National Financial Literacy Month

Money Management Strategies for The Self Employed

Entrepreneurs and home-based business owners take a few extra steps to manage their money. Find out creative way's to manage your self employed finances.

After you have weighed the pros and cons of a home-based business and decided that self-employment is right for you, your next step is to develop a plan. Your business plan should define your business and identify goals. When developing your plan, research laws that may impact your business. For starters, you must find out if you need a license or permit to operate your business. A good business plan also includes financial information such as a balance sheet and income statement.

When working on your business’ financial plan, don’t forget to develop a method for managing your new personal financial situation. Unfortunately, statistics show that many home-based businesses fail often due to poor financial planning. Following are some ideas to help make self-employment work for you.

Don’t underestimate your expenses. Fortunately, more than 40 percent of all home-based businesses require less than $5,000 for startup. However, there are many other costs associated with running a business. In your spending plan, don’t forget expenses such as childcare, insurance, postage, gas, and dry cleaning.

Manage your income. Most self-employed workers have sporadic incomes. If your income varies from month-to-month, determine your average monthly income. Then, if you have a month where you earn more than average, put the extra amount into a savings fund to supplement less lucrative months.

Avoid relying on credit cards. Borrowing from a credit card can quickly lead to costly trouble. If you need to use a credit card for business expenses, open an account specifically for that purpose. If you need money to launch your business, consider a small business loan instead.

Keep tabs on your taxes. Some self-employed individuals may have to pay up to a 15 percent self-employment tax in addition to their regular income taxes. To avoid tax-time surprises, periodically review your taxes throughout the year. Don’t forget to make necessary quarterly tax payments to avoid under-withholding penalties.

Keep accurate records. Complete all of your paperwork on-time, particularly if you are billing clients or customers. Many companies will take several weeks to process invoices. Keep copies of all receipts for tax time. Because networking is so important, keep business cards and contact information in an organized manner.

Get help. Consider working with a lawyer who can help you with necessary, and sometimes complex, legal matters. You should also contact your insurance agent to make sure you have appropriate coverage.

Finally, realize there is no need to reinvent the wheel. The Small Business Administration (SBA) estimates that home-based businesses make up half of US businesses; take advantage of their resources at


Set Yourself Up For Financial Success: Make A Family CFO

Organizing your financial paperwork helps you see just where you stand financially.

While all members should be aware of the family’s overall financial situation, choosing one person to conduct the day-to-day financial tasks is a good way to stay on top of things. The appointed individual should be organized and a good communicator. They should be given uninterrupted time to do their tasks effectively.

Consider making the job of family CFO easier by establishing an online bill payment service (offered free-of-charge by many banks and credit unions). Even better, check with your creditors about setting up automatic bill payments.

Designate a spot in your home for organizing financial paperwork. Used office supply stores offer great bargains on filing cabinets, or consider small plastic filing cabinets instead of metal or wood. If your goal is to have a paperless filing system, make sure that you back-up your computer regularly and invest in a good security program to prevent criminals from obtaining sensitive information. To keep your most valuable documents safe, consider opening a safety-deposit box at your local bank or credit union.

5 easy steps to get organized and save money

Did you know that being organized saves you money?

• You waste money buying duplicates of items you didn’t know you had
• You waste money on late charges because you can’t find the bills you need to pay, or you forget to pay them on time
• You also waste money not deciding in the store where you should store the item you’re thinking of buying, and then not using it

So now that you know why you should get organized, let’s discuss some practical tips to show you how you can get your finances organized. It’s a big myth that organizing is difficult and time-consuming. Yes, you do have to take some time initially to set up your system but unless you want to make things really complicated, it’ll only take you about 15 to 30 minutes.

1. Put all bills to be paid in a specific folder
When you bring in the mail, throw away the junk mail and envelopes immediately and only keep the actual bill in a dedicated plastic see-through envelope in a specific place. Arrange the bills in order of when they have to be paid so that the one facing you is also the most urgent bill.

This way you and the rest of your family always know exactly where to find all the bills.

2. Automate as many bill payments as possible
We live very busy lives so if you don’t have to think about paying it, all the better for you. That said, schedule a day of the month to check your online payments against your actual budget.

3. Dedicate a specific day or days of the month to pay your bills.
Mark off a date on your calendar when you pay bills. If your bills are due on different days of the month, you may need more than one date. Because life happens, schedule the date a couple of days before the payment is actually due so you don’t incur any late fees.

4. File
Once your bills are paid, file them in the way that’s easiest for you to manage. If you’re not a file puncher, don’t fool yourself that you will start punching and filing. The road to hell is paved with good intentions! 🙂

5. Maintain
Restrict your filing space so that it forces you to clear out old bills every 6 – 12 months. This easy-to-use system will take you only a minute or two a day, and about 30 minutes when you sit down and pay your bills.

For more on organizing your finances, I invite you to my private Facebook group, Cocktails, and Coins where I recently did a live broadcast about organizing your financial paperwork. How do you keep your financial paperwork organized? Let me know in the comments below.


6 Easy Steps To Raise Your Credit Score

With these 6 steps to raise your credit score, you can't go wrong.

Your credit report is essential in building a strong financial foundation. In the spirit of National Financial Literacy month let’s discuss some things you can do to raise your credit score. The better your credit score, the less you have to pay in interest. Just about every bill you pay is tracked by the three credit bureaus, TransUnion, Equifax, and Experian.

Your credit score is based on a risk measure invented by a company called Fair Isaac and is called your FICO score. This number lets companies know how good or bad a credit risk you are. Your score can range anywhere from 300 to 850. All credit bureaus use this scoring method as a basis to rate you as a good or bad risk.

There are six easy steps to getting and getting your credit score healthy.

Pull Your Credit Report

See what the three bureaus have to say about you. You can to and order your reports from all three bureaus for free.

Check For Inaccuracies

Given your age, your credit report spans decades of your borrowing activity. It’s no surprise that errors sometimes occur. Some common credit-reporting mistakes include: outdated addresses, closed accounts being shown as open. Misspelled names are common mistakes as well. One last mistake happened to my husband, he had one of his brother’s accounts on his credit report, because they have the same last name and similar social security numbers.

Mend Your Uncreditworthy Ways

Those self-inflicted credit wounds, such as a history of late payments, defaults, or judgments will fade from your record over time. You won’t be able to wipe out accurate information from your credit report, nor can any firm who offers to do so for a fee, no matter what story the spin.

Pay On Time

Now that you have looked at your credit reports and corrected in inaccuracies, make sure to pay everything on time, every time. Also keep your debt level low, compared to credit available.

Credit Card Usage

Remember, a credit card is a credit card, not cash. Even though you may have been deemed worthy by some entity to borrow $50K doesn’t mean you actually have $50k, nor do you need to spend $50K.

Acceptable Level Of Debt

Your debt-to-income ratio is the measure of debt you carry to how much money (after taxes) you have coming in. In the world of lending, it is acceptable to carry 25% of your income in debt.

As you can see, it doesn’t take much work to keep your credit healthy, Just keep your spending under control, pay your bills on time, and don’t apply for extra credit too often.

If you are having trouble with your credit, I am taking appointments for consultations. Feel free to book yours here

Book with tracie


Financial Literacy Basics

Financial literacy basics make for a strong financial foundation.

When I was in school, the most we learned about personal finance was how to write and check, how to balance a checkbook, and how compound interest works. Did you know that as few as 13 states require high school students to take and pass a personal finance course to graduate? I know that some of these may seem pretty basic, but you would be surprised the number of people who don’t know or understand these personal finance basics. Here are five personal finance basics everyone should know.

1. How To Budget

I was well into my twenties before I learned how to budget and I am not ashamed to say that. Budgeting is as simple as learning to prioritize. The best way to decide where your money goes is to create a monthly budget. First, calculate how much money you have coming in. Next, identify your needs, i.e. food, shelter, insurance, transportation. Finally, add those up and subtract from your monthly income. You may want to add your monthly savings to your needs, just to make sure that you are making saving a priority. Once this is done, you will know how much you have left over for discretionary spending. If you need help with setting a budget, you may want to participate in my beta test for the new Money Makeover Planner. 

2. The Time Value Of Money

Saving a small amount each day can do a world of good for your finances. Instead of spending that $8-10 a day on lunch try putting that amount in an interest-bearing savings account and let it sit. This concept is something that is beneficial to all ages but can be super beneficial to younger people, who can accumulate a lot of money over the years from learning simple steps to cut their daily expenses.

3. Checking Account versus Savings Account

Okay, I know this is super basic but I am going to cover it anyway. A savings account is an account in which you deposit money into and watch it grow to accumulate interest. Some banks may require you to have a minimum balance in order to keep the account open. Since you won’t be using this money daily it can grow. Daily use money is to be kept in a checking account. You can use the checks to pay for expenses such as bills. You can also get a debit card to go with the checking account so that you can make purchases or withdraw money from the ATM.

4. Debt

I understand some debt is unavoidable. Accumulating massive amounts of debt such as with student loans, credit cards or car loans can wreak havoc on your personal finance and credit score. The average household carries $16,000 in credit card debt. If you miss a payment on any of your debts it may be hard to recover.

5. Credit

A high credit score makes businesses like auto lenders, banks, and insurance companies view you as a trustworthy risk. When you are just starting out, opening a checking or savings account enables you to show lenders that you can manage money. Keeping your credit score high also helps with qualifying for that dream job you want, as many employers check your credit before hiring you.



April Is Financial Capability Month

The month of April is synonymous with many things — spring, taxes, April showers,April Fool's Day. What it should perhaps be most associated with is financial empowerment, which is no joke. April is Financial Capability Month. Learn the basics over the next 30 day's and get your financial life in order


The month of April is synonymous with many things — spring, taxes, April showers, April Fool’s Day.  What it should perhaps be most associated with is financial empowerment, which is no joke. In 2004, the Senate did precisely that when it officially recognized April as National Financial Capability Month. Over ten years later, those poor fiscal habits are still a challenge for many people, from every economic rung on the ladder. As a financial educator and coach,  I see the consequences of these bad habits every day. A lack of knowledge about financial matters is the root cause of many poor decisions about credit, saving money, investing, banking, and many other issues that seriously threaten the financial stability and well-being of individuals and their families.

Financial Illiteracy Costs $9,724.83

3,006 people in six age categories across the US. People were asked, “Across your entire lifetime, about how much money do you think you have lost because you lacked knowledge about personal finances?”   Respondents estimated that their lack of financial knowledge cost them between $9,724.83. This figure is looking at the low end of the spectrum. If you look at the high end, respondents estimated a whopping $13,237.94 lifetime loss due to financial illiteracy. Reported lifetime losses over $15,000 were reported by 1 out of 3 respondents. 1 in 4 people reported losses over $30,000 due to a lack of financial knowledge.
When I look at these figures, I think of all the experiences I could have or things I could do with that lost money. Don’t fall prey to financial illiteracy, educate yourself on money matters.

 Common  Facts and Fixes

In honor of Financial Literacy Month 2017, I am pleased to highlight some facts about how well (or not so well) Americans are managing their personal finances these days, as well as suggested “fixes” that can help you overcome these common obstacles to better financial health.
Fact: Only 40% of U.S. households report good or excellent progress in meeting their savings needs.
Most U.S. families are struggling to reach their financial goals. This might mean not saving enough for the family vacation and charging the flight on a credit card. For many of my clients, it can often mean not having enough for gas from week to week, or taking out illegal payday loans.

Fix: Whether on your own or with a financial coach, you can identify obstacles and create a plan (and a budget!) to guide you. In many cases, it starts with a look back to where your money is being spent, and then identifying expenses that can be cut, maximizing your income, and taking advantage of income-support benefits. Keeping your goal front and center is crucial.

Fact: 64% of Americans do not have enough cash to handle a $1,000 emergency.

Most people can recall the exact moment when they fell into their debt spiral, and it is very often when a crisis arises. Without savings on hand, you will have to either borrow money from friends and family or use your credit card.

Fix: It’s simple. Start by creating a financial capability fund, and stick to it. One of the major determinants of financial security is the ability to consistently save a portion of your income. Start with whatever amount you can afford – $50 or $5 a month – and increase the contributions as you grow your income and optimize your budget.

Fact: One in four student loan borrowers are either in delinquency or default on their student loans.

Student loan debt passed the $1 trillion mark in 2012 – exceeding both credit card and auto loan debt. If you are not in default, but still struggling to keep up, you have a few options. You might be able to resolve a delinquency with a deferment or forbearance if you qualify, which are ways to temporarily pause monthly payments. You might even qualify for an income-driven repayment plan where your payment will be determined by your discretionary income. For tools and resources, go to and

Fix: Once your federal student loan is in default, your options are limited. You must either rehabilitate the loan or consolidate it out of default with a new loan. Though servicers are supposed to thoroughly explain your options, you can also speak with an impartial financial counselor or professional. In addition, access the U.S. Department of Education’s special portal developed for students in default at

Fact: Medical bankruptcy is the number-one cause of personal bankruptcy in the U.S.

Unfortunately, the threat of medical debt doesn’t seem to be subsiding. Americans pay three times more for medical debt than they do for bank and credit-card debt combined. Even with more people covered by some form of insurance, medical debt is still stymieing progress toward achieving financial goals.

Fix: Ensure that any upcoming procedures are covered under your insurance plan  If you have a high-deductible insurance plan, make sure that you have at least the amount of the deductible saved in your financial capability fund. You might want to consider low-deductible insurance plans, but be ready to pay more in monthly premiums.

