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Here Are 4 Fatal Credit Card Mistakes that You Must Avoid

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Owning a credit card is one of the greatest assets that you can have. However, the slightest mistake can cost you quite a penny. You can get a high-interest rate charge, incur a late fee, close the credit card or worst-case scenario tarnishes your credit score.

Nonetheless, did you know that the same credit card, when used correctly, can assist you in building a credit history? You can have a magnificent chance to save money, build credit as well as enjoy the awesome perks. You ought to avoid common credit card mistakes to make the most of your credit card. These fatal mistakes are as follows and ways to prevent them.

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401k Withdrawal Taxes and Penalties

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The 401k has grown in popularity over the last couple of decades because pensions have all but vanished; as a result, strategies around taking withdrawals and how to limit taxes and penalties are extremely prevalent.

In this article, we’re going to discuss the common penalties and taxes, and some of the strategies you can deploy to reduce them.

When a penalty typically applies

In almost all cases, a penalty applies if you withdraw from your account before the age of 59 ½. This is a 10% tax penalty. (Be advised: All withdrawals are subject to ordinary income taxes)

There is also a tax penalty if you fail to withdraw your Required Minimum Distribution (RMD). This applies to individuals over the age of 70 ½. This penalty, however, is 50% of the amount you should’ve withdrawn.

There are several exceptions, however.

Additionally, with the new Secure Act, there have changes to required minimum distributions, contributions, and others. For more information, click here.

When you are exempt from penalty

  • Withdrawal after 59 ½
  • Left employer after 55
  • Left employment in public safety after 50
  • Death distributions: your beneficiary is able to take distributions without penalty, regardless of their age
  • Totally and permanently disabled as defined by the IRS
  • 72t rule – Agree to withdraw the same amount for a fixed period of five years or until you turn 59 ½, whichever is greater.
  • Unreimbursed medical expenses: You’re allotted to withdraw the unreimbursed medical expenses minus 10% of your adjusted gross income
  • If you over contribute to your retirement plan for the year, you’re allowed to withdraw the excess without incurring a penalty.
  • IRS Tax Levies
  • Divorce: Depending on your state and how you settle the divorce with your former spouse, he/she can withdraw their respective portion without penalty
  • Roth conversion: you pay taxes on the conversion, but there is no 10% tax penalty

*All exceptions may have certain requirements that need to be met to qualify for the exemption. Please check with your 401k Plan Administrator and Financial Advisor regarding your personal situation.

Taxes

With regard to tax-saving strategies on 401k withdrawals, there are no short-cuts or exceptions like there was for the penalty section.

The best way to save money on taxes when taking distributions is to be strategic.

If the expense you are withdrawing for is something that can be planned ahead of time, determine your current tax bracket, figure out how much you’ll need at that future date, and withdraw slowly over time (how much you withdraw depends on how soon you’ll need it).

For example, if you are in the 22% tax bracket, are $10,000 from going into the next bracket, and need $40,000 for a down payment in 4 years, then withdraw just under $10k each year.

This assumes that your income and tax bracket will stay the same.

Another way to go about it is to utilize Roth conversions. If the intention is to minimize or eliminate your tax liability for retirement, do a Roth conversion every year. Just be mindful of where you are in your current bracket, so you aren’t bumped into the next one.

In this example, however, it can be counter-intuitive because in most cases, your tax bracket in retirement is lower than it was while you are working. This is commonsense, though. You’re making less, so logically you would be in a lower bracket.

With regard to taxes, it comes down to math. If you need to withdraw from your 401k, crunch the numbers and figure out how you can do that while limiting your tax exposure.

Related reading:

How to Save Money Effectively

Business Retirement Plan Guide

*Be advised – Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

10 Things You Should Know Before Taking Out a Loan

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Every year, more than 30% of people go through the process of taking out a loan for one reason or another. Some do it to pay for college, while others do it to pay off a past-due utility bill.

If you’re thinking about taking out a loan at the moment, you should know what you’re getting yourself into before you do it. Loans can be very useful when you’re responsible with them. But they can also turn into a huge headache if you don’t know what you’re doing when you take one out.

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Here’s Why You Should Get a SR22 Insurance

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Have you recently had your driver’s license revoked or suspended and you’re wondering how to go about getting it back?

One of the steps to getting your driving privileges reinstated is to obtain what’s known as an SR-22. This is required to show that you’re being backed up by a legitimate insurance company while on the road despite your past traffic offenses.

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Living with Anxiety and Depression

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A few weeks ago, I wrote a post about my personal experiences with anxiety and depression, and how those mental illnesses affect your finances. (See article here)

This week, I’d like to talk about what it’s like living with these two illnesses. Before I do, however, I’d like to show a graphic from Anxiety.org that sum the symptoms pretty well.

The most challenging part about having anxiety and depression is that no day is the same.

Sometimes, I can’t even tell they’re there. Although, to be honest, those days are very few and far between.

Other days, my anxiety is in overdrive, which is exhausting. I’m jittery, constantly worrying about things that I needn’t worry about, and I have a big ball of negative energy that’s ever present in my stomach.

I have to say, though, the days when my depression is dominant are the toughest. The only thing I want to do these days is stay in bed and sleep.

Isolate myself from everyone, and just deal with it alone. Which is counter intuitive because social interaction is one thing that helps the most.

Recent changes

My medication changed. I don’t know if I noted it in that prior post I alluded to earlier, but my previous prescription wasn’t doing the job.

I’ve been on my new dose for two weeks now. My doc gave me two medications. One to treat my depression and another to treat my anxiety.

So far, so good. My depression isn’t gone by any means, but it’s definitely reduced. Though, I will say, there are days when it flares up due to certain triggers.

My anxiety is, somewhat, better. The biggest positive is that I’m sleeping better, which is vitally important.

The biggest drawback I’ve noticed is something I didn’t expect.

A temper was passed down to be, and sometimes, it’s really bad. Over the past year or so, my depression has been so prominent that it’s muted my anger.

Guess what? The new medication is doing its job and the anger is making its way back.

So what do I do? Change my medications again? Or do I learn techniques to manage my anger? Techniques that will allow me to feel my emotions without feeling controlled by them.

Yes is my answer.

Meditation, relaxation, and exercise. The two former I’m incorporating into my morning routine. The latter will take place in the evening.

My new morning routine will go as follows: (all while listening to relaxing chillstep)

  1. Wake up 45 minutes before I have to get ready (shower, shave, change, leave)
  2. Start with 5 minutes with my neck/head tension reliever
  3. 10 minutes in my inversion table
  4. 15 minutes of meditation
  5. 15 minutes of Tai chi
  6. Turn on some classic 90s/00s hits to get ready to

My exercise routine changes everyday. At least 30 minutes each day.

Day 1 – Elliptical

Day 2 – Stretch

Day 3 – Pull-ups and lunges

Day 4 – Stretch

Day 5 – Resistance bands and jumping jacks

Day 6 – Stretch

I haven’t done enough to take my mental health into my own hands. Sure, I’m seeing a therapist and I’m taking prescription medication, but that’s not enough.

I need to move my body and relax my mind.

I’m also reading a book about the Dalai Lama right now, and it’s quite interesting. It’s giving me a different perspective on how I can go about my day and the mentality I can incorporate into my daily life.

How it affects my finances

Depends on the day. If it’s a depression day, not too much. Like I said, I want to isolate myself on these days and I generally won’t buy things to make me feel better.

If it’s an anxiety-ridden day, that’s a different story. Food is my go-to when my anxiety is running high. That negatively affects my  finances.

Bottom line, just make sure you are taking care of yourself. Whatever that looks like for you. Also, make sure you have a “person”. Someone you can vent to. Someone that checks on you.

Read More:

Choosing a Bed: Sleep Number vs Tempurpedic