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My Company Offers A Standard 401(K)-What Does That Mean?

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When you’re starting with a new employer, you typically get access to a range of benefits. When it comes to retirement plans, many companies offer employees a standard 401k. If you haven’t had a 401k before, you may be wondering what a typical one involves. Here’s a look at the standard 401k, including what it is, how it works, and the benefits it can provide.

What Is the Standard 401K?

Technically, there isn’t a “standard” 401k, as every company’s plan can differ to a degree. However, the most common offering is a traditional 401k.

A traditional 401k is an employer-sponsored retirement plan that provides employees with a selection of investment options. That can include stocks, ETFs, mutual funds, or similar types of assets, though the exact ones available do vary between retirement plans.

Employee contributions are taken directly from their paychecks, making it easy to save for retirement. Additionally, they are pre-tax. You don’t owe income taxes on the amount you send to the retirement plan immediately. Instead, you’ll pay taxes on withdrawals.

How the Standard 401K Works

A standard 401k allows employees to set money aside in a retirement-specific investment account. In many ways, it functions similarly to investing outside of a retirement account. Often, you can select from a variety of stocks, bonds, ETFs, or mutual funds. Additionally, you can usually adjust your allocations over time, though there may be limits on the types of changes you can make.

Once a contribution is made, the requested assets are acquired. Then, those investments will grow or shift over time. While most increase in value over the long-term, economic conditions that cause stock market downturns will impact 401k portfolio values. As a result, the total value of the retirement account will fluctuate, though they generally trend upward.

Once you reach retirement age, you can make withdrawals without incurring any financial penalties. However, those withdrawals do trigger tax obligations, as that money is treated as income by the IRS.

Early withdrawals are potentially an option, but they can trigger a financial penalty depending on how the funds are used. Plus, taking money out early means missing out on future gains, so it’s best to wait until your retirement whenever possible.

The Benefits of the Standard 401K

Aside from being a simple way to set money aside for retirement, a traditional 401k comes with many other benefits. As mentioned previously, contributions can come directly from your paycheck, making it easier to set money aside. Additionally, the contributions are pre-tax, so they can reduce your current tax burden.

In many cases, employers also offer contribution matches with their 401k plans. With these, the company contributes up to a certain percentage of your income, based on the amount you’re contributing. In many ways, this is functionally free money that boosts the value of your portfolio. However, as with your contributions, you do have to pay taxes when you withdraw the funds during your retirement.

If you leave your employer, you may also have options about what happens to your 401k. Some companies may allow it to remain where it is, though that isn’t universally the case. Plus, you can often roll the account over when you exit, transitioning the funds to another retirement account instead. In some cases, that means you can convert a 401k into an IRA if you prefer.

Can You Opt-Out of a Company 401K?

In most cases, opting out of an employer-sponsored 401k isn’t ideal, particularly if the company offers matching contributions. However, if you prefer to invest for retirement on your own or need to pause your contributions due to a financial hardship, that’s usually an option.

Speak with your employer’s human resources department to explore the paths you can potentially take. They’ll be able to let you know whether pausing contributions or opting out entirely is possible and can help you assess the impact of that decision. That ensures you can make a sound choice before moving forward, allowing you to ensure you don’t experience any unexpected consequences.

Do you have one of the standard 401K options through an employer and want to tell others about your experience so far? Do you wish you had access to another kind of retirement plan, or is the 401K working for you? Share your thoughts in the comments below.

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How To Re-evaluate Your Investment Portfolio for Retirement

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Whether your retirement is approaching or you want to start planning early, it’s important to take a close look at your investment portfolio to ensure it’s aligned with your current goals and needs. If you’re like many people, your portfolio may have been focused on growth over the years. But as retirement nears, you’ll want to shift your focus to preserving your assets and generating income. That may mean making some changes to the way your portfolio is invested.

Here are a few things to consider as you re-evaluate your retirement investment portfolio:

Your Time Horizon

How long do you expect to be in retirement? If you’re planning to retire relatively soon, you’ll want to ensure a substantial portion of your portfolio is in cash or investments that can be readily converted to cash. A good example for this is a gold IRA, which you can withdraw money from at any time, based on some of the best gold IRA companies. That way, you’ll have the flexibility to withdraw funds as needed without having to sell investments that may be down at the time.

The right timing for selling investments is often dictated by your need for the money, not market conditions. On the other hand, if you’re still several years away from retirement, you have a longer time horizon to ride out market fluctuations. That means you can afford to take on more risk since there’s a greater chance that your investments will recover from any short-term losses before you need the money.

