Tag: 401k

When it comes to personal finance, there are a lot of mistakes that people make. Some of these mistakes can be costly, while others may not have a huge impact on your overall financial picture. However, making any of these mistakes can set you back in reaching your financial goals.

Here are some of the most common financial mistakes people make, and how to avoid them:

Not saving for retirement

One of the biggest financial mistakes people make is not saving for retirement. It’s important to start saving for retirement as early as possible, because the sooner you start, the more time your money has to grow. If you wait until you’re closer to retirement age to start saving, you’ll have to save a lot more money each month to catch up.

Not having an emergency fund

Another mistake people make is not having an emergency fund. An emergency fund is important because it gives you a buffer if you lose your job or have an unexpected expense. Without an emergency fund, you may have to rely on credit cards or loans to make ends meet, which can put you in a difficult financial situation.

Not budgeting

Budgeting is an important tool to help you stay on track with your finances. Without a budget, it’s easy to overspend and get into debt. If you don’t know where your money is going, it’s difficult to make informed financial decisions.

Not investing

Investing is another mistake people make. When you invest, you’re essentially putting your money into something that has the potential to grow over time. This can be a great way to build your wealth and reach your financial goals.

Not tracking your net worth

Your net worth is a snapshot of your financial health. It’s the difference between your assets and your liabilities. Tracking your net worth is a good way to stay on top of your finances and see how you’re progressing towards your goals.

Not paid off debt

If you have debt, it’s important to make paying it off a priority. The interest on your debt can make it difficult to get ahead financially. In addition, carrying a balance on your credit cards can hurt your credit score, which can make it more difficult to get loans in the future.

Not having insurance

Another mistake people make is not having insurance. Insurance protects you financially if you experience an unexpected event, like a car accident or a medical emergency. Without insurance, you could be on the hook for a large bill that you can’t afford.

Not taking advantage of employer benefits

If your employer offers benefits like a 401(k) or health insurance, be sure to take advantage of them. These benefits can save you a lot of money and give you a leg up in reaching your financial goals.

Not staying informed

It’s important to stay informed about personal finance. There are a lot of resources available, like books, articles, and websites. By staying informed, you can make better financial decisions and avoid making costly mistakes.

Not seeking professional help

If you’re having trouble managing your finances, don’t be afraid to seek professional help. There are a lot of resources available, like financial advisors and counselors. A professional can help you develop a plan to reach your financial goals and get your finances on track.

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No one ever said that retirement planning was easy. In fact, it can be quite confusing and overwhelming at times. There are a lot of different factors to consider, and it can be difficult to know where to start.

However, one thing is for sure: the sooner you start retirement planning, the better. The earlier you start, the more time you have to save and invest, and the more likely you are to achieve your retirement goals.

So, if you haven’t started retirement planning yet, now is the time. Here are a few tips to get you started:

Figure out how much money you’ll need. This is probably the most important step in retirement planning. You need to have a good idea of how much money you’ll need to cover your expenses in retirement. Start by estimating your annual expenses and then multiplying that by the number of years you expect to be in retirement.

Determine your retirement income sources. Once you know how much money you’ll need in retirement, you need to figure out where that money is going to come from. Will you have a pension? Social Security? An IRA or 401(k)? Make sure you understand all of the different options and how they work.

Start saving and investing. This is where the rubber meets the road. You need to start putting away money for retirement now. The sooner you start, the better. Begin with whatever you can afford, even if it’s just a few dollars a week.

Get professional help. Retirement planning can be complex. If you’re not sure where to start or what to do, consider working with a financial advisor. A good advisor can help you develop a retirement plan that’s tailored to your unique situation.

The bottom line is that retirement planning is important. The sooner you start, the better off you’ll be. So, if you haven’t started yet, now is the time.

This article is provided for general education and information purposes only. It is not intended to provide specific legal, tax, or financial advice. You should always consult a qualified professional for advice on your particular situation.

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When it comes to financial planning, many people think it is something that only wealthy people need to worry about. However, this could not be further from the truth – personal financial planning is something that everyone can benefit from, regardless of their income or net worth. Here are just a few ways that personal financial planning can help you save money and time.

Get your financial affairs in order

One of the main benefits of personal financial planning is that it can help you get your financial affairs in order. This means creating a budget, tracking your spending, and setting up a system to pay your bills on time. This can save you a lot of money in the long run, as it will help you avoid late fees and interest charges.