It never hurts to ask for a discount before securing services. In fact, many local, government-funded hospitals offer a sliding scale for services and procedures. For the uninsured, utilize community health centers and other free or low-cost programs and services.

Fact: An estimated 825,000 adults lack even a basic checking account.

Banking is a crucial pathway to financial inclusion and security. It provides a platform for effectively managing your money. Without access to affordable banking products you are robbed of the benefits of the formal banking system and are often forced into more expensive and less secure alternatives.

Fix: There has been a lot of progress in making bank accounts accessible for low-income Americans. You still need to watch out for fees. Banks are now offering more options and there’s a proliferation of free online bank accounts.

Today is April 1! We still have time to mark the occasion by making ourselves a promise to become more educated about our finances. Personal finances can be tricky and intimidating. With the right resources and support, everyone can move closer to financial stability and achieve goals they set for years to come. Join me over the next 30 day’s for 30 step’s you can take to become financially literate.

Disease Called Debt

7 Reasons Why Your Personal Budget Is Failing and How to Fix It

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7 Reasons Why Your Personal Budget Is Failing and How to Fix It

When it comes to budgeting, I am a serial budget-maker. The number-crunching, the spreadsheets, the organization – I’m absolutely addicted. I won’t buy something as small as a Jolly Rancher, if it is not in my budget. However, over the years, I’ve nursed a love-hate relationship with my budget. I love how it organizes my funds, but I hate actually having to adjust my spending to meet what a spreadsheet tells me.

So, what’s someone with the best intentions, who is serious about budgeting to do when a budget isn’t working? It’s usually human error that makes a budget fail, and by investigating for possible gaffes, you might find out where you’ve gone wrong. Don’t fear your budget – just be vigilant and triple-check it for accuracy to ensure it works with you, not against you. And always keep an eye out for the major reasons that most budgets fail And always keep an eye out for the major reasons that most budgets fail.

Reasons Why a Budget Fails

1. It’s Too Restrictive

If you really want to save money, you might be tempted to strip your spending down to the bare minimum and challenge yourself to live with it. If you succeed, you’re going to show a hefty surplus at the end of the month. Of course, when it comes to the actual execution of a restrictive budget, you may be tempting yourself to max out your allotted funds, go over your spending limits, and finally toss your budget in the garbage because it “didn’t work.”

Solution: Pad your budget a little, and be ambitious as well as realistic. Cut back in a few areas at a time, rather than trying to completely overhaul your lifestyle all at once. While having a big surplus at the end of the month looks great on paper, if you can’t pull it off in practice, it’s an exercise in futility.

2. You Don’t Set Goals

It always helps to keep your eyes on the prize, and setting a goal can certainly help keep you motivated to stick to your budget. However, while “getting rich” is definitely an admirable goal, it may be too broad to really keep you on track when the going gets tough. The same goes for paying off all of your debt, or building up a down payment for a house.

Solution: Determine to save or pay off specific amounts in a given time period, and make sure these are achievable goals. Set other mini-goals along the way to help you stay strong when your money is burning a hole in your pocket. Then, reward yourself – modestly – when you meet them.

3. You Haven’t Adjusted It Since Day One

The thing about budgeting is that it’s all guess-work until you put it into practice. When you first draw up a budget, you can use utility bills, credit card statements, and pay stubs to develop the most accurate spreadsheet possible, but that doesn’t mean it’s all going to run smoothly once you put it into play. You’re going to have to make adjustments month-to-month, and if you haven’t touched your budget since you first formulated it, it’s probably not working out very well.

Solution: Revisit your budget on a monthly basis. You don’t have to give it a thorough overhaul – just devote a few minutes to adjusting for an extra windfall, new commissions, fluctuating utility bills, or anything else you didn’t plan for in the month prior.

4. Your Spouse Isn’t On Board

If you’re determined to maintain your newfound self-discipline and financial responsibility and your spouse isn’t on board, your budget isn’t going to mean much – especially if your spouse happens to be the big spender in the relationship.

Solution: If you haven’t had the dreaded big money talk in your marriage, now is the time. Sit down and discuss your financial philosophy, and make sure that you have all your numbers handy. Point out that a budget isn’t necessarily restrictive. Instead, it simply acts as a road map for your finances. When your spouse sees you won’t have to drastically alter your lifestyle to gain the positive effects of a budget, you might find you’ve got a more willing partner than you initially thought.

5. You Didn’t Plan for Emergencies

A budget is well and good until your dog breaks his paw, your car needs a new transmission, or your toddler needs his tonsils removed. Emergency expenses can completely derail a carefully detailed budget if you don’t account for them. Before you know it, your monthly money is gone before you’ve even paid your bills.

Solution: Build up an emergency fund. Aim to have at least six month’s of living expenses saved, and shoot for more if possible. If you don’t already have the funds to create one, devote a line in your budget to establish it. Consider it a personally administered insurance policy, and take comfort in the fact that your premiums are still yours to keep, even if you never have to file a “claim.”

6. You Didn’t Give It Enough Time

Count me as one of those people who gets impatient with her budget. I’m so excited to see the fruits of my labor that you can find me obsessively checking my bank balance and wondering if I’m a millionaire yet. However, the truth is that budgets take time, patience, and a bit of trial and error before they really produce significant results.

Solution: Consider your first few months a beta test for your budget. If they don’t go smoothly, simply make some adjustments and try again. It can take time for you to iron out the creases and for any real changes in your spending habits and financial management to take effect. Go easy on your budget – and yourself – and give it a chance.

7. You Really, Really Hate Budgets

Hey, a budget isn’t the be-all, end-all to financial management. If the sight of budgeting software makes you steam, explore other methods of managing your money without all the spreadsheets and columns.

Solution: Seek out alternative budgeting techniques that may work better with your lifestyle and income. Try withdrawing the cash you need for a week, two weeks, or a month at a time, and when it’s gone, it’s gone. If you stick to the rules, this kind of regimen can teach you pretty quickly how to conserve money. Research your options and test a few budget alternatives to find one that works for you.


If you stick to it, a budget is going to work. It can help you make smarter financial choices and give you a sense of control over where your money is going each month. However, budgeting is not an exact science. It takes work, tweaking, practice, and a lot of trial and error to make it effective in the real world. If yours is tanking, don’t ditch it. Just retool it and try again until you find the right balance.

Do you have trouble sticking to your budget? If so we can fix that. Book a consultation with me so we can get started.

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Do You Have A Saving Strategy?

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do you have a savings strategy

It’s never an easy question to answer. What should you save toward? Should you save only for retirement? Should you save for college first and then retirement? Should you save for college and retirement at the same time? Or should you adopt some other savings strategy? In a world where money may seem tight, picking and sticking with a savings strategy could be the difference between reaching your goals or not. But how should you prioritize your savings? Which savings strategy is best for you?

Most Americans have only certain resources —income and assets — to allocate to current needs and future goals. You should first sit down and think hard about your future goals, and be as specific as possible. What kind of retirement do you want? What type of college do you want your children to attend? You should have specific ideas of what you are saving for in light of available resources.

When thinking about those goals, analyze what would happen if one goal is funded but not the other. For example, I might first think that funding for my children’s college is my top priority. However, what would my retirement look like? Would I have enough time to save for my own retirement? Or, further, will I fund my child’s college only to find out that I will need to rely on them financially in the future because I hadn’t saved enough for my own support?

When thinking through your priorities, weigh the future issues that may arise from funding one goal but not the other or others. The fallback of retirement income is Social Security which may not meet your desired retirement lifestyle.  College, by contrast, can be financed through financial aid, loans, parent’s excess cash flow, children’s jobs, and the like.

As a rule of thumb, I suggest prioritizing in this order:

  • Save for your emergency fund;
  • Save in your 401(k) plan, or at least enough to get the full match from your employer;
  • Pay down your high-interest debt.

After that, funding your short- and intermediate-term goals and then any other goals, including retirement. Depending on your priorities, you might consider saving for your retirement goals before your short- and intermediate goals.

Deciding how you should prioritize your savings does require some number crunching so sit down and get started crunching.


Types Of Individual Retirement Accounts

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Yesterday we went over the basics of Individual Retirement Accounts, so today I want to tell you the types of IRA’s available to you.

Types of IRAs

When IRAs were first introduced, there was just one basic type, which was open to anyone with earned income. But since then, IRAs have evolved to include a number of variations:


There are two categories of tax-deferred traditional IRAs: deductible and nondeductible. If you qualify to deduct your contributions, you can subtract the amount you contribute when you file your tax return for the year, reducing the income tax you owe. If you don’t qualify to deduct, the contribution is made with after-tax income. The IRS website has resources to help you figure out whether, and to what extent, you can deduct your contributions.
Earnings on investments in a traditional IRA are tax-deferred for as long as they stay in your account. When you take money out—which you can do without penalty when you turn 59½, and are required to begin doing once you turn 70½,—your withdrawal is considered regular income so you’ll owe income tax on the earnings at your current rate. If you deducted your contribution, tax is due on your entire withdrawal. If you didn’t, tax is due only on the portion that comes from earnings.

You can’t contribute any additional amounts to a traditional IRA once you turn 70, even if you’re still working.


Contributions to a Roth IRA are always made with after-tax income, but the earnings are tax-free if you follow the rules for withdrawals: You must be at least 59½ and your account must have been open at least five years. What’s more, with a Roth IRA you’re not required to withdraw your money at any age—you can pass the entire account on to your heirs if you choose. And you can continue to contribute to a Roth as long as you have earned income, no matter how old you are. Contribution levels for a Roth are the same as those for a traditional IRA. However, there are income restrictions associated with contributing to a Roth IRA. Both you and your spouse can each establish your own Roth IRA’s.


If you’re married to someone who doesn’t earn income (for example, if your spouse stays home with small children), you can contribute up to the annual limit in a separate spousal IRA in that person’s name as well as putting money into your own IRA. Your spouse owns the spousal IRA, chooses the investments and eventually makes the withdrawals. A spousal IRA can be a traditional deductible, traditional nondeductible or a Roth IRA, as long as you qualify for the type you select.

“Deemed” or Sidecar IRA’s:

In some cases, you can make contributions to an IRA through your employer by taking advantage of a deemed or “sidecar” IRA provision. In this case, your employer deducts your IRA contributions from your after-tax earnings. All the rules for this account—that is, for contribution limits, withdrawal rules and so forth—are the same as for any other IRA. If you qualify, you may be able to deduct your contribution when you file your tax return.

You might find a deemed IRA helps you to save. After all, contributions are automatic, so you don’t have to remember to write a separate check to your IRA custodian and you won’t be tempted to spend the money on something else. But you might also find that your choices of IRA investments are limited with this option, since they will depend on which financial services company your employer chooses as custodian or trustee of the account.

In addition, if you’re not keeping accurate records of your deemed IRA contributions, you might inadvertently go over the contribution limit, which remains the same no matter how many separate IRA accounts you have. That could mean incurring penalties.

Which Is Better: Traditional or Roth IRA?

The answer to this question will vary from person to person. Assuming you’re eligible to contribute to a deductible, traditional IRA or to a Roth IRA, here are some factors to consider:

  • Current- year tax benefits—Depending on your income and employment, contributions to a traditional IRA may be tax deductible, which reduces your taxable income each year you contribute. But if you don’t need that tax break now, a Roth IRA can give you more flexibility since you can withdraw your contributions at any time without paying taxes or fees—and you can withdraw your earnings tax-free if your account has been open at least five years and you are 59½ or older.
  • Likely future tax bracket—If you’re young and likely to be in a higher tax bracket when you retire, then a Roth IRA may make more sense. But if you’re likely to be in a lower tax bracket after you retire, a traditional IRA is usually the better choice. With a traditional IRA, however, you are subject to minimum required distributions when you reach age 70½.

Traditional Versus Roth IRA

 Traditional Roth
EligibilityMust have earned income of at least the amount contributed, except in cases of Spousal IRA.

No regular contributions allowed in the year you reach 70½ and older. The ability to take a deduction phases out if you earn more than $71,000 as a single taxpayer or $118,000 as a couple in 2016.

Rollover contributions allowed regardless of age.
Must have earned income of at least the amount contributed, except in cases of Spousal IRA.

May not contribute if you earn more than $132,000 as a single taxpayer or $194,000 as a couple in 2016.

IRA and rollover contributions allowed regardless of age.
ContributionsContributions may be made any time up to your tax filing date for that year (April 15 for most people).

For 2016, the contribution maximums are $5,500 if under age 50 and $6,500 if age 50 or older.

You may roll over (transfer) proceeds from a TSP or 401(k) plan into an IRA. (This does not affect contribution limits.)
Contributions may be made any time up to your tax filing date for that year (April 15 for most people).

For 2016, the contribution maximums are $5,500 if under age 50 and $6,500 if age 50 or older.

You may roll over (transfer) proceeds from a TSP or 401(k) plan into an IRA. (This does not affect contribution limits.)
WithdrawalsTurning 70½ years old triggers required minimum distributions from your traditional IRA.

A 10% tax penalty will apply to any withdrawal—of contributions, earnings or both—before you reach age 59½, unless you meet an exception set by the IRS.
You never have to take required minimum distributions from your Roth IRA.

Contributions can be withdrawn any time without taxes or penalty.

A 10% tax penalty will apply to any earnings you withdraw before you reach age 59½, unless you meet an exception set by the IRS. Also, a 10% tax penalty may apply if you take a distribution from a Roth IRA that has not been open for at least five years.
Tax DeductionsContributions may be tax deductible, depending on your income and whether you are covered by a retirement plan through your employer. Contributions are not tax deductible.
Other Tax BenefitsEarnings are tax deferred if withdrawn when you are 59½ or older. Earnings may be withdrawn tax free as long as the account has been open at least five years and you are 59½ or older.

Contributions can be withdrawn any time without taxes or penalty
Investment ChoicesDetermined by custodian or trustee holding your IRA.

Most custodians or trustees allow firm-approved stocks, bonds, mutual funds and CDs.
Custodians and trustees for self-directed IRAs may allow investments in assets such as real estate, private placement securities and some collectibles.
Determined by custodian or trustee holding your IRA.

Most custodians or trustees allow firm-approved stocks, bonds, mutual funds and CDs.
Custodians and trustees for self-directed IRAs may allow investments in assets such as real estate, private placement securities and some collectibles.

Taking Money Out

One important thing is true of all IRAs: Taking out money early is discouraged. In fact, you generally cannot make IRA withdrawals before age 59½ without paying an early withdrawal penalty. The penalty is 10 percent of the amount you withdraw. There are exceptions, however, if you take IRA money out to meet certain medical expenses, purchase your first home, pay college tuition bills or for certain other reasons listed in the federal tax laws. In any event, before you make any early IRA withdrawals, you should check with your tax or legal adviser to be sure you’re following the rules. Even if you do not face a penalty, you will have to pay income tax on any withdrawal you make. The only exception is that you can take up to $10,000 in earnings from your Roth IRA tax-free to buy a first home for yourself or a member of your immediate family, provided you have had the Roth for at least five years. There is a reason why withdrawing early from your IRA is made difficult. These savings vehicles are specifically designed to help you set aside money for retirement, not for other purposes. By imposing penalties for the early use of these funds, the government hopes that most people will leave their money alone. That way, the money will have time to compound, and will be available to support you in your retirement. You should be aware, too, that unlike certain employer plans, you’re not allowed to borrow against your IRA balance.

Required Withdrawals

Just as the IRA rules generally discourage you from taking your money out too early, other rules require that you begin withdrawing from a traditional IRA no later than April 1 of the year following the year in which you turn 70½. And once you do start taking money out, you must take at least your required minimum distribution, or RMD, every year. You’re always free to take more than the minimum, but you must take at least that amount, or risk paying a penalty. If you fail to keep up with your RMDs, you face a penalty that can be pretty steep: up to 50 percent of the amount you should have withdrawn but didn’t, plus the income taxes you would have owed on that amount. Don’t assume that if your IRA is invested in mutual funds, and you’re receiving distributions from those funds, that you’ve automatically satisfied your RMD. It could happen, but you can’t count on it. However, if your IRA is an individual retirement annuity, which you would set up with an annuity provider such as an insurance company, your annuity provider assumes the responsibility for ensuring that the income you receive from your annuity meets your RMD.


Individual Retirement Accounts

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IRA Basics

Individual retirement arrangements (or IRAs) provide a way for you to set aside money for your retirement—for living expenses and to pay for the things you want to do when you have the time to do them, such as traveling or learning new skills. Like other retirement plans, IRAs offer tax advantages—specifically, the potential for tax-deferred or tax-free growth. Tax-deferred means you postpone taxes until you withdraw money later on. Tax-free means you owe no tax on your investment earnings at all, provided you follow the rules for taking the money out of the account. But in exchange for these tax benefits, there are certain restrictions. Here’s what you need to know about IRAs.

What is an IRA?

An IRA may be either an individual retirement account you establish with a financial services company—such as a bank, brokerage firm or mutual fund company—or an individual retirement annuity that’s available through an insurance company. Certain retirement plans, including a simplified employee pension (SEP) and a SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) may be set up as IRAs, though they operate a little differently from those you set up yourself. There is information about these types of plans in IRS Publication 590.

How Does an IRA Work?

Your IRA provider is the custodian for your account, investing the money as you direct and providing regular updates on your account value. Once your account is open, you can select any of the investments available through the custodian. So one key consideration in choosing a custodian is the type of investments you are planning to make.

To participate in an IRA, you must earn income, and you can contribute up to the annual limit that Congress sets. However, you can’t contribute more than you earn. So, for example, if your total earned income is only $2,500 for the year, that’s all you can put into an IRA, even though the contribution limit is higher.

If you’re divorced, you can count alimony as earned income. And there’s an exception to the earned income requirement for nonearning spouses, called a spousal IRA. This type of IRA also has contribution limits (see the Kay Bailey Hutchison Spousal IRA limit information in IRS Publication 590.)

You can put money into your IRA every year you’re eligible, even if you are also enrolled in another kind of retirement savings plan through your employer. If both you and your spouse earn income, each of you can contribute to your own IRA, up to the annual limit.

All IRA contributions for a calendar year must be made in full by the time you file your tax return for that year—typically April 15, unless that deadline falls on a weekend.

TIP: It may be smarter to spread out your contributions over the year, on a regular schedule. That way you don’t have to struggle to pull together the whole amount just before the deadline, or risk putting in less than you’re entitled to contribute. Another reason spreading out your contributions over the year may be smart is that it allows you to take advantage of dollar-cost averaging.

Join me tomorrow when I break down types of IRA’s


Managing Your 401(k)

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managing your 401k

Managing Your 401(k)

Managing your 401(k) takes work. Your administrator handles your portfolio’s actual transactions and the recordkeeping and reporting, but you decide when and how to reallocate and rebalance your assets.

Beyond keeping tabs on the performance of your portfolio, you will want to know your plan’s rules and procedures, and how much your plan and its investments are costing you. Take time to read your summary plan description (SPD), a document that lays out the rules, fees and procedures of your 401(k). Your employer should provide a copy of your individual benefit statement at least once every 12 month’s; though you may have to request it. You might want to review the document with your financial adviser or ask your plan administrator or human resources department about any details you would like clarified or explained in more detail. If you’re looking for guidance on the issues you should be concerned with, review the Department of Labor’s What You Should Know About Your Retirement Plan.

 Get a Handle on Fees

All 401(k) plans carry asset-based fees and expenses that have a direct impact on your investment return and your long-term financial security. The difficulty is that it can be hard to calculate what fees are costing you because you don’t pay them directly by writing a check. Rather, they are subtracted before your return is reported. Your account statement documents the amount of money you actually paid for various services and investments expenses, so be sure to check it out. In addition, most fees are explained in your summary plan document (SPD). You can also ask your human resources or personnel department for an explanation. You can access more information about 401(k) fees and charges from the US Department of Labor’s online publication, A Look at 401(k) Plan Fees for Employees.

 Monitor Performance

Although your fees cover the administrative services needed to manage your 401(k), it’s up to you to keep track of how your investments are doing. Refer to FINRA’s Evaluating Investment Performance section to learn more about different ways to measure performance, and how benchmarks such as key stock or bond indexes can serve as helpful reference points for assessing how well your portfolio is doing.

Read Account Statements

Another resource for managing your 401(k), and keeping tabs on how your investments are performing is your account statements. They contain details such as your account holdings, the change in value of your account from one period to the next, and other important account information.

Your employer must give you an account statement at least once every quarter. Many plan providers, however, send you statements on a monthly basis. You may also be able to access account information online.

The frequency with which you receive account reports might depend on how often your account is valued, or how often record keepers determine the total value of your account. Valuation also directly affects the flexibility with which you can reallocate your portfolio. If you decide to reallocate your assets, but your plan is valued quarterly, you may have to wait until the close of that period before your investments can be moved.

Don’t Forget to Rebalance
There’s a strong likelihood that over time your portfolio will get out of alignment. The investment allocation you started with (say 60 percent stocks and 40 percent bonds) will change—perhaps dramatically—and you will want to rebalance your asset mix. To learn more, including how target date funds can help you rebalance automatically, visit the Rebalancing Your Portfolio section of Key Investing Concepts.

Where To Look For Advice

You’re not alone when it comes to managing your 401(k). You’ll want to anticipate future returns as accurately as possible—and you may need the help of outside resources to do so. Luckily, there are a few places where you can look for advice.

  • Your Employer and Plan Administrator. Your employer and the 401(k) plan administrator may offer resources to help you with your financial planning. Many provide educational material and seminars about retirement planning and saving. They also may provide access to investment advice for retirement online or through a financial professional. Most of these services are available at little or no cost to you.
  • Online Resources. There are many websites that specialize in 401(k) advice. Most likely, these sites will ask you to provide information about yourself, such as the investments you own, your contribution rate, your financial goals, the age you would like to retire and the level of risk you’re comfortable taking.Online resources can offer a quick overview of your 401(k) portfolio. Just keep in mind that some of these resources will charge you for more personalized recommendations. And some sites sell their own investments, so you should weigh their recommendations against the profit they stand to make from your investment decisions.
  • Investment Professionals. You also may want to consult an investment professional for advice. Ask any potential broker or adviser about his or her background and how they earned their credentials. Also ask for an explanation of their fees. Most importantly, check their backgrounds. FINRA BrokerCheck tracks the credentials of licensed brokers and investment adviser representatives.

The SEC’s Investment Adviser Public Disclosure website also allows you to search for information about investment adviser firms registered with the SEC or state regulators. You also can view an adviser’s Form ADV on the SEC’s website or by contacting your state securities regulator.




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