How to Survive and Thrive in a Pricey City

July 12, 2016

I was born and raised in Brooklyn, NY – before it was trendy. When I was growing up Red Hook, the underpass of the Brooklyn and Manhattan Bridges were places you did not want to go to at night. It seemed like overnight the worse and somewhat cheaper parts of town became the most sought after and expensive places to live.

These changes are what attracted my cousin to move to Brooklyn later this year. As I was talking to her, I realized that she was excited about the idea of living in New York, but the reality of the financial change from her move had not quite sunken in yet. I told my cousin about financial changes she had not fully factored into her move such as:

Paycheck Sticker Shock: My cousin was moving from Florida to Brooklyn. She knew that she was going to experience a major shock in expenses, but she had not factored in the change in her take home income due to taxes. Unlike Florida, New York City and some other major cities have state and city income taxes. She was shocked to see about a $600 a month estimated decrease in her paycheck once she moved there. For anyone moving to a new state, using calculators like the one from Smart Asset to gauge what your new income will be can help you better manage your finances.

Caviar Tastes on a Tuna Fish Budget: My cousin grew up watching The Cosby Show and fell in love with the brownstones featured on it. She knew the rent would be high but she almost passed out when I told her that a one bedroom apartment in Brooklyn Heights could easily run over $2,500. I told her to first do a budget to see how much she can afford. Her budget did not support $2,000 in rent so we researched apartments on  websites like Apartments.com,  which helped her set realistic expectations of where she could afford to live.

We brainstormed ideas like renting a room, living in a basement apartment, taking in roommates or living on the outer edges of Brooklyn. We also searched apartments that were in rent controlled/stabilized buildings to protect her from crazy rent increases. I encouraged her as well as anyone moving to a new city to research the cost of housing and realize that it may be a choice between a longer commute or more expensive rent.

Ditch the Car: My cousin grew up in a place that required her to have a vehicle. It never occurred to her that she may not need a car. She was shocked when I told her that my mother, a typical New Yorker, does not have a driver’s license, and I was 24 before I got mine.

I encouraged her to get to know the mass transit system in her area and estimate the cost of maintaining her vehicle in Brooklyn. Between the extra cost of car insurance, gas, parking and the hassle of alternate side of the street parking, she decided it was not worth it and ditched her car. The extra savings helped her to afford an apartment closer to where she worked. Call your insurance company to find out the cost of insurance in your new location, look up the average gas price, the average cost of parking and the hassle of finding parking to see if it is worth keeping your car.

Finally, I encouraged my cousin to do a comprehensive budget, not only factoring in the cost of living but also vacations, since she will either have to rent a car or fly home. She created a budget that helped her get her apartment and even have a little fun. Because of all the preparation she did, she was able to enjoy her new location without going broke in the process.

Don’t Believe Everything You Hear

July 01, 2016

I’m the kind of person who will always try to listen with an open mind to different points of view and find something to learn from the speaker. I hear a lot of theories that way, some which appear to be myths, superstitions or misinterpretations, and some of which offer a refreshing change in perspective. In many cases, what’s true for most people might not be true for everyone. When sifting through financial advice, make sure to ask yourself if that guidance makes sense for your situation. Here are three common examples of financial guidance where you might want to think about things differently:

Question: I’ve been told that I should always have a mortgage so that I can get the mortgage interest deduction. Is that always true?

My view on it: MYTH

For each $1 in interest they pay the mortgage company, the typical family gets ~$.20 in tax relief (using the tax rate as the real payback number). To me, you lose $.80 on the dollar by paying interest. Plus if you have no mortgage, your embedded cost of living is permanently lower, so your accumulated savings and investment dollars can last a whole lot longer. Financial advisors typically say disciplined, long term investors could do better in the stock market rather than using savings to pay off a mortgage, but I’ve observed that most people prefer to have the peace of mind that comes with low or no debt so I’m not a huge fan of carrying a mortgage just to get a tax deduction.

Question: I should never contribute more to my 401(k) than my company’s matching contribution. Once I reach that, I’m told I should open a Roth IRA. Is that the right choice?