Invest for the future

Another benefit of personal financial planning is that it can help you invest for the future. This includes investing in a retirement account, such as a 401(k) or IRA, as well as investing in other long-term goals, such as a college fund for your children. Investing for the future can help you save a lot of money in the long run, as it will grow over time.

Protect your assets

Personal financial planning can also help you protect your assets. This includes buying insurance, such as life, health, and homeowners insurance. This can help you save money in the event that you need to use your insurance, as it will cover the costs of your medical bills or repairs to your home.

Plan for your future

Another benefit of personal financial planning is that it can help you plan for your future. This includes setting up a will, as well as creating a power of attorney and advance directives. This can save you a lot of time and money in the event that something happens to you, as your family will know your wishes and will be able to act on them.

Personal financial planning is a great way to save money and time. If you have not started planning for your financial future, now is the time to start. There are many resources available to help you get started, such as books, online courses, and financial planners.

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Personal financial planning is important for a number of reasons. It helps you to understand your current financial situation, set goals for the future and develop a plan to achieve those goals. It can also help you to manage your money more effectively, reduce your overall financial stress and build your financial confidence.

There are a number of different aspects to personal financial planning, and it is important to consider all of them when developing your plan. These include budgeting, saving and investing, retirement planning and insurance.

Budgeting

Budgeting is a key part of personal financial planning. It involves setting up a system to track your income and expenses, so that you can see where your money is going. This can help you to identify areas where you are spending too much money, and make changes to your spending habits.

Saving and investing

Saving and investing are important aspects of personal financial planning. They can help you to reach your financial goals, and provide you with financial security in the future.

There are a number of different ways to save and invest your money. These include setting up a savings account, investing in stocks and shares, and buying property.

Retirement planning

Retirement planning is an important part of personal financial planning. It involves thinking about how much money you will need to live comfortably in retirement, and making sure that you have enough money saved to reach your goal.

There are a number of different retirement savings plans available, including pension plans, 401(k) plans and Individual Retirement Accounts (IRAs).

Insurance

Insurance is another important aspect of personal financial planning. It can help to protect you and your family financially if you are ever faced with an unexpected event, such as an accident or illness.

There are a number of different types of insurance, including health insurance, life insurance, disability insurance and long-term care insurance.

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When it comes to retirement planning, there are a lot of options and strategies out there. But one of the most common and basic questions people have is whether or not they should invest in a 401k.

The answer, in short, is yes – you should absolutely invest in a 401k if you have the opportunity to do so. Here’s why:

You’re essentially leaving money on the table if you don’t.

If your employer offers a 401k plan and you don’t take advantage of it, you’re essentially leaving money on the table. That’s because most 401k plans come with some sort of employer match – meaning that your employer will match a certain percentage of your contributions, up to a certain amount.

For example, let’s say your employer offers a 50% match on 401k contributions up to 6% of your salary. That means that if you contribute 6% of your salary to your 401k, your employer will also contribute an additional 3% (50% of your contribution).

In other words, you’re essentially getting free money by investing in a 401k – so there’s really no reason not to do it.

It’s a great way to save for retirement

Investing in a 401k is also a great way to save for retirement. That’s because 401k contributions are made with pre-tax dollars, which means you’ll be able to reduce your taxable income for the year.

And the more you can reduce your taxable income, the less taxes you’ll have to pay.

In addition, the money in your 401k will grow tax-deferred, which means you won’t have to pay taxes on any investment gains until you withdraw the money in retirement.

It’s a simple and easy way to invest

Investing in a 401k is also a simple and easy way to get started with investing. That’s because most 401k plans offer a limited selection of investment options, which helps to simplify the investment process.

In addition, 401k contributions are typically made automatically through payroll deductions, which makes it easy to save and invest without having to think about it.

You may get access to employer stock

If you work for a publicly-traded company, you may also have the opportunity to invest in employer stock through your 401k plan. And while investing in employer stock comes with its own set of risks, it can also be a great way to boost your retirement savings.

For example, if you had invested $10,000 in Apple stock in 2001, your investment would be worth over $1 million today.

You may be able to take advantage of a 401k loan.

Another benefit of investing in a 401k is that you may be able to take advantage of a 401k loan.

A 401k loan allows you to borrow money from your 401k account, without having to pay taxes or penalties. And while you will have to pay interest on the loan, the interest will go back into your 401k account.

401k loans can be a great way to access cash in a pinch, without having to tap into your retirement savings.