 

Your Risk Tolerance

Are you comfortable with the idea of seeing the value of your investments fluctuate up and down over time? Or would you prefer investments that are more stable in value? As you get closer to retirement, it’s generally advisable to reduce the amount of risk in your portfolio by shifting some of your assets into less volatile investments such as bonds or cash equivalents.

But that doesn’t mean you should completely abandon stocks and other growth-oriented investments. A mix of both types of assets can provide the potential for higher returns over the long run while helping to protect your portfolio from the potentially devastating effects of a severe market downturn. The key is to find the right balance between risk and return for your individual circumstances.

 

Your Income Needs

How much income will you need to generate from your retirement savings? If you have a pension or other sources of guaranteed income, you may not need to rely as heavily on investment income. On the other hand, if you don’t have a pension or are otherwise expecting a significant drop in income in retirement, you’ll want to make sure your portfolio is invested in a way that will provide the level of income you need.

To get a sense of the income you can generate from your portfolio, look at the yield – the percentage of your portfolio’s value you can expect to receive in dividends or interest each year. For instance, if your portfolio has a value of $100,000 and a yield of four percent, you can expect to receive $4000 in investment income each year. Of course, the yield on your portfolio will fluctuate over time, so think about how much income you’ll need on an annual basis and make sure your portfolio is invested in a way that will provide that level of income.

 

Retirement Is Not an All-or-Nothing Proposition

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You don’t have to retire all at once. You can continue to work part-time or in a consulting capacity and still have time for leisure activities. This also allows you to gradually transition your portfolio from a higher risk/reward posture to a more conservative one. So, as you approach retirement, re-evaluate your investment portfolio and ensure it is aligned with your new goals. Also, consider other alternative investments to provide both stability and growth potential.

 

Seek Professional Help

Finally, don’t be afraid to seek professional help if you’re not sure where to start. A financial advisor can work with you to re-evaluate your portfolio and ensure it’s on track for retirement. By re-evaluating your investments now, you can ensure a comfortable retirement later.

These Are The 5 Best Retirement Gifts For Women

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These Are The 5 Best Retirement Gifts For Women

When a person retires, giving them a gift to celebrate the occasion is a common practice. However, choosing an appropriate present isn’t always easy. If you aren’t sure where to begin, here are five of the best retirement gifts for women.

1. Spa Gift Certificate

Most people view retiring as a positive. However, it’s still a significant transition, and that may cause some people to experience some anxiety. As a result, giving a gift that promotes relaxation can make a potentially stressful time easier to navigate. That can make a spa gift certificate a perfect choice.

Choose a spa that offers a range of services, allowing retiree to select treatments that they’ll enjoy most. Additionally, consider having a little extra on the gift certificate, as that may let them use the excess amount as a tip.

2. Hobby Items

During retirement, many people get to spend more time doing activities they enjoy. If the retiree has a favorite hobby, consider giving a gift that connects to it. For example, craft supplies, lessons that help them grow their skills, cooking equipment, or gift certificates to related stores could all work well.

3. Travel Gifts

Many people dream of traveling more when they retire. If the retiree wants to spend some of their newly available time exploring new cities, states, or countries, travel-related gifts can be a solid choice. You could provide them with a high-quality set of luggage, gift certificates to large hotel chains, or even a vacation package, depending on how much you’d like to spend.

4. Annual Entry Passes

For retirees that adore a particular type of attraction, an annual entry pass is a solid option for a retirement gift. Many museums, zoos, and aquariums offer yearly passes. Similarly, you can typically find annual passes for national or state park systems. With these gifts, you’re giving them the opportunity to spend time at their favorite attractions without having to pay to get in, which can allow them to spend more time there during the year.

5. Subscription Boxes

Today, there is a wide array of subscription boxes that can make great retirement gifts for women. Whether they’d appreciate a box of international snacks, wines from different regions, beauty supplies, puzzles, books from a specific genre, or nearly anything else, there’s likely a subscription box that can meet that need.

If you go with a subscription box, make sure that the duration is suitable. If you can pay for a full year, that’s ideal. However, if that isn’t in your budget, a three or six-month subscription can also work well.

Have you given any of the best retirement gifts for women listed above and want to tell others about the experience? Can you think of any other outstanding retirement gifts women may appreciate? Share your thoughts in the comments below.

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Your Retirement Savings Can Grow — Whatever Your Age!

