Blog

Retirement Planning for Veterans – Investment Options You Must Make the Most Of

Posted by on May 26, 2017 in Blog | 0 comments

Are you sure that your pension plan is sufficient to lead a comfortable life throughout your retirement? Can you guarantee that your lifestyle won’t change if the cost of living continues to rise? Can you count on your social security benefits for the rest of your life? It is important that you have a secure and steady stream of income that has you covered beyond your basic expenses. Military members surely have a great pension plan that assures a 50% pension after 20 years of service but unfortunately even a 50% pay is not enough to live a comfortable life throughout retirement. While it is a good amount, it is still not adequate and this is exactly why veterans and military members need to take retirement planning seriously. Not to forget the fact that most military members never even serve 20 years due therefore they are not entitled to receive the retirement benefits.

For all these reasons, it is necessary that veterans and military members plan their retirement regardless of whether they serve the military or separate from it to join a different sector. Contributing to an IRA allows you to take your income with you wherever you go and it also offers great tax benefits.

What Makes Military Veterans Different from Other Employees

Most military veterans are on PDRL wherein they receive a predetermined payment every month. However, despite generating a steady stream of income, the payment overrides the possibility of demotion, disability and job loss.

A veteran only receives a certain percentage of his base pay and retiring on the basis of this pay alone is not a prudent decision as it would not even cover the basic expenses during retirement. VA payments are not considered to be a source of income and hence they are tax-free. So veterans who are entitled to receive benefits do not qualify to contribute to an IRA. They can, however, take advantage of other retirement savings options.

Best Investment Strategies for Long-term Retirement Savings

Veterans are eligible to receive home loans which can be leveraged for purchasing large properties or a multiunit that can be rented out for substantial profits, provided you reside in one area of the multiunit.

The thrift savings plan is another lucrative investment option that allows account holders to make tax-free retirement contributions. Veterans working in a combat zone can get tax-free deductions if they have dependent children. The money that is saved during a deployment is not taxed even when it is time to withdraw. A TSP allows veterans to invest in bonds and stock. It also offers target date funds that comprise a mix of five different index funds. Expenses are kept to a minimum in the TSP program by forfeiting automated contributions and the loan charges are also low. The only caveat with a TSP is that veterans do not receive a matching contribution that federal employees do which is where a Roth IRA gains preference.

Why a Roth IRA Makes a Rational Choice

The Roth IRA comes with tangible future tax benefits unlike a traditional IRA which is tax deductible. This means that there is no tax break when you make your contributions. All your retirement savings keep growing tax deferred and become tax free if the IRA owner has the IRA for 5 years and reaches the age of 59 ½.

A Roth IRA is extremely flexible as compared to other investment options, which is why opening a Roth IRA is beneficial for military members and veterans. If you are a single filer and your adjusted gross income does not exceed $110,000 or $160,000 if you are a joint filer, you can establish a Roth IRA and enjoy tax-free withdrawals at age 59 without inviting any penalty.

Investing Your IRA in Real Estate and Alternative Assets

Posted by on May 22, 2017 in Blog | 0 comments

IRA -Investment-Options

source: ralblog.com

The options for investing your hard-earned retirement savings are numerous, each with its pros and cons. Among those options would be investing your IRA in real estate and other alternative assets by operating a self- directed IRA. One important thing to remember is that age is not a limiting factor to retirement savings; you can start as soon as you get your first job.

If you are looking for a retirement vehicle to invest in, it is important to ask a trusted financial adviser on how best to invest your savings. For instance, if you desire to invest in stock market trading, you need to understand how volatile the stock market can get. By choosing to buy stocks, you might get yourself into a situation where you have your finances tied and hence cannot use it at a time when you need to.

As a wise response to market volatility, investors are diversifying their investments by looking and buying alternative investments, such as real estates. So, if you are looking for an investment option, look no further than real estate investment.

What accounts do you need to get started saving for your retirement?

An IRA, Individual Retirement Account or plan is an account that you open with a custodian, such as a bank or a brokerage firm where you direct a monthly amount of money to use after retirement. One disadvantage of the IRA is that they limit your investments to bonds and other exchange-traded stocks. If you have such an account and are interested in real estate and other alternative investments, you will be required to convert it to a self-directed IRA with a custodian offering that service. Another retirement account you can open is a 401 (k) plan, which has a higher contribution limit thus enabling you to save more.

A self-directed IRA (SD IRA) gives you investment freedom and complete control over your money and much more options than what a traditional IRA does. One good reason why you should consider a SD IRA is if you can’t trust someone with managing your funds and are confident with the investment decisions you make. The alternative investments include:

  • Real estate
  • Horse breeding business
  • Precious metals such as gold and silver
  • Private equity
  • Art galleries

So, a SD IRA gives you absolute control and investment freedom, but is it a must have for everyone saving for retirement? No, SD IRA is not for everyone and this is why:

  • You need to be an expert in the field you have chosen to invest in. For instance, if you chose to invest IRA in real estate, you need to be well conversant with land or properties. Another alternative asset is investing is horse breeding business, but you also need to clearly understand what the horses require. A common mistake investors make is to invest IRA in real estate or the horse breeding with no expertise at all and only do so because their friends have been successful in these businesses.
  • SD IRAs are more risky in that they do not allow for diversification of the asset classes. What this means is that your retirement is at risk if something bad happens.
  • As compared with other retirement plans, the assets in a SD IRA are seldom liquid but you will still be required to take Required Minimum Distribution (RMD) when you hit seventy and a half years. A penalty follows if your asset generates less cash than what is required to take the RMD.
  • This account prohibits direct transactions to self or family. It does not allow you to borrow or lend money to your account, and you cannot also buy or sell assets from self to self. If a prohibited transaction is noted, your SD IRA is disqualified and you are penalized.
  • A SD IRA requires proper record keeping, which may not go so well with some people. Rental property will need a regular check now and then in order to keep the tenants happy. All the transactions undertaken in this property need to be documented should cases of violations arise.
  • SD IRAs are less transparent and one could easily become a victim of fraud. This is because there are little or no regulations set on alternative investments. It is, therefore, wise not to invest IRA in alternative assets just because the returns look so promising.
  • Opening a SD IRA is also not easy since not all custodians offer the service.

So, before deciding on which IRA investment fits you, decide first on what you want to achieve with your funds first. Any action you take with your money will determine how your retirement will be.

What Do Financially Successful People Do Differently?

Posted by on May 19, 2017 in Blog | 0 comments

Whom do you consider to be financially successful? If your answer is ‘those individuals who make loads of money’, then the answer is partly true. You could have a ton of money but lose it in an instant due to a bad financial decision. On the other hand, you can build up a great financial portfolio and grow big financially, in spite of starting small, with smart decisions and choices. So, what makes someone financially successful? Read on.

Here are some of the things that Financially Successful People Do Differently

1. They Keep a Check on their Thoughts and Emotions

Financially successful people believe in affirmative thinking and practice the same. They believe that ‘thinking’ controls every aspect of their life — business, finance, health and relationships. At the same time, they don’t let emotions control them. They keep a check on how they feel and don’t let negative emotions such as stress, fear, sadness or overwhelming events cloud their judgment. They understand that these emotions will make the brain less resourceful, and hinder their ability to make good decisions.

2. They Keep the Experts Close and Secure their Retirement

Successful people know their strength and the areas where they lack the required expertise. They don’t hesitate to acknowledge their weaknesses and choose to build a team of experts in their business to compensate their weaknesses. They assemble a team of experts that include a good business lawyer, financial counselors, accountants, financial advisors, etc., who can assist them in making good financial decisions. Having a trustworthy team of such experts can take their business to great heights and even lend a big hand in retirement planning.

3. They Prioritize Differently

The tasks on the ‘to-do’ list will keep growing, no matter how fast you complete them. It is no different for financially successful people, but they approach that list differently. They focus on starting and executing important things first, rather than the easy ones. They apply this to their financial decisions as well by tackling important decisions that can help them make money, instead of pushing such decisions to ‘some-other-time’ which can have the potential to seriously affect their finances. Change the mindset to approach the important tasks first, regardless of how tempting the easy ones seem.

4. They Minimize their Taxes

Financially successful people aim to get the most of their investments and money by minimizing their tax burden. They have a certified public accountant who ensures that they don’t miss applicable deductions when they file their taxes. Additionally, they invest pre-tax dollars through tools such as company 401(k) to the employer match. They choose to invest in Roth IRA as well so that they don’t have to pay taxes on their earnings in the future. It is essential to pay taxes but you can take advantage of tax benefits to the degree the law allows.

5. They Never Stop learning

The common trait amongst every financially successful person is that they NEVER stop learning. They always immerse themselves in books, articles or any reading material that will help them grow, both in business and financially. They know that there is always something to learn and keep their minds open about the same.

6. They Know How to have Fun

Financially successful people don’t just know how to make money, but also how to spend it and have fun. They spend their hard-earned money on vacations, loved ones, hobbies, and fun activities to do with their family. This allows them to build and strengthen important relationships and even grow personally. They understand that celebrating their accomplishments, no matter how small, is equally important. Not only does this allow them to see how they are faring in their business and financial journey but also recharges them to strive and reach for their next financial goal.

7. They Always Set Goals

Goals are a part of every financially successful person’s life. Goals provide them with a roadmap of what and how they should do things to proceed ahead in their business. They set SMART (specific, measurable, achievable, realistic and time-bound) goals that help them dream bigger and fulfill their desires. They make SMART financial goals that help them save money and manage their finances smartly.

8. They Keep Adapting and Reinventing Themselves

Things in the business world are dynamic and keep changing frequently. Financially successful people adapt to these changes and are willing to reinvent themselves to maximize the opportunities presented to them. By keeping an open mind and a willingness to change with the times, they successfully capitalize on financially successful opportunities.

9. They Believe in Paying it Forward

It is true that financially successful people put a lot of effort in making more money, but there is another side to them. They believe that it is equally important to give back a portion of their wealth to the community. They frequently donate to a favourite charity or simply help someone in need. It keeps them grounded and gives them a purpose to make more money so that they can keep paying it forward.

10. They are Not Afraid of Failing

Successful people are not scared of embracing failure. They rather consider it to be a stepping stone towards success. They know that they can’t always succeed and that failure will be inevitable at some point but they don’t let the fear of failure deter or stop them from going after what they want. They might make decisions that would literally cost them money, but they learn from the mistakes and forge ahead. When you overcome the fear of failure and see it as a temporary setback instead, you open multiple avenues to explore and succeed, just like financially successful people.

11. They take Risks Even when it Comes to Debts and Loans

Usually, debt and taking loan scares off people, and rightfully so. But financially successful people view them as powerful tools that can enable them to purchase or even own a greater percentage of an investment. If successful, it could earn them a lot of money through the interest on the loan. It is a risky move as irresponsible and impulsive decisions can have negative effects, but it is a risk the financially successful people are willing to take as they see it as a chance to leverage debt to maximize returns.

12. They are REALLY Persistent

Lastly, the one trait that sets the financially successful apart from others is persistence. This quality enables them to take another step when they think they can’t go any further, overcome obstacles without getting overwhelmed and attain their goals, no matter how big. Financially successful people manage to pay off debt, create better products and increase their retirement savings through persistence.

A quote by Winston Churchill does a perfect job of outlining the attitude displayed by financially successful people — ‘Success is walking from failure to failure with no loss of enthusiasm.’ You no longer have to just dream of being financially successful, but rather live it. Embrace these twelve qualities and you will be on your way to becoming financially successful like those people you look up to. Make wise decisions and don’t hesitate to consult with the experts when needed.

Why Should You Use a Roth IRA to Save for College (and Retirement)?

Posted by on May 12, 2017 in Blog | 0 comments

When it comes to putting money away for the years to come, you have quite a few options available. One of these is a Roth IRA, which could be your best choice when you’re planning your child’s education. As a parent, cutting down on a few small expenses and making the right choices now will help you offer your child a secure future!

Use a Roth IRA to Save for College and retirement

4 Ways to Boost Your Savings

Here are some tips that will help strengthen your personal finance strategy for college savings as well as retirement:

  • Start Saving Early and Often – If you get used to saving money for your kids’ education when they’re still young, you have a better chance of building a good-sized nest egg by the time you retire. By starting early, your money will have the potential to grow that much more, thanks to the magic of compounding interest.

For a college student, retirement planning is probably the last thing on their mind. However, college is expensive, even if they get a scholarship, so encourage them to start saving early. The earlier you and your child start saving, the larger your college and retirement nest egg will be.

Here’s another reason to start putting funds in an IRA now: When you save even small amounts of money and give it more time to grow, you actually need to put less money away every month to reach a certain goal. Plus, the tax benefits compound over time too. You need to save every penny, especially with skyrocketing tuition and living costs!

  • Remember, Roth IRAs Offer Unique Benefits – It may seem like a bad idea to tap into a retirement account for college expenses, but look at some of the advantages a Roth IRA gives you as a saving tool:
    • Unlike most other IRA or retirement accounts, early withdrawals from a Roth IRA do not incur penalties or taxes. While only applicable up to the total amount you’ve contributed, it can help cover college tuition in a pinch.
    • While determining financial aid, all of your assets, earnings and savings are taken into consideration (even a 529 College Savings Plan), except a Roth IRA. The money you’ve saved in this account won’t count against your child’s eligibility.
    • Withdrawals from a 529 plan (for any purpose other than college) involve tax and penalty. For someone who decides not to go to college, Roth IRA savings can still be used for retirement savings or other purposes, penalty-free.
  • Understand the Tax Breaks and Rules – Depending on your income and your child’s status in school, there are some tax advantages you can use to save money:
    • You can save up to $2,500 annually during the first four years of undergraduate study (for students enrolled at least half-time) with American Opportunity Credit. Of this amount, 40% is a refundable credit, so it can be paid even if you have no tax liability. MAGI (modified adjusted gross income) limits are $90,000/$180,000 (singles/joint filers claiming the credit).
    • The Lifetime Learning Credit isn’t affected by student status or number of years in school, and can save you up to $2,000 (non-refundable). MAGI limits are $55,000/$110,000.
    • If you don’t qualify for tax credits, you could receive an income adjustment of up to $4,000 with the Tuition & Fees Deduction. MAGI limits are $80,000/$160,000, and it’s not limited to the first four years of college.

Don’t take distributions till the final year financial aid form has been filed. Stay updated with tax rules and loopholes (which keep changing). For instance, in the 2017-18 academic year, you can use tax returns from your child’s sophomore year while applying for aid in their senior year. Consult a tax professional or personal finance advisor too.

People are retiring younger, with better health and more time to enjoy their golden years. If you want to spend your retirement at leisure without worrying about how to stay afloat, make the most of every penny you save. Your kid’s college education could be the largest expense you deal with, so plan it right and get cracking on your savings plan today!

5 Compelling Reasons For Women To Make Retirement Planning A Priority

Posted by on May 8, 2017 in Blog | 0 comments

retirement-planning-for-women

Saving for a secure future remains a primary goal for every wise individual be it a man or a woman. But, a woman, irrespective of her marital status, faces unique economic issues post retirement. A woman lives longer than a man and hence she needs more money to survive. She serves fewer years in the workforce as compared to a man because a woman is likely to give her career a break for raising children or to care for an elderly parent. These interruptions make it all the more difficult for a woman to obtain a promotion or a pay hike. A lower income coupled with lesser years in the workforce and a longer life expectancy make savings and investments a little more difficult for a woman.

5 Compelling Reasons To Make Retirement Planning A Priority

#1 Women Are Less Likely To Take Advantage Of Retirement Plans

Retirement savings tend to take a back seat in a woman’s life due to career breaks. Women are also found to be more conservative investors as compared to men. Some of them are unable to avail retirement benefits due to the shortage of the number of work hours needed in a year to qualify for the employer’s retirement plan. Women also lose out on retirement security due to their uneven work patterns, the wage gap, and their role as caregivers. Working for an employer that offers a sound retirement savings plan for employees, can make it easier for you to save money and taxes at the same time. 401(k) plans are meant for the employees of public and private organizations and help you save money while managing your financial obligations alongside.

#2 Women Tend To Live Longer Than Men

Women need to plan for a longer retirement period as they tend to outlive their male counterparts by the average difference of a decade. A longer life expectancy means a woman is likely to lead a lonely life at an older age and is expected to spend more on medical care during that phase. The death of a spouse brings down the income to half and to make things worse; the social security benefits decline dramatically. A self-directed 401(k) plan is a golden opportunity to lower the burden of tax and save for the retirement. The sooner you start, the more you save.

#3 Widowhood And Divorce Invite Serious Financial Difficulties In Case Of An Illness

Due to a longer life expectancy, women tend to live much longer than men. Widowhood generally occurs at a later stage in life and can be emotionally draining and financially devastating for a woman. Living alone without a spouse due to divorce or widowhood significantly increases the expenditure of long-term care in case of disease or disability. Plan in advance and stay prepared for every adversity in life. Self directed retirement plans are the key to lifelong financial stability.

#4 Women Rely Solely On Social Security

Women have the tendency to rely completely on Social Security for their retirement funds. A recent study suggested that more than 20% of widowed women are dependent exclusively on Social Security for their income. Opting for social security benefits at an earlier stage can significantly reduce the amount. Similarly, delaying the claim by a few years would result in a considerable increase.

#5 Women Have A Lower Workforce Participation

Women often sidetrack savings when balancing multiple financial obligations with lower workforce participation. Raising children or caring for an aging parent leaves little money at disposal towards the end of life. Despite a considerable increase in workforce participation, women continue to earn less as compared to men. Lower workforce participations adversely affect the career ladder and this makes it extremely difficult for a woman to accumulate an adequate amount to support her retirement.

Loss of a spouse, increasing costs of healthcare, and chronic illnesses that crop up with aging can be debilitating for a woman. Save for your retirement today, because life gets demanding with every passing day. Meet an experienced financial advisor and get started with your personalized retirement plan that efficiently caters to the challenges that confront your unique situation. Plan smartly to make your retirement phase easy and comfortable and continue to enjoy the same lifestyle till your last breath.

The Why and How of Retirement Planning for Women

Posted by on May 1, 2017 in Blog | 0 comments

Retirement-for-Women

Source: sixtyandme.com

Proper retirement planning is crucial for everyone, but it may be even more important if you’re a woman. Despite an income gap where men earn almost 25% more, most women do not have a financial plan that will help them maintain their comfort, security and independence after retirement.

Women Approach Financial Planning Differently

Most women don’t have the time or energy to plan their finances, investments and savings after providing care for their families, managing day-to-day expenses and handling other personal priorities. Many feel lost in the world of income and portfolio planning and are uncomfortable discussing money with advisors.

Knowledge is power, so let’s consider why it’s important for you to have a smart financial plan, and some simple ways to get started.

What Are Some Retirement Planning Hurdles Faced by Women?

Here are some common obstacles that women face with retirement planning:

  • The average income for women is lower than for men, and they typically contribute 30% less to their 401k plan. Less than half of all employed women between the ages of 21 and 64 participate in an IRA or other retirement plans.
    • Fewer women have recovered from job losses caused by economic recession in the last decade. Many women work part-time or too few hours to be eligible for employer-sponsored pension plans.
  • Life expectancy is higher by 5-7 years for women, which raises the chances of needing long-term care at some point. However, almost 20% of women between the ages of 18 and 64 have no insurance coverage.
  • Social Security benefits are lower for women. Couples need to be married at least 10 years before a divorce, for either party to claim their ex-spouse’s benefits. Since most divorces happen within 7 years, a number of older women face financial trouble after a divorce.
  • Women are also more likely to provide care to parents and family members, taking an average of 12 years off from work. Many single mothers are unable to save for retirement, and more women than men are single parents.
  • Single, widowed or divorced women often have to provide for themselves as they get older. Almost a third of single, divorced or widowed women over the age of 64 are not financially stable, compared to 1 in 5 men.
  • Men tend to make more aggressive investments than women, with potentially higher gains that keep pace with inflation.

How Can You Overcome These Hurdles?

Here are some basic financial tips to help you meet your retirement planning goals:

  • Set Some Goals:
    You need to know where you want to be before you can start taking steps to get there. Decide which financial goals are most important to you, whether for yourself or your parents, children and other loved ones.
  • Analyze Your Finances:
    Understand where you stand at the moment, listing your sources of income against expenses. This will help you determine areas where you can cut down spending, to save for financial emergencies as well as retirement.
  • Learn What You Can:
    The best way to start making smart financial investments is to understand everything you can about them. Explore retirement savings, employer-sponsored plans, insurance and investments that can help you save for the future.
  • Get Expert Help:
    Don’t rely on advice from well-meaning friends and relatives, since they may not have the expertise to help you reach your goals. A professional advisor will be able to help you create an effective and structured financial plan.

As a woman, not only are you statistically likely to live longer than men, but the financial odds may be stacked against you in other ways as well. If you don’t already have a nest egg for your golden years, it’s definitely time to start one.

With a self directed IRA, you can explore investment opportunities at your own pace. Get in touch with our financial advisors to learn how, today!

What to Do If Your Parents Don’t Have a Retirement Plan?

Posted by on Apr 24, 2017 in Blog | 0 comments

Most millennials and working youngsters today have parents who are close to retirement age, many of whom do not have a sufficient nest egg to see them through their golden years. The responsibility for your parents’ care and comfort (as well as their debts) could fall on you if their retirement planning strategy falls short of their actual requirements.

It’s important for you to understand where they stand in terms of social security, pension funds and savings, so you can plan for potential expenses in the future. Whether they live with you, on their own or in a retirement community, you may need to budget and save today so your parents are comfortable and secure tomorrow!

What You Need to Know about Your Parents’ Retirement Savings

When you’re trying to help your parents with retirement planning, it’s crucial to understand where they stand. This helps you work out real solutions for issues like debt, healthcare and day-to-day expenses, in addition to providing them the financial independence and “space” they desire.

Offering a supplemental income source could not only wound their pride, but also create a mutually harmful dependency. This is a larger risk if the reason for insufficient retirement savings is bad money management or unnecessary expenses.

Start by asking where they have parked their retirement nest egg, if at all. For instance, have they invested in:

  • Insurance?
    Not just life insurance, but additional coverage for potential medical issues that arise with age. Long term care insurance may be expensive, but a prolonged illness or disability could eat into their savings and your own!
  • Retirement Funds?
    Ask whether (and how much) your parents have invested in IRA and 401K plans. Help them make the most of contribution limits and tax breaks, even if they’re uncomfortable telling you how much they’ve saved.
  • Debt Repayment?
    If mortgages or outstanding loans are paid off, that’s one less thing to worry about later. If not, it may be time for gentle encouragement, so your parents aren’t saddled with debt when they’re no longer able to work.

Helping Your Parents with Retirement Planning

Here are some effective ways to help your parents manage their finances and save for retirement:

  • Meeting an Advisor:
    A third-party financial advisor can not only look over your parents’ investment portfolio and rebalance it if required, but also minimize any awkwardness they feel discussing finances with you.
  • Updating Wills and Trusts:
    Get a lawyer to help your parents with wills, trusts and other estate planning documents. Existing paperwork should be up-to-date, your parents should consider a power of attorney as well.
  • Maximizing their Savings:
    Encourage your parents to save as much as possible, making frugal living choices now so they have financial security later. Check their budget for unnecessary expenses that can be trimmed.
  • Boosting Retirement Income:
    Delaying retirement by a few years, continuing to work part-time, making smart investments, and exploring business opportunities can all help boost income both before and after they retire.
  • Preparing Yourself As Well:
    No matter how well you plan, there’s no way to guarantee that your help won’t be needed somewhere down the line. Plan your own finances and savings, so you can help your parents when they need it.

Early planning will help you prepare against the financial impact of their retirement, if they can no longer care for themselves at any point. Even if it doesn’t feel like any of your business, you definitely need to consider your parents’ retirement plan and help them get it on track (so you don’t end up being it!).

Top 10 Retirement Planning Tips for Young Professionals

Posted by on Apr 17, 2017 in Blog | 0 comments

Retirement tips for professionals

While retirement has always been treated as a time to “hang up your boots and do what you like”, modern retirees are taking this more seriously. Young professionals planning their retirement nest egg want to enjoy a comfortable and secure future, where they can do what they like without worrying about money.

However, they face some key challenges along the way. For instance, they are usually saddled with heavy student debt, as well as fluctuating incomes and a tax disadvantage if they’re single and childless. If they decide to start a family, they may get some tax benefits, but wedding, childcare, education, housing and other expenses add to their debt.

How Can You Start Saving for Retirement?

If you’re facing any of the challenges we discussed above, here are 10 retirement planning tips that will help you save for the future:

  1. Open an IRA Now:
    If you’ve started earning, whether through a business or a job, start saving in an IRA. Not only do you get tax benefits when you start contributing to these accounts, but also more time for your money to grow.
  2. Understand IRA Types:
    Different IRAs give you different benefits, so open one that matches your needs. The most popular options are traditional and Roth IRAs, but consider a SIMPLE or SEP-IRA if you’re self-employed or a business owner.
  3. Compare the Tax Benefits:
    Traditional IRAs allow you to make pre-tax contributions, so you only pay taxes when you make a withdrawal. On the other hand, Roth IRAs are funded with post-tax money, but withdrawals are tax-free.
  4. Check for Employer Plans:
    If your employer offers a 401k plan for employees and you meet the eligibility criteria, join it. Make the maximum contribution that your employer will match since that’s free money going into your retirement fund.
  5. Automate Your Savings:
    Make saving a habit instead of a luxury, and take temptation out of the picture. Set up a direct debit for your savings plan, so a certain percentage of your earnings or a fixed amount goes into it every month.
  6. Contribute More Every Year:
    If you can’t max out your IRA contributions right away, at least put in the maximum amount you can. Increase this amount every year, as your income starts going up, so your nest egg will grow that much faster.
  7. Pay Off Your Debt:
    Debt repayment should be a major financial priority since it reduces the amount of money you lose in interest payments. Start with the most expensive debt first, and refinance whatever you can with lower-interest vehicles.
  8. Start Investing:
    Returns on investments will account for a larger chunk of retirement income than your savings and interest alone. Diversify your portfolio to make the most of long-term investments as well as short-term ones.
  9. Rollover Your 401k:
    When you change jobs, rollover your 401k money into your new employer’s plan or an IRA. Cashing out this fund will lead to penalties and taxes if you’re under the age of 59½, but a direct rollover will not cost you anything.
  10. Educate Yourself:
    Stay up-to-date with the latest rules, regulations and opportunities, so you can make smart decisions for your future. If you need help, consult a financial advisor for guidance on investments and retirement planning.

It’s not impossible to start saving for retirement, though it may seem that way when you’re just beginning to explore the world of money management. In fact, starting early is the best move you could make. It gives compound interest more time to work its magic on your money, so you have a substantial nest egg to fall back on when you retire.

If you need help with a self directed IRA or any other investment advice, we’re here to help. Contact the financial experts at Self Directed Retirement Plans now!

Spousal IRA: What Are the Rules?

Posted by on Apr 10, 2017 in Blog | 0 comments

Rules-for-Spousal-IRA

Source: brimg.net

When you and your spouse are saving for retirement, you’re probably looking for ways to invest as much money as possible so you can live comfortably when you’re finally able to stop working. However, because most retirement plans require you to have an income before you can contribute any money, it may seem like you’re at a disadvantage if one spouse doesn’t work.

However, you’re not necessarily at a loss if you or your spouse chooses to take care of the home or raise children instead of working. A spousal IRA can help you save on behalf of a nonworking spouse.

What Is a Spousal IRA?

A spousal IRA is designed to allow a couple to make contributions in each spouse’s name, even if the income is only coming from one place. Married couples who file their taxes jointly may qualify for a spousal IRA.

A spousal IRA essentially allows you to open an IRA in your spouse’s name. Unlike checking accounts or savings accounts, you cannot share an IRA with your spouse. In opening the second IRA in your spouse’s name, you’re able to contribute twice as much to your retirement fund. Twice as many contributions mean you can double the amount you save over the years, giving you a better opportunity to save for a comfortable retirement.

A spousal IRA can either be a traditional IRA or a Roth IRA. Before you decide which is right for you, you’ll need to know the limitations and benefits of each.

Spousal IRAs: Traditional IRA vs. Roth IRA

When opening a spousal IRA, you need to decide whether a traditional IRA or a Roth IRA makes the most sense. In order to make the most educated decision, let’s look at the age limits, compensation limits and laws for withdrawing money.

If you’re planning to open a traditional IRA, your spouse must be under the age of 70½ for the year you plan to start contributing. However, a Roth IRA does not have age limits, so you can open this type of investment account no matter the age of your spouse.

If you’re considering a Roth IRA, you need to be sure you don’t make above the income limit. There is no income limit for a traditional IRA. Both types of IRAs do have limits as to how much you’re able to contribute. If you’re above a certain age, you can contribute an additional catch-up amount.

A Roth IRA provides additional benefits when you withdraw your money. Because all contributions are made with post-tax cash, you do not need to pay taxes on the money you’re taking out. This can be a great benefit when you’re funding your retirement. However, you are not able to deduct this money as you would with a traditional IRA.

Choosing the Right Spousal IRA

When selecting the right IRA for your spouse, you’ll want to consider a few different things. First, look at your own retirement plan and how much you’re saving. Based on this information, set goals for what you’d like to save for your spouse. What plan will help you achieve those goals?

You’ll also want to consider outside factors, such as the cost-of-living adjustments for certain retirement plans. These adjustments may change how much you’re able to contribute to your retirement funds, so be aware of how they are changing or growing.

A spousal IRA can make a huge difference when it comes to saving for retirement. If you have a spouse who is not working and does not plan to go back to work, consider what a spousal IRA could do for you and your retirement nest egg.

 

Author bio:
Anum Yoon is a personal finance blogger and journalist who strives to help others manage their money better. You can follow her blog, Current on Currency for her latest posts, or sign up for her weekly money newsletter.

Donald Trump’s Take on Social Security & How It Can Affect Your Retirement Plans

Posted by on Apr 3, 2017 in Blog | 0 comments

the-key-to-social-security-benefits

Source: s.mainstreet.com

Think you got your retirement planned out? Think again as Donald Trump’s plans may affect yours. According to Gallup’s latest survey findings, more than 60% of the elderly population is counting on their Social Security checks for their monthly income while the remaining expect their social security benefits to be a steady source of income that supports them through retirement. However, given the longer life expectancies and the increasing cost of living, it is not recommended to rely solely on the social security system for your retirement income.

Having said that, here’s what Trump said prior to the presidential election on retirement security for Americans:

  • I will preserve social security benefits without raising the taxes, cutting down on the benefits or raising the retirement age.
  • I will neither raise the social security tax ceiling on earnings nor modify the annual cost of living adjustments.
  • I plan to lower the cost of medical care by allowing the import of cost-effective drugs from foreign countries, letting Medicare bargain drug prices and allowing the sale of medical insurance.
  • I will implement a comprehensive tax reformation which will streamline income tax by eliminating death tax and alternative minimum tax.
  • I will mount a campaign that attacks waste, abuse and fraud in the American government.

According to Trump, sustainable growth in GDP combined with a prudent administration will play a crucial role in securing social security for future generations.

What’s Likely to Change in the Social Security System?

Those nearing retirement can be sure of receiving their benefits as all the reforms being proposed are in the favor of preserving social security. Trump plans to privatize part or all of the social security programs as he believes that directing social security funds into personal saving accounts would swell national savings and this would eventually pump out big money for the country’s economic growth in terms of national investments, increased wages, and improved productivity.

Trump’s retirement savings plan will act as a catalyst that will bring prosperity to all and it carries a lot of appeal for every American who is counting on social security benefits for retirement returns.

Will Trump Cut Down on Medicare and Taxes?

Donald Trump has planned to cut taxes by $6.2 trillion over the coming decade and has promised to increase the federal spending on veterans and military along with developing national infrastructure. He would reform corporate taxes to include a reduction in the corporate income tax rates. When it comes to Medicare benefits, Trump has offered no practical ideas but promises to protect these benefits by allowing negotiations with pharmaceutical companies.

The Need of the Hour

With 77 million baby boomers all set for retirement and expecting to receive their entitlements, much of Uncle Sam’s spending is likely to get consumed by 2035, giving rise to a long-term funding deficit thereafter. The dollars would then only suffice to pay for 77% of the social security benefits.

This is a wake-up call for retirement investors who would now need to save as much as they can and avoid making any changes in their 401(k) contributions. It is always a great idea to save extra for unpredictable changes. The market will continue to remain volatile until the new specifics come to the surface, so you should be focusing on long-term retirement planning with some tolerance for risk.

While it is most likely that more jobs will be created and the wage situation will improve, you would still need to take pre-emptive action for personal benefits. Keep your personal debts to a minimum and create alternatives to your current source of income. Though trump plans to preserve your social security benefits, healthcare expenses will continue to remain a wildcard. Trump’s economic agenda is still unclear and there is no concrete information available as yet and only time will tell how his reformations affect the retirement planning landscape in America.

To retire confidently with a complete peace of mind, invest in an affordable Medicare plan and contribute consistently to your retirement savings.