My view on it:  MYTH

Most people I see who try to implement this, forget one critical part – funding the Roth IRA. The problem with this guidance is that many people never get around to funding the Roth IRA every time they get paid. Once their paycheck hits their checking account, it gets accounted for in so many other ways.  I’d prefer to see people shoot for the maximum 401(k) contribution ($18,000 this year, plus $6,000 in catch-up contributions for those over 50) and once they max out the 401(k), THEN contribute to an IRA.

Also, maxing out the 401(k) doesn’t have to be an instant thing. You can increase your contribution level by 1-2%/year until you get there. If you have a rate escalator in your plan, sign up for it today!

Question: If I close out some of my credit cards, that should improve my credit score, right?

My view on it:  MYTH

Well, it’s not that simple! There are a lot of factors that go into your credit score. A few great places to see the multiple factors are CreditSesame.com and CreditKarma.com.

If the credit cards you want to close are relatively new, closing them may help you because it could increase your average “age of credit” (how long your open accounts have been open). But it may decrease your score because it reduces your overall credit limits and if you carry balances, it makes your “utilization ratio” higher. That’s the amount of overall credit balances divided by overall credit limit. Keeping that ratio below 25%, ideally at 0%, will be additive for your credit score. If closing accounts increases your utilization percentage, then closing the accounts can harm your score.

The thing to take away from this is that credit scores are fluid things. They change constantly. But if you take the time to review your scores and factors on the sites above, you will be able to make well informed decisions that impact your credit score.

As you go about living your life, learn how to discern the differences between good, solid personal financial management and misapplied financial principles. How? Ask a financial planning professional, pose a question on our Facebook page or ask me a question in the comments section below. Having the facts on your side can help save you from the many conflicting theories of managing your personal financial life.

 

Don’t Make These 3 Common Tax Mistakes

April 19, 2016

As we wrap up tax season, I find people have more questions than answers. Some are pleasantly surprised and others are shocked and even angry about owing taxes. As I was sitting with family over dinner, their grumblings about taxes kept cropping up in the conversation.  As they continued to talk, I realized that many of their  problems came from the following mistakes about taxes:

Mistake #1: Getting a big tax refund. Giving an interest-free loan when you need the money is almost never a good idea. Consider using the IRS Withholding Calculator to estimate how much withholding to use to break even on your taxes. This may free up the funds for other financial goals like savings, getting out of debt and college.

Mistake #2: Not taking advantage of itemized deductions. An article from Nolo.com  cites a report by the Government Accountability Office stating that as many as 2.2 million taxpayers overpay taxes by an average of $610 per year due to a failure to itemize deductions. Consider itemizing deductions if you:

  • Paid interest and taxes on your home
  • Made a large charitable contribution
  • Had a lot of uninsured medical and dental expenses
  • Had large unreimbursed job-related expenses

Mistake #3: Not looking to your employer benefits for tax savings.  I recently spoke to a friend who was concerned about owing taxes and was looking for ways to lower her taxable income. I told her to start looking at her workplace benefits. Pre-tax 401(k) plan contributions lower your taxable income as well as contributions to pre-tax medical savings plans like Flexible Spending Accounts or Health Savings Accounts. Since she has children under 13 years old, I mentioned the Dependent Care Flexible Spending Account so she can contribute money pre-tax for her children’s childcare expenses.

Don’t believe everything you hear, especially when it comes to taxes. Before jumping on everyone’s tax bandwagon, take some time and do research to validate if what they are saying is true. If you find this overwhelming, consider working with a tax professional that can help separate fact from fiction.

 

 

Are Self-Directed IRAs a Good Idea?

April 18, 2016

If you could buy a private business, a rental property or racehorses in your Individual Retirement Account (IRA), would you do so? Even if you could, would that be a wise choice? Self-directed IRAs (SD-IRA) offering non-traditional investments have become increasingly popular and more broadly available.

The self-directed IRA is a traditional or Roth IRA in which the custodian, the financial institution which keeps records and reports to the IRS, permits the full range of investments allowed by law in retirement accounts. Many types of investments are permitted in IRAs, but there are certain things you can’t do, like buy collectibles (such as art and coins) and life insurance, as well as investment strategies that require borrowing, such as shorting stock or certain options strategies. However, the reality is the vast majority of financial institutions limit retirement account investments to the more traditional ones like stocks, bonds, mutual funds, CDs and exchange-traded funds.

“Self-Directed” Really Means “Alternative Investments Accepted”

The term “self-directed” is a bit off base. What it means is that alternative investments are accepted or offered by the IRA custodian. Technically, at most financial institutions, IRAs default to the more literal interpretation of “self-directed,” in that the account owner makes the final decisions on what investments to buy or sell, unless they have given discretion in writing to an investment advisor.

A custodian who offers self-directed IRAs agrees to keep required records of your non-traditional investments in the IRA and report them to the IRS. The custodian may or may not offer physical custody of the investment, depending on type, or may just house the records of investment activity and valuation. Common alternative investments available in SD-IRAs are precious metals, real estate, loans, and private equity.  Certain custodians of self-directed IRA accounts will accept just about anything allowed by the IRS, including tax lien certificates and dairy cows.

Very High Risk

Many alternative investments available in SD-IRAs carry a high risk of losing all or most of your money due to lack of diversification or the inherent risk of the investment itself. You may not be able to sell the investment later (lack of liquidity), meaning that you won’t be able to access the value of it to make distributions in retirement. Keep in mind that the entire burden of investigating the investment (doing your “due diligence”) is on you, the account holder. This could be a benefit when you are investing in an area of your professional expertise (e.g., the experienced real estate investor). However, it can also lead to fraud, when investors are duped into Ponzi schemes or other types of investment scams through slick offerings and piles of legal paperwork.

Beware of investing in anything you don’t understand and can’t explain easily to others. If you are considering an investment within an SD-IRA, read this pamphlet from the SEC first and do your homework. Use the checklist at the end of this post. Remember, if it sounds too good to be true, it probably is.

High Fees

Fees in self-directed IRAs are generally much higher than more traditional types of IRAs. Expect to pay set up fees, custodial fees and annual fees to value the investment. Many of the types of alternative investments offered in SD-IRAs are hard to value, so this can get quite pricey.

Keep in mind that the IRA or Roth IRA is the owner of the investment, so you don’t have direct control over it. With investments like real estate or a business, for example, that means you have to pay the custodian to do things like collect rents or business income. (Per this Bankrate article, some custodians propose that you set up a an IRA LLC to address this issue, which may give you checkbook control but is costly to establish and has legal risk.) No matter what, make sure you do some comparison shopping for a custodian who specializes in the type of investment you want to own in your SD-IRA.

Potential Tax Problems

Investors often get tripped up by unexpected tax consequences in SD-IRAs. Most importantly, in a traditional IRA, distributions in retirement are taxed as income, not the lower capital gains rate. The investor may have been better off holding the asset outside of a retirement account. Additionally, investors miss out on the ongoing favorable tax treatments for some common types of investments, such as real estate.

Depending on the type of investment income, a self-directed IRA may not be completely tax-deferred and a Roth IRA may not be completely tax-free. For example, if the investment generates Unrelated Business Income, the IRA or Roth IRA would be taxed at the high trust rates for the tax year in which it occurs. Those taxes must be paid by the IRA, not the account owner separately.

Can’t Invest in Yourself or Your Family

Don’t get too excited about selling the family business to your IRA! Certain transactions are prohibited in retirement accounts to prevent self-dealing, including transactions with people within your linear family, such as your spouse, your parents, your children, your grandchildren and their spouses. Most of your family could not work in or on behalf of the investment or live in a property held by the IRA.

When to Consider a Self Directed IRA?

SD-IRAs are not suitable for many people. Use this checklist to see if you might be a good candidate for self-directed IRA accounts: (Aim for at least 4 out of 6.)

  • I am an accredited investor. (If you don’t know what it is, you probably aren’t.) While you don’t need to be an accredited investor to open an SD-IRA, being one means you have the income and net worth to consider alternative investments.
  • I don’t need my IRA or Roth IRA for future retirement income. Either:
    • I am fully on track to completely fund my retirement with my employer-sponsored retirement plan, e.g., 401(k), 403(b), etc.
    • I have a pension or other investments (e.g., rental income) which will fully cover my retirement income needs.
  • I have well-diversified traditional investments in my work-sponsored and non-retirement brokerage accounts that can be liquidated to pay future living expenses if needed.
  • I have professional expertise and experience in the SD-IRA investment which I am considering.
  • I want to add a target percentage of precious metals to my retirement portfolio for diversification.
  • I am considering making a small private equity investment that might pay off big (a possible strategy in a Roth SD-IRA) but could also go bust.

Two Ways To Make Next April 15 Less Taxing

April 15, 2016

In the early days of my career as a financial advisor, there were some “interesting” investments that my clients owned. There were a lot of oil and gas partnerships that were very mediocre investments if viewed solely as an investment vehicle, but they offered spectacular tax advantages that made them wildly popular. People wanted to buy them solely for the tax benefits. And then…tax laws changed and these investments tanked! Clients couldn’t get out of them because no one else wanted them.

Similarly, I have had many conversations lately with people who are looking for magic strategies to reduce or eliminate their tax burdens from 2015. (It must be close to April 15th.) Newsflash – there is very little you can do in April 2016 to impact your 2015 tax return. When it comes to tax planning, the key is to start early in 2016 (I’d suggest NOW if you haven’t already) to impact the tax return you’ll file on April 15th 2017. A couple of my favorite ways to reduce income tax burdens are available right through your employer in many cases:

Health Savings Account (HSA): This is my #1 favorite right now. The contribution limit for single in ’16 is $3,350 and for a family it’s $6,750. Contributions are either pre-tax (through your employer) or tax deductible (if you write a check) and if used for medical expenses, they are tax-free on the way out too.

Are you kidding me??? The IRS allows a vehicle to be tax-free in AND tax-free out? That’s remarkable. You can build a substantial bucket of money in the future, and the IRS can help subsidize it. I can’t think of another vehicle where you’re allowed to “double dip” with tax benefits in and out.

401(k): Another great way to minimize next year’s taxes is to get as close as you can to the IRS maximum on your 401(k) contribution. This year, it’s $18,000 ($24,000 if over 50 years of age). If you’re in the 25% tax bracket, getting to the $18,000 mark would save you $4,500 in current year taxation. Rather than just stop at 3% or 6%, whatever the employer matching contribution is…..work toward getting the max contribution. If you can’t do it this year, you can increase your contribution by 1-2% per year until you’re there.

I hear and read a lot of “experts” talking about stopping at the level of employer matching contributions and then opening an IRA or Roth IRA outside of the employer account. I’m not opposed to that, but not everyone is disciplined enough to make that work.  But if you get up to the maximum contribution and then do the IRA or Roth IRA, you’re going to be saving an enormous amount of money and getting closer to your retirement goals with each passing paycheck. For perspective – I’ve never met someone who was within months of retiring complain that they had too much money saved for retirement!

These are two quick and easy things that you can do to make next April 15th much more manageable and reduce your overall tax burden. These are the obvious ones, and a future blog post will touch on some of the not so obvious ones. Until then, get busy contributing to your HSA and 401(k)!

How The Self-Employed Can Defer Taxes On Retirement Savings Too

April 14, 2016

Updated March, 2019

In our CEO’s book, What Your Financial Advisor Isn’t Telling You, Liz Davidson writes about understanding the importance of taxes to your investing returns. After all, it’s not just what you earn but what you actually keep. In honor of National Retirement Planning Week, I thought I’d write about one of the best ways to reduce taxes on your investing: qualified retirement plans.

By allowing you to defer taxes on your contributions and earnings until you withdraw the money, these plans benefit you in a couple of ways. First, you’re likely to pay a lower average tax rate on the withdrawals than on the contributions. (Even if you retire in the same tax bracket, a lot of your withdrawals will probably get taxed at lower rates because of how the tax code is structured.) Second, your investments will grow faster since the money that would otherwise be going to taxes is instead being reinvested.

Savings options for self-employed

But what if you or your spouse is self-employed? You can contribute to an IRA but you’re limited to only $6,000 a year or $7,000 if you’re over age 50. (One advantage to not having a retirement plan at work is being able to deduct all of your traditional IRA contributions regardless of your income.) Here are some other options if you’d like to put away a bit more in a tax-advantaged retirement account:

Individual 401(k). Also called a uni-401(k), solo 401(k) or a 401(k) for one, you’re only eligible if you have no partners or employees (other than maybe your spouse). The main advantage is that you can contribute up to $19,000 per year plus 25% of your earned income (there’s a special calculation of this) up to a total annual contribution of $56k plus an additional $6k if you’re over 50. Withdrawals are limited and subject to a 10% early withdrawal penalty but you can also set it up to allow you to borrow from the plan.

SEP-IRA. With a SEP-IRA, you can contribute 25% of your earned income (up to a total annual contribution of $56k plus an additional $6k if you’re over 50) but you have to contribute the same percentage of pay to each of your eligible employees. However, you can vary the percentage each year. Withdrawals are subject to a 10% early withdrawal penalty.

Simple IRA. With a Simple IRA, you generally cannot have more than 100 employees. Employees can contribute up to $13,000 per year (or $16,000 if over age 50) and you must either contribute 2% of income for each eligible employee (up to $5,600 a year) or provide a dollar-for-dollar match (up to $13,000 per year) of employee contributions of at least 3% of their income.  The penalty for early withdrawals is increased to 25% in the first two years and then 10% after that.

When I was self-employed, I chose the SEP-IRA since the individual 401(k) was too expensive for my needs (fees have come down a lot since then) and I couldn’t contribute as much to the Simple IRA (also didn’t like that higher penalty on early withdrawals).

If you or your spouse is self-employed, the individual 401(k) will allow you to contribute the highest amount and take a loan if necessary. If you have employees, it all depends on how much you want to contribute for yourself and for them. In any case, being self-employed is no excuse not to save for retirement and reduce your taxes in the process.

The Investor’s Secret Guide to Understanding Your Account Tax Statement

April 11, 2016

It’s spring time again, that magic time of year when investors with brokerage accounts come face to face with the dreaded Year End Tax Reporting Statement. All over the country, tax filers are cursing at their computer screens. How do they dig through eleven pages of legalese to find out how much they actually paid for the 100 shares of stock they sold in 2015? Why is it that they received a capital gains tax distribution on a mutual fund which actually lost money? What in Heaven’s name is a “qualified dividend” and why is it also ordinary?

Most importantly – is there a hidden meaning in “This Page Intentionally Left Blank?” and what do they do with all the entries that say, “n/a?” It’s enough to make taxpayers throw in the towel, file an extension and head for the stash of stale Halloween candy to ease the anxiety. While I’m not an accountant and I can’t give you tax advice, I can shed some light (or at least light humor) on investment tax challenges.

What is Your Cost Basis?

Your cost basis is what you paid for an investment plus any commissions paid to acquire it. Why is this important? If you sold a security in a taxable investment account, you must report a capital gain or loss on Schedule D, summarizing all the transactions you list on Form 8949. You’ll need the sale price (minus commission if applicable) and the adjusted purchase price to figure out your capital gains and losses. The good news is that if you made a profit and you held the investment for more than a year, you’ll pay long term capital gains tax rates on the profits, which are lower than ordinary income tax rates.

Seems simple to calculate, right? Not always. This can get more than a little complicated if there has been a merger, acquisition, spin-off or stock split. Also, what if your brokerage firm doesn’t list your cost basis on your tax reporting statement? This could happen for a number of reasons:

You inherited the securities. What if your grandfather left you his 1000 shares of Big Oil Company, and you decided to sell 100 of them last year? The cost basis of those shares received a “step up” on the date of his death.

If you don’t have the actual record from the settlement of the estate, you could consider using the market low on that date as your basis. You can generally find that by entering the symbol on market data sites like Yahoo Finance or asking your brokerage firm. Make a printout of the data showing your price and keep it in your tax file in case of an audit.

You transferred them in from another brokerage firm. Technically, you are expected to keep a record of your purchase prices of securities. Did you keep your old statements from previous years?  Possibly not, unless you’re the kind of person that also kept your childhood report cards.

While brokerage firms have been required to include purchase data on statements since 2011 – and many firms have been back filling data from previous years – this data isn’t necessarily going to show up on your new statement if you switched firms. As you can guess, your old financial advisor’s team isn’t going to prioritize your 11th hour call seeking information about your long ago cost basis. This Forbes article has some helpful tips about how to reconstruct cost basis using tools like Netbasis.

You bought the securities at your current firm before they used their current statement software. Good news here. If it’s your current firm, they’ll be likely to prioritize answering your cost basis question. Call early though because they are inundated with these kinds of calls the last few weeks before the tax filing deadline. A firm will generally have old records on microfilm if they haven’t back filled data on customer files.

Please be considerate when you call. There’s an administrative person on the other end who’s been taking outrageous last minute requests for account information for a few weeks now. If you don’t get an answer, you can consider using the low market value for that date (even if the purchase price was less than a few dollars per share) – better to err on declaring slightly more gain than you needed to in case of an audit.

Why Do I Have to Pay Taxes on a Mutual Fund That Lost Money?

No, this is not a Kafka novel. This happens all the time. Investors who hold mutual funds in taxable brokerage accounts have taxes to pay on those investments, even if the fund performance was negative for the year, and even if they didn’t sell any shares. I know it seems cruel. Taxable distributions from mutual funds are likely if you own the fund in a non-retirement account and can take the form of capital gain or dividend income.

This is because the mutual funds must pass dividend income and net short and long term capital gains and losses that happen during the year through to fund shareholders proportionately. Fund managers buy and sell securities over the course of the year, either as part of active portfolio management or to meet fund redemptions. Yes, folks, it’s true…you can even get dividend and capital gains distributions when you own index funds.

There’s good news, though. Many dividends are taxed at a low rate. (See below). Even if they are not, the max you’ll pay is your marginal income tax rate.

Even better, you can net all capital gains and losses from security investments (“active” investments) against each other – short losses against short gains, long term losses against long term gains, and net short term against net long term. If you consistently have net capital gains in your taxable investment portfolio, you may want to consider switching to a more tax-efficient investment strategy. Check out these tips from Morningstar on capital gains tax season.

What is a Qualified Dividend?

A dividend is a distributed share of corporate earnings. According to NASDAQ, a qualified dividend  “is a type of dividend that is taxed at the capital gains tax rate. Generally speaking, most regular dividends from U.S. companies with normal company structures (corporations) are qualified.”  Not sure if your dividends are qualified? See this description from the IRS.

Why is This Page Intentionally Left Blank?

Despite appearances, it’s not for taking a meditative pause to regain your composure during tax time.  This is one of the true mysteries of the universe. Is this disclaimer there to inform us that there is not a printing error? Could we not have figured this out on our own? Wikipedia even has an entry on this topic, which goes to show you that others also see this as an enigma.

You Might Need a Tax Preparer

By the way, if your tax filing seems so tricky that you can’t figure it out on your own, this is a sign that you need to see a tax professional. That’s what they’re there for, people. A tax preparer has chosen to help people with their taxes as their life’s work. Seriously – they love this kind of thing!

If you’re looking for ongoing tax guidance and advice, consider engaging a Certified Public Accountant (CPA). Less complex or one-time tax preparation can generally be handled by an Enrolled Agent (EA). Tax preparation fees are usually tax deductible.

How about you? Do you have a financial topic you’d like me to address on the Monday blog? Email me at [email protected] or Tweet me @cynthiameyer_FF.

Did You Contribute Too Much to a Roth IRA?

March 09, 2016
Updated June 14, 2017

One of the downsides of the Roth IRA is that there are income limits that preclude high income earners from contributing to these accounts. But for people on the cusp or for those who unexpectedly end up earning more than they planned (or who get married during the year and only discover after the fact that they now exceed the limits), it’s actually quite common to find out after they file their income taxes that they were actually ineligible to contribute the year before.

Luckily, the IRS understands that this can happen so there are ways to fix it, but you have to take certain steps to minimize the tax consequences and avoid penalties. Here are your choices if you contributed to a Roth IRA and then found out later that you were ineligible for the contributions because you made too much money in the year of contribution: Continue reading “Did You Contribute Too Much to a Roth IRA?”

Don’t Make Jeb Bush’s Mistakes…With Your Investments

March 03, 2016

A couple of weeks ago, former Republican presidential front-runner Jeb Bush tearfully exited the race. The self-described policy wonk’s economic proposals may not have won him the election, but they might actually help him with his investment portfolio. Here were some of his policies during the campaign and how they might apply to his finances: Continue reading “Don’t Make Jeb Bush’s Mistakes…With Your Investments”

Roth IRA or Roth 401(k)?

February 18, 2016

We’ve recently received several calls on our Financial Helpline from people who entered their Roth 401(k) contributions as Roth IRA contributions in tax software and were told that they had over-contributed. Since Roth 401(k) plans are relatively new, it’s easy to get these mixed up but the differences are important and not just when filing your taxes. Let’s start with the similarities. Both accounts allow you to contribute after-tax dollars that can grow to be tax-free after age 59 ½ as long as you’ve had the account for at least 5 years. Now let’s look at the differences: Continue reading “Roth IRA or Roth 401(k)?”

How To Make That 1099 Less Taxing

February 12, 2016

One of the TV moments that I still find absolutely hilarious a long time after its first airing is Reverend Jim from “Taxi” taking his driver’s license exam. This clip STILL cracks me up every time I see it. While Rev. Jim not knowing what a yellow light means is not a big financial issue (although, I swear that A LOT of drivers I’ve seen lately have absolutely no clue what it means either), not knowing what a 1099 means could provide quite a shock to the recipient. Continue reading “How To Make That 1099 Less Taxing”

5 Reasons Not to Put Off Your Taxes

February 04, 2016

By now, you should have received the documents you need to file your taxes. I know it’s easy to procrastinate though. After all, I’ve had my share of late night runs to the post office on April 15th. (You actually have until April 18th to file your taxes this year because the IRS will be shut down on April 15th for “Emancipation Day.”) But there are some very good reasons not to put off filing your taxes: Continue reading “5 Reasons Not to Put Off Your Taxes”

Fix These Expenses Before They’re Fixed For You

January 28, 2016

Last week, I wrote about the importance of reducing so-called “fixed” expenses and not just discretionary ones like that morning coffee at Starbucks.The important thing is to reduce them before they become fixed. Here are some of the key decision points in which you can make that happen: Continue reading “Fix These Expenses Before They’re Fixed For You”

The Easiest Way to Save On Your Taxes

January 20, 2016

I think one of the reasons these mid-January and February days are so dreary is that it’s also tax time. Your mailbox and even your email inbox these days are being graced with tax forms, reminding you that preparing your income taxes is looming over your head. One of the reasons I dread tax time is because I can no longer procrastinate getting my records organized, and in doing so, it inevitably adds a bunch more to-do’s to my list of things I’d rather not be doing in my free time. Continue reading “The Easiest Way to Save On Your Taxes”

How Would You Take the Powerball Winnings?

January 14, 2016

What would you do if you won yesterday’s $1.5 billion Powerball jackpot? Before you start thinking about how to spend a billion and a half dollars, understand that you won’t get it all at once. Instead, it’s paid out in 30 installments over 29 years. If you want the money now, you only get $930 million. Then there’s taxes. Continue reading “How Would You Take the Powerball Winnings?”

5 Questions to Ask About Your Employer Tuition Benefit

October 21, 2015

Despite the inflation of college tuition far outpacing the growth of wages, having a bachelor’s degree is still one of the best ways to boost earning power and job opportunities. A 2014 report found that a person with a bachelor’s degree earns over $20,000 more per year on average than someone with just a high school diploma. One way to help defray the cost of college is to take advantage of your employer’s tuition reimbursement program, but before you do, here are some questions to answer: Continue reading “5 Questions to Ask About Your Employer Tuition Benefit”

10 Ways To Celebrate Financial Planning Week

October 05, 2015

Did you know that this week is the Financial Planning Association’s® 14th annual “Financial Planning Week?” The purpose of the week is to raise awareness of the financial planning process and to enable individuals and families to make prudent financial decisions. You can visit FinancialPlanningDays.org to see if a one-on-one financial planning advice event or educational workshops is being offered in your area. In the spirit of smart financial decision making, here are 10 ways to celebrate Financial Planning Week along with some of our thoughts on how finesse your personal finances: Continue reading “10 Ways To Celebrate Financial Planning Week”

Good Things Come To Those Who Wait

October 01, 2015

I was recently talking to my parents about Social Security and was surprised to discover that they had no idea they could delay their benefits past their retirement.This is important because it’s usually the best strategy yet most people collect at the earliest age of 62. Here are some reasons why delaying might make sense: Continue reading “Good Things Come To Those Who Wait”