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Are you worried about your retirement savings? You shouldn’t be! No matter what age you are, there are plenty of ways to grow your retirement savings. In this blog post, we will discuss some of the best methods for increasing your retirement funds. Whether you are just starting out in your career or close to retirement, there are steps you can take to make sure you have enough money saved up for later in life!

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1. Invest in a 401(k) or IRA

 

If you’re looking for ways to grow your retirement savings, one of the best things you can do is invest in a 401(k) or IRA. Both of these options offer tax benefits that can help you save more money for retirement. If your employer offers a 401(k) match, be sure to take advantage of it! This is free money that can help you boost your retirement savings.

 

There are also different types of IRAs you can choose from, depending on your financial goals. A traditional IRA offers tax-deferred growth, while a Roth IRA allows you to withdraw your money tax-free in retirement. Talk to a financial advisor to see which option is best for you because investing in a 401(k) or IRA is a great way to grow your retirement savings, no matter what age you are.

 

2. Annuities

 

Annuities can be a great way to grow your retirement savings, especially if you are closer to retirement age. Before you look where you can buy annuities you should know that an annuity is a contract between you and an insurance company where you agree to make regular payments over a period of time. In exchange, the insurance company agrees to provide you with income during retirement.

 

There are different types of annuities, but one of the most popular is the fixed annuity. With a fixed annuity, you know exactly how much money you will receive each month during retirement. This can help give you peace of mind as you approach retirement age and start thinking about how much money you’ll need to have saved up.

 

3. Invest in Real Estate

 

Investing in real estate is another great way to grow your retirement savings. There are a few different ways you can do this, such as buying a rental property or investing in a REIT (real estate investment trust). Both of these options offer the potential for high returns, which can help you boost your retirement savings significantly. For example, if you invest $100,000 in a REIT that generates a return of 12%, you would have $112,000 after one year.

 

However, it’s important to note that investing in real estate is not without risk. Be sure to do your research and talk to a financial advisor before making any decisions. But if you’re looking for ways to grow your retirement savings, investing in real estate could be a good option for you.

 

4. Start a Side Hustle

 

If you want to grow your retirement savings, but don’t have a lot of extra money to invest, starting a side hustle can be a great option. There are many different ways to make money on the side, such as freelancing, pet sitting, or becoming an Uber driver. And with today’s technology, it’s easier than ever to get started.

 

Of course, starting a side hustle takes some work and dedication. But if you’re willing to put in the effort, it can be a great way to grow your retirement savings. Plus, it can give you some extra spending money in the meantime!

 

5. Save More Money

 

One of the simplest, but most effective, ways to grow your retirement savings is to save more money. If you’re not already doing so, start by setting aside a certain amount of money each month to put into your retirement account. Even if it’s just a few hundred dollars, it can make a big difference over time.

 

You can also try some creative methods for saving money, such as setting up a budget or utilizing cashback apps. And be sure to take advantage of any employer matching programs that might be available. The more money you can save now, the better off you’ll be in retirement. For example, if you have $100,000 saved for retirement, but you want to retire with $250,000, you’ll need to save an extra $750 per month.

 

6. Invest in Yourself

 

Investing in yourself is another great way to grow your retirement savings. This can mean taking courses to improve your skills, starting a business, or even just learning how to invest your money wisely. The more you know about personal finance and investing, the better off you’ll be when it comes time to retire.

 

Plus, investing in yourself can have other benefits as well. It can help you earn more money, which can then be used to boost your retirement savings. And it can also make you happier and more fulfilled overall. So if you’re looking for ways to grow your retirement savings, don’t forget to invest in yourself!

 

7. Live Below Your Means

 

One of the best ways to grow your retirement savings is to live below your means. This means spending less money than you earn and investing the difference. It’s a simple concept, but it can be difficult to do in practice.

 

If you want to retire comfortably, it’s important to start living below your means now. Start by evaluating your spending habits and see where you can cut back. Then, start investing the money you save into your retirement account. Over time, this can help you boost your retirement savings significantly. For example, if you save $300 per month, you’ll have $36,000 saved after 20 years.

 

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There are many different ways to grow your retirement savings. But these seven methods are a great place to start. So if you’re looking to boost your retirement fund, be sure to try some of these strategies. You might be surprised at how much they can help!

 

What other methods do you know of that can help grow someone’s retirement savings? Let us know in the comments below! Thanks for reading!

 

 

 

 

 

How Epsilon Data Management Facilitated Elder Fraud Schemes and What to Do if You Lost Money

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Epsilon Data Management Fraud Case

Between 2008 and 2017, Epsilon Data Management sold lists of customer names and addresses to companies involved in fraudulent activities. These companies sent letters or emails to consumers saying they won a big prize or free psychic reading if they paid a reasonable fee. These scams were aimed at the elderly and other vulnerable individuals who paid the companies for the prizes or physic readings and received nothing in return.

The Epsilon Data Management Company had to pay $150 million for fraud and in 2021 entered an agreement with the Department of Justice and the US Attorney’s Office for the District of Colorado. They continued to sell client information even when their employees knew some of their partners had been arrested for fraud and scams.

Companies that sell customer lists have a responsibility to sell the lists to ethical companies and protect consumer information. Victims of this scam by Epsilon Data Management were to be contacted directly by the company, and funds are expected to be distributed by an independent claim administrator.

Types of Consumer Fraud

There are many distinct types of consumer fraud. For example, one company called consumers on the phone and told them their personal computers had serious technical issues. They posed as technicians and demanded payment for unneeded technical support.

There have been wire transfer companies involved in fraud, and consumers have reported that their funds never arrived at the bank or that the person for whom they were intended never received them. Some customers lost thousands of dollars, and the issue has never been resolved.

During the pandemic, companies sold fake vaccine kits and cures to consumers. Robo calls, telemarketing calls, emails, texts, and even door-to-door solicitation are just some of the ways scammers market their schemes. The level of federal fraud security class actions in 2019 was high, with plaintiffs filing 424 cases in 2019 as compared to 413 in 2017. Federal fraud security cases and federal civil cases continue to increase every year due to new scams.

What to Do About Scams and Fraud Schemes

When you discover you have been swindled or scammed, report the company and the scam to the appropriate agency. If you are a senior, you can report it to the Elder Fraud Hotline or the Department of Justice. Additionally, your state financial controller and attorney general take reports and complaints about fraud. You can report your case to the Better Business Bureau if a local company is involved in a scam. In severe scam cases, charges may be brought to the federal court. In 1962, 11.5% of federal civil cases went to trial. Today, only around 1% of civil cases actually reach trial in the Federal courts. However, for cases as large as the Epsilon Data Management case, taking the case to the federal level is essential.

If you are regularly paying the company that scammed you, do not pay any more money. Collect emails, documents and conversations you have had with the company to document the fraud. What websites or phone numbers did you use to contact them? Where did the money you paid come from and how did it affect your finances? All this information can be used to file a complaint.

If you provided a credit card number, debit card number, or bank account number to pay for services, you should contact the bank or credit card company to report the scam and fraud incident. You can change your passwords or be issued a new card or account number. Your financial institution can also freeze your account until the issue is resolved.

Some homeowner’s insurance policies have fraud theft protection for losses related to identity theft that affects your finances. You can hire a lawyer to help you with your case and a financial counselor to help you devise a plan to improve your financial situation. In cases of severe money loss, chapter 7 bankruptcy debt allows consumers with credit card balances, medical bills, and personal loans to have the fees discharged. This allows you to move forward with rebuilding your finances after you have been frauded out of your savings.

Reporting scams to the right agency can help protect other consumers and may be a way to help you with finances. Hiring a lawyer, financial advisor, or accountant can be a way to deduct costs from your income taxes and help you recover and protect yourself from scams going forward.

This Is How Much Money You Need to Retire Before 50

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retire by 50

For many people, the idea of retiring well into their 60s just isn’t appealing. Instead, they’d like to leave the workforce far earlier, giving them time to travel, explore hobbies, or spend time with family and friends. While retiring before age 50 is a challenge, it is doable if you set aside enough money. If you’re wondering how much money you need to retire before 50. Here’s what you need to know.

Is There a Magic Number That Lets You Retire Before 50?

Technically, there isn’t a magic number that means you’re in the clear to retire before age 50. The main reason for that is that everyone has a unique preferred lifestyle. Thus, altering how much money they’ll need to have available. Plus, your health might vary from the norm. Which could cause you to need to spend more or less in what’s often an expensive category.

Since how much money you’ll need is personal, don’t rely on a magic number presented by someone else, even if they’re a financial expert. Instead, you need to assess your own situation, allowing you to factor in your needs and preferences. That way, you set enough the right amount of money based on your unique situation, reducing the odds that you’ll experience an unexpected financial hardship after leaving the workforce.

Determining How Much Money You Need to Retire Before 50

As mentioned above, how much you’ll need to set aside to retire before age 50 depends on the type of lifestyle you want to maintain. If your goal is to travel the world, you may need to replace 100 percent or more of your annual working income. If you’re aiming for a modest life at home, you may be able to scale back to somewhere in the 60 to 80 percent range.

However, along with your lifestyle, you need to account for costs that may rise over time. For example, medical expenses usually go up as a person ages. While some of that might get offset once you reach Social Security age and can start receiving that income, whether that’s sufficient may depend on the condition(s) you have and the treatment that’s required.

Finally, it’s important to remember that lifespans vary. While you can use averages, family history, and current health levels to get an estimate, you may end up living for years past that point. As a result, you may need to assume that a buffer is necessary.

Calculations For Retirement

Once you consider those points, you can start performing some calculations to get a baseline of how much you may need. Generally, you want to begin with a simple equation that doesn’t involve any interest-earning potential, such as:

Annual retirement income x Number of years in retirement = Savings target

Your annual retirement income is simply the pre-tax amount you believe you’ll need to live your preferred life. For the number of years in retirement, you can subtract the age you plan to retire from your life expectancy. By doing that, you can get a rough savings target that can serve as a starting point.

The benefit of not factoring in interest is that any earnings post-retirement can serve as a buffer against a longer life expectancy, market downturns, inflation, or other challenges that may arise. Similarly, by not bringing Social Security into the equation, you’re supplementing that buffer, giving you even more protection.

How to Save Enough Money to Retire Before Age 50

Once you have the savings target, you can use a retirement calculator to determine how much you’ll need to set aside each month to hit your goal. While you’ll have to estimate your earnings, as there’s no way to know precisely how the stock market will perform, by using a slightly conservative number for your growth potential, you can make sure you won’t fall short.

Beyond that, if you want to retire before age 50, you’ll need to use a multi-faceted approach to ensure you have enough money set aside. First, you’ll want to max out any available retirement accounts. In most cases, using both an employer-sponsored option, like a 401(k), and an IRA is your best bet, as you’ll get to capture some tax advantages.

After that, you’ll need to shift onto other platforms. A traditional brokerage account typically isn’t a bad option. Often, you can invest in similar assets to your retirement account. Plus, there aren’t any penalties if you start making withdrawals before age 59 ½.

In many cases, you’ll need to be fairly aggressive with your investments as well. Otherwise, you may not capture enough growth potential to ensure an early retirement. While that does mean taking on risk – and potentially seeing some losses – with a properly diversified portfolio, forward progress is often more likely.

Making Sure You Remain on Target Over Time

As you set money aside for your retirement, you’ll want to assess your progress and potentially changing needs as time passes. By monitoring your balance, you can see if you’re getting close to the target, letting you know if you need to save more aggressively or not.

By reviewing your needs to see if they’ve changed, you can adjust your target accordingly. For example, if your health situation changes, you can account for cost differences. If inflation alters the amount of income you’ll need, you can shift the target upward to accommodate that.

In most cases, you’ll want to review your situation at least once a year. As you get closer to retirement, you may want to do a check-in every three to six months.

Also, you might want to adjust your investment allocations once retirement is near. While you’ll want to ensure you can still capture some earnings, reducing risk can possibly preserve more of your money, which may give you peace of mind as you get closer to leaving the workforce.

Once you reach retirement, you’ll still want to check your account at least annually. That way, you can potentially adjust your withdrawals should the need arise, allowing you to make sure that you’ll have enough money available to last your entire retirement.

Do you want to retire before 50? If so, do you think the amount of money above is sufficient, or are you aiming for more? If not, is the amount you need to save what’s holding you back, or is there another reason why you plan on delaying retirement? Share your thoughts in the comments below.

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Five Financial Questions Women Should Ask About

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It’s no secret that women face unique financial challenges. From the gender pay gap, to managing household finances, it can be tough for us to make informed decisions about our money. To empower ourselves and make sure we’re on the right track financially, we need to ask the right questions. Here are some of the most important ones.

What Insurance Should I Have?

Insurance is a big (and often surprising) topic for women: we live longer, are more likely to experience a disability that impacts our earnings, and are more likely to support children or elders. We have a stronger need for a safety net.

As a high-level guide: max out any employer-sponsored coverage (like through your job) and then get an individual policy for the remainder of your need, as your budget accommodates.

Life Insurance

Life insurance is a tax-free gift you give the next generation, and term life insurance is inexpensive. Buy what you can afford, on the private market or through your employer.

Disability Insurance

Disability insurance is so important for women – it will replace a portion of your income if you can’t work, and you want to target 60% and 70%. Especially if you are a single mom or supporting family. To achieve this target, you will probably need a private policy in addition to any coverage from your employer (if available).

Long-Term Care Insurance

And finally, if you’re approaching retirement, long-term care insurance is important if you want to make sure you don’t have to spend all of your savings on health care in retirement. It can be very expensive, so don’t purchase this til you’re older and approaching the need for it.

These are just general guidelines – there’s no one right answer when it comes to insurance. It’s important to talk to an expert (like a financial planner) about what kind of coverage makes sense for you given your unique circumstances.

What is the Best Way to Budget?

There’s no one right way to budget your money – find the method that works best for you and stick with it! Consistency is much more important than perfection.

The Envelope Method

Some people use the “envelope system” where you put a certain amount of cash into an envelope for each category (like groceries, entertainment, and transportation). That’s all you get for that category for the month. This is great if you have to be very careful and want to stay away from credit cards entirely. It’s also a great system if you like using a physical planner over software/apps.

Budgeting Apps

If you prefer using technology to manage your finances, there are a number of great budgeting apps out there that can help you track your spending and set goals. Some popular options include Mint, You Need a Budget (YNAB), and EveryDollar.

Spreadsheet Budgeting

For those who like having more control over their budget (and who are comfortable with Excel or Google Sheets), creating a budget in spreadsheet form can be a great option. This method gives you a lot of flexibility to track your spending in the way that makes the most sense for you.

Pay Yourself First

One of the best ways to make sure you’re saving enough money is to “pay yourself first.” This means that as soon as you get paid, you put some money into savings before you spend any of it. This can be difficult at first, but if you make it automatic (i.e., set up a direct deposit from your paycheck into your savings account), it will become easier over time.

What is the best way to save money?

Again, there is no one right answer to this question – it depends on your goals and financial situation. But the upshot is that you can build an emergency fund or improve your generational wealth. Here are some general tips that can help you get started:

Increase Your Income

It can be very challenging, but to save money, you need to bring in more money than you spend. You can lower your costs and watch your spending, but you can also increase your income through a side hustle, a raise at work, or a promotion. You could sell extra things around your house. You don’t need to make a huge commitment – even small improvements in your earnings can make a big difference.

Automate Your Savings

Set up automatic transfers from your checking account to your savings account so that you’re automatically putting away money each month. This is a great way to make sure you’re always saving something, even if you don’t have a lot of extra money.

Join a Savings Challenge

A savings challenge is a great way to encourage you to save more money and get some community support. There are all kinds of challenges out there (like the 52-week challenge, where you save $52 in week one, $51 in week two, and so on), but the important thing is that you find one that works for you and stick with it. Dasha Kennedy at the Broke Black Girl runs a great year-long savings challenge to help women save $1000.

How Much Do Women Need to Save For Retirement?

As much as you can.

Women retire disadvantaged: we generally receive lower social security benefits due to lower earnings. We also tend to live longer (which means more years in retirement), and we’re more likely to experience a period of disability. All of this points to the need to have a larger retirement nest egg.

Target 20% Savings

Controversial opinion: I encourage all women to target 20% of pre-tax household income for savings. That is a lot. But most of us are playing catch up, and starting from lower earnings. Build up to it by increasing your savings rate little by little, and remember that even small amounts add up over time.

Invest Your Savings

You want to make sure your money is working hard for you, and one of the best ways to do that is to invest it. Investing can be intimidating, but on average, female investors outperform by 1% because we are less likely to panic. 1% is what professional investment advisors charge. Set up auto investment, choose low fee index funds and increase your contribution little by little. Like saving, successful investing is about consistency and patience.

What Biggest Money Mistake Should Women Avoid?

The biggest mistake you can make is to hand your finances off to a partner and ignore them. Women are socialized to do this (and it’s changing, slowly) but we pay for it. If you are widowed or experience divorce, you will be adding a terrifying and steep learning curve to a personal crisis.

Additionally, and I say this as Chief Financial Officer of our family, financial decisions will be better with your input! Even though I do this for a living, my husband often has great insight and our decisions benefit from his involvement. Don’t discount your ability or perspective, especially given that women are better investors.

Retirement Bill in Congress

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Congress has a new retirement bill in the works. They’re calling it Secure 2.0 and it has a few transformational pieces to it that will change retirement saving and retirement income planning. Before we get too far into what this new bill looks like, let’s take a look at what the original Secure Act did.

Secure Act 1.0

The Secure Act was enacted on January 1, 2020, and was the largest retirement reform bill since the Pension Protection Act of 2006. The full title is Setting Every Community Up For Retirement Enhancement (SECURE). And it passed through Congress with a 417-3 vote.

The beginning age to which to start taking required minimum distributions (RMD) from retirement accounts (excluding Roth accounts) was moved from 70 ½ to 72.

People can make retirement contributions no matter what age, as long as they have earned income. The previous limit was 70 ½ when RMDs would begin.

Inherited IRAs (non-spouse beneficiaries) have to have the entire account withdrawn within 10 years of receiving it. This means that if someone passes away and their beneficiary is someone other than their spouse, that beneficiary needs to have the entire account withdrawn and closed within 10 years of receiving the inherited IRA. However, there are exceptions, including a surviving spouse, a minor child (the 10-year rule starts when a child reaches the age of majority), a disabled individual, a chronically ill individual, an individual who is not more than 10 years younger than the IRA owner.

Employees who work part-time, at least 500 hours per year, are now eligible to contribute to their employer-sponsored retirement plan.

Secure 2.0

What’s different with this new law?

For one, the vote passed 414-5. Not as lopsided as the previous one, but still an incredibly convincing tally. “Secure 2.0 is fundamentally designed to make it easier for people to save” – Susan Neely, American Council of Life Insurers President and CEO.

The catch-up contribution provision got a facelift. 401k account owners that are 50 and over are eligible to contribute up to $10,000 more than the maximum for those under 50.

The beginning age for required minimum distributions (RMD) also went up, from 72 to 75. The Yahoo Finance article noted that some reps took it a step further. “ My goal is to get rid of it completely.” – Representative Kevin Brady (R-TX).

The bill would also push employers to automatically enroll new employees into the company-sponsored retirement plan.

Small businesses that stare down the, sometimes, daunting expense of establishing and maintaining a company-sponsored retirement plan can receive assistance. They can receive credits for matching contributions.

One very progressive part of the bill that is sure to garner a lot of attention is the ability of people paying down student loans to save for retirement. The bill would allow employers to “match” a students’ loan payment as a retirement contribution. For example, if the student made a $100 student loan payment, the employer would contribute $100 to their retirement account on their behalf.

The bill introduces a SAVERS credit, which would give lower-income individuals a tax break if they save for retirement.

This is another transformative retirement bill. I’m very pleased society is taking steps to encourage individuals to plan and save for the future.

Related reading:

Ensuring Financial Security Throughout Retirement

5 Solutions for Managing Your Money After Retirement

401k Withdrawal Taxes and Penalties

Disclaimer:

**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

Pros and Cons of Self-Employment

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self-employment

The number of businesses that have started since the start of the pandemic has shot through the roof. People realized how short life can be and decided to take their earning potential and work-life into their own hands. Here are a few stats to illustrate the self-employment picture in the U.S.:

  • As of 2019, the self-employed section of the population accounted for nearly 30% of total employment (Source).
  • As of November of 2021, there are 9.9 million self-employed people in the United States.
  • 96% of self-employed people don’t want regular jobs (Source)

Business structures

Sole proprietorship – There is no separate business entity. You are the business entity. That means your assets and liabilities are your assets and liabilities. Banks are more hesitant to lend to sole proprietors than they are for other entity types.

Partnership (LP/LLP) – An limited partnership (LP) has one general partner with unlimited liability and all the other partners have limited liability. Creditors can come after all of the general partner’s assets including things they personally own. Limited liability partners can only lose what they put in. A limited liability partnership provides limited liability to all partners. Profits are paid through on personal tax returns, except for the general partner – they must pay self-employment taxes.

LLC – Very similar to the LLP in terms of how profits, losses, and liabilities are treated. Profits are passed through to employees on personal returns. However, members of the LLC are required to file and pay self-employment taxes. 

Retirement plan options

As a self-employed individual, you have a few options when it comes to retirement accounts – Traditional IRA and Roth IRA (available to everyone), SIMPLE IRA, Solo 410(k), and SEP IRA.

Traditional IRA and Roth IRA – Contribution limits up to $6,000 ($7,000 if you’re 50 and older). Withdrawals prior to 59 ½ are subject to a 10% tax penalty unless certain conditions are met.

SIMPLE IRA – available to employers with fewer than 100 employees. Contribution limits up to $14,000 ($17,000 if 50 or older). Employer match available.

Solo 401(k) – Contribution limit is $61,000 ($67,500 if 50 or older). Available to self-employed individuals and self-employed individuals that have their spouse as their only employee.

SEP IRA – Contribution limit is 25% of employee compensation up to $61,000.

Click here for more information about business retirement plans.

Be your own boss

You get to set your own hours and work with whoever you want to. There’s no one to tell you what to do and how to do it. For people that like to make their own schedule and like to go to the beat of their own drum, self-employment makes a lot of sense.

Earning potential

There’s no ceiling on your earning potential. You don’t have a salary range, you make what you make. You can make $10,000 or you can make $10 million. That’s a double-edged sword though, your effort determines your income. You will only make money if you work for it. Someone who isn’t a self-starter, should not be self-employed.

Costs

You have to pay for everything. Whatever the cost of business is for your sector or industry, that’s on you. Health insurance, you have to pay for that. There’s no business or employer that can foot those costs for you. Same with your retirement plan, a lot of employers offer an employee match. If you’re the business owner and the employee, ALL of your contributions are your responsibility.

Related reading:

6 Ways to Save Money When You’re Self-Employed

How to Be Self-Employed Safely and Wisely

Disclaimer:

**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

Finance Lessons Learned from the Pandemic

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The Covid-19 pandemic changed life for two years and there are definitely still elements of what life was in the world today. No doubt there were some terrible things that happened. People lost their lives and their jobs. But there were also positives that came out of it. We’re going to highlight the lesson we can learn from this pandemic, particularly some personal finance lessons we can learn.

Working from home

This new type of work does not apply to everyone and I don’t like leaving people out, but this needs to be talked about. Working from home and articles about it took over during the pandemic and continue to be discussed.

Working from home, at least from some of those articles and studies, appears to be a net positive for employees and employers. Let time commuting, less overhead costs, more productivity thanks to no commute, increased job satisfaction, and improved work-life balance.

Thanks to the work-from-home setup, people who were able to do that moved out of the city or rented an Airbnb for an extended amount of time. In either case, those people were, likely, able to reduce their housing costs by moving to the suburbs or giving themself a little vacation/change of scenery.

Savings rate

A lot of people saved money during the pandemic thanks to stimulus payments. In April of 2020, the personal savings rate for Americans was 33%. In March of 2021, the personal savings rate for Americans was 26.6%.

The savings rate has fallen since then but is still above 12% which is higher than it was before the pandemic (less than 10%).

Stimulus payments

According to the National Bureau of Economic Research (NBER), most Americans either saved or paid down debt with the majority of their stimulus payments. 40% of the stimulus payment was spent, 30% was saved and another 30% was used to pay down debt.

Personal finance lessons

I think there were a lot of personal finance lessons that can be learned from the pandemic. Here’s a list of them below:

People saved more money

The future was very uncertain so people were more conservative with their spending and less conservative with their savings. That mindset shouldn’t change. The future, in principle, is uncertain. We do not know what tomorrow holds, so saving for a rainy day/goals/retirement is very important.

You don’t need to spend money to have fun

At the very beginning of the pandemic, you couldn’t go anywhere. Quarantine and lockdown orders came in right away. Instead of getting together in person, people utilized Facetime, phone calls, and Zoom. I, personally, had group Zooms with family members where we played and had conversations like we would if we were in person.

Diversification is important

Early in the pandemic, the market tanked. We lost over 30% in six weeks. Granted, it came right back up not long after, but that might not always be the case. If you don’t have time to ride out the ebbs and flows of the market, it’s important you get your asset allocation right. Talk with your adviser to make sure your investment matches your time horizon and risk tolerance.

Get rid of debt

You never know when your job and your ability to earn can be taken from you. Some people lost their jobs, some people were furloughed, and some people just weren’t able to go to work. If you don’t have an income, the only other part of the balance sheet you can affect is your expenses. Get rid of your debt. That’ll help you reduce your expenses in case that happens (you can also save more).

Protect your loved ones

Get life insurance. A lot of people passed away during the pandemic. If you contribute income to your household, you need to make sure you financially protect the people that rely on your income.

Related reading:

5 Personal Finance Tips from the Pandemic

How to Regain Control of Your Finances Amid the Pandemic

How to Save Money on Your Post Pandemic Vacation

Disclaimer:

**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