The Bottom Line

Investing in a 401k is a no-brainer for most people. Not only do you get access to employer matching contributions, but you also get to enjoy the benefits of tax-deferred growth and potentially lower taxes in retirement.

So if you have the opportunity to invest in a 401k, be sure to take advantage of it.

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The 401k contribution limits for 2022 have been announced by the IRS. Here’s what you need to know.

The contribution limit for employees who participate in 401k, 403b, most 457 plans, and the federal government’s Thrift Savings Plan will be $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans will remain $6,500.

The contribution limit for employees who participate in SIMPLE retirement accounts will be $13,500.

The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE retirement accounts will be $3,000.

The contribution limit for employees who participate in SEP retirement accounts will remain at the lesser of $58,000 or 25% of compensation.

The contribution limit for employees who participate in SARSEP retirement accounts will remain at the lesser of $75,000 or 25% of compensation.

The contribution limit for employees who participate in qualified retirement plans, such as 401k, 403b, most 457 plans, and the federal government’s Thrift Savings Plan, will be $19,500 in 2022. The catch-up contribution limit for employees aged 50 and over who participate in these plans will remain $6,500.

The contribution limit for employees who participate in SIMPLE retirement accounts will be $13,500 in 2022. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE retirement accounts will be $3,000.

The contribution limit for employees who participate in SEP retirement accounts will remain at the lesser of $58,000 or 25% of compensation in 2022.

The contribution limit for employees who participate in SARSEP retirement accounts will remain at the lesser of $75,000 or 25% of compensation in 2022.

The 401k contribution limits for 2022 have been announced by the IRS. Here’s what you need to know.

The 401k contribution limit for 2022 will be $19,500, an increase of $500 from the limit in 2021. The catch-up contribution limit for those aged 50 and over will remain at $6,500.

The 401k contribution limit is the maximum amount of money that you can contribute to your 401k plan each year. The IRS adjusts the limit each year to keep up with inflation.

The 401k contribution limit is important because it determines how much money you can save for retirement. The more money you can contribute, the more money you’ll have saved when you retire.

If you’re already maxing out your 401k contributions, then you don’t need to do anything differently for 2022. If you’re not maxing out your contributions, then you’ll need to contribute more money to reach the new limit.

If you have any questions about the 401k contribution limits for 2022, please contact a financial advisor.

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Financial planning is a process that will help you determine where you are today, where you want to be in the future and how you can get there. Although it may seem daunting, personal financial planning is not rocket science. In fact, with a little time and effort, anyone can develop a plan that will work for them.

Here are five tips to help you get started:

1. Know Where You Are Today

The first step in any financial planning process is to take stock of your current financial situation. This means knowing how much money you have coming in, how much you have going out and what your net worth is. This will give you a starting point to work from and will help you to set realistic goals.

2. Know Where You Want to Be

The next step is to think about where you want to be in the future. What are your financial goals? Do you want to retire early? Buy a new home? Send your children to college? Once you know what you want, you can start to develop a plan to help you get there.

3. Make a Budget

One of the most important aspects of personal financial planning is creating and sticking to a budget. This will help you to keep track of your spending and ensure that you are not spending more than you can afford. A budget will also help you to save money for your future goals.

4. Invest in Your Future

Another important part of financial planning is investing in your future. This can be done in a number of ways, such as contributing to a 401(k) or IRA, investing in stocks or mutual funds, or even just saving money in a high yield savings account.

5. Get Professional Help

If you are having trouble getting started with your financial planning, or if you just want some professional guidance, there is no shame in seeking out the help of a financial planner. These professionals can help you to develop a plan that is tailored to your specific goals and needs.

Personal financial planning is not something that you should put off until later in life. By taking the time to develop a plan now, you can ensure that you are on the right track to a bright financial future.

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There are a few key components to personal finance that include:

-Budgeting and goal setting: This is probably the most important aspect of personal finance. Without a budget, it’s difficult to save money and make wise spending decisions. Goals give you something to work towards and help keep you motivated.

-Investing: Investing is important for building wealth over time. While there are many different investment options, some of the most common include stocks, bonds, and mutual funds.

-Retirement planning: Retirement planning is important for making sure you have enough money saved up to cover your expenses in retirement. This includes figuring out how much you need to save and choosing the right retirement account (such as a 401(k) or IRA).

-Insurance: Insurance is important to help protect you financially in case of an unexpected event, such as a car accident or medical emergency. There are many different types of insurance, but some of the most common include auto, health, and life insurance.

What are the benefits of personal finance?

There are many benefits to personal finance, but some of the most important include:

– improved financial security: When you have a handle on your finances, you’re less likely to experience financial difficulties in the future. This can lead to improved peace of mind and overall financial security.

– increased savings: One of the benefits of personal finance is that it can help you save more money. This can allow you to reach your financial goals quicker, whether it’s buying a home, saving for retirement, or taking a dream vacation.

– reduced stress: Money problems can be a major source of stress. But when you have a good handle on your finances, you can reduce this stress and enjoy a more relaxed lifestyle.

– improved quality of life: When you’re not worrying about money, you can focus on enjoying your life. This can lead to a better quality of life overall.

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Tax time can be stressful for many people, for two reasons – the filing process itself and the knowledge that if you’d made different decisions the year before, you might be facing a smaller tax hit this year. Let’s explore ways to lower the stress level – and the tax burden – at this time of year.

Make the Process Easier

Getting organized and filing your return can be a chore. Even just pulling together your information to get started can be overwhelming. Here are a few tips to ease the process:

Organize Your Paperwork

The first step is to gather your information and receipts. I recommend you keep these in a paper or electronic folder organized by category. Your main categories should include:

– Business income and expenses, which can be exported from financial software such as QuickBooks.
– Personal income, from forms such as W-2s and 1099s.
– Rental and other income.
– Charitable deductions.
– Taxes paid on property, vehicles or purchases.
– 529 plan contributions and distributions.
– Investment income (dividends, interest, sale info).
– Retirement contributions or distributions.

Decide on Your Method

Next, decide whether you want to do your taxes yourself using an online tool or you should seek the help of a tax professional. If you have rental property, real estate investments or a complex investment portfolio, if you own a business, or if you don’t have the desire to take this on, it’s wise to turn to a professional.

Take Your Time

If you’re going to do it yourself, don’t try to rush through the task in one day. I find it’s best to break it up over a few days. Give yourself plenty of time to gather all of the information you need and complete the process.

Some years it takes until mid-February to get the necessary documents for your various investment holdings. For example, Vanguard issues tax documents for mutual funds much earlier than for funds on the brokerage platform. If you rush through your return and file early, you might inadvertently exclude some of your funds, forcing you to amend your return.

You’ll also want to take the time to review your return thoroughly for accuracy before you file.

Finally, save your return and all of the backup documentation in a safe place for at least three years in case you are audited.

Keep an Eye on Your Withholding

If your tax liability is too high or you’ll be receiving a large refund, consider adjusting your withholding. Also, try to determine how your income and deductions will change in the coming year so you can adjust further.

Lessen your tax burden

At tax time, it’s easy to see that decisions you made the year before have a major impact. Here are some things you can do that will pay off next tax season:

Max Out Your Retirement Contributions

Contributing the maximum to your retirement savings accounts is the simplest way to reduce your tax burden, but many people are not doing it. For 2015 and 2016, you can contribute 100% of your salary, up to $18,000, to your 401(k), with a $6,000 ‘catch-up’ for people 50 and over.

You can still contribute to a traditional IRA for 2015 up to the tax filing date, which is April 18. Check the IRS website to see if you’re eligible to deduct your IRA contribution based on your income. You can contribute $5,500 to an IRA with an additional catch-up of $1,000 for those 50 and over.

If you’re in a high tax bracket, say 28% or higher, consider increasing your 401(k) contributions, because these pretax contributions will reduce your taxable income. If you are in the 25% tax bracket or lower, consider increasing your contributions to a Roth 401(k) or contributing to a Roth IRA if you are eligible, as those contributions are made after taxes. The deadline for Roth contributions for 2015 is April 18.

With Roth plans, although you will be taxed on the income now, your investment will grow tax-free and you will be able to withdraw it without paying taxes, if you meet certain conditions. This can be a powerful way to avoid paying taxes on future income, especially if you are young and have time on your side.

Document Your Charitable Contributions

Make sure you have documentation for all cash and noncash donations. Make an itemized list for noncash items and their condition before you make the donation. Remember that you can also deduct mileage for your volunteer work.

If you have substantial charitable donations, say $10,000 a year or more, you might want to consider donating appreciated stocks or mutual funds. This can provide a triple tax benefit – you can deduct the amount of the donated securities, you can eliminate future capital gains on the sale of the securities, and you can buy back the same shares at the higher current market value, resulting in a lