
There is a retirement crisis currently underway. Why is this? Because people don’t save during their working years to fund their golden years. The Economic Policy Institute recently released is a startling report about American’s retirement savings.
The graph above shows the median account values of retirement savings for a given age group. The overall median among all age groups is a meager $5,000 while the median value for those closest to retirement, 56-61 age group, have only $17,000 saved up.
To put this in perspective, I am 26 years old and have been employed full time for less than 4 years. In my retirement accounts, which include a company 401k, a rollover IRA and a Roth IRA, I have $47,589 saved.
Retirees are relying on Social Security by larger percentages these days. Nearly 2 out of every 3 retirees rely on Social Security for at least 90% of their retirement income. No matter your current age, there are ways to ensure that you are setting yourself up for success in your later years. Here are the steps I followed to have my current retirement savings:
- Fund a Company 401k and get a full employer match. This should be a no brainer. Fund your company’s 401k plan at least to the amount that will maximize your employer’s match. It’s FREE MONEY.
- Start an IRA. I prefer a Roth IRA because it is money you will never be taxed on again, and is a good complement to a 401k (which you will pay income tax on in the future). Go to Vanguard’s website and get one started in a matter of minutes.
- Maximize out your 401k. If you are under 50, you can contribute up to $18,000 of your pre-tax pay to a 401k. If you are over 50, you can contribute an additional $6,000. See if you can contribute an additional 1 or 2 percent each year until you reach the maximum.
Planning for retirement is now more important than ever. Many don’t have pensions to rely on anymore, so the responsibility is now on YOU to determine your retirement destiny.
Budget Smart, Invest Wise
The other night I was pondering what actually classified as retirement. We all think of retirement as falling towards the end of one’s life. You work for a while, save up enough money, then use those savings to enjoy the latter part of your life.
But what if you don’t want to wait until you are 65 or older to retire? Say you want to save up money for 15 years, take 5 years off and then re-enter the workforce. Is this retirement?
I didn’t know the answer, so I did what everyone does nowadays to find such an answer. I Googled it. Webster’s Dictionary defines retirement as the following:
The act of ending your working or professional career; the period after you have permanently stopped your job or profession.
So if you did decide to take 5 years off during the middle of your working career I guess it would be classified as a hiatus. Regardless of when you decide to retire, there are a few things I believe retirement truly is.
- When one’s passive income is greater than one’s expenses.
Your investments, rental properties, royalties or whatever revenue generating sources you have other than trading your time for money are greater than your expenses.
- Finding ways to spend your time with people you love and doing the things you love.
You can have all the money in the world, but if you don’t have ways to enjoy it or enjoy your time then it has no purpose.
- Creating your very own legacy.
Volunteering, raising money for a worthy cause, instilling wisdom in the minds of younger generations. Creating a legacy to be remembered by is the ultimate goal of success.
Budget Smart, Invest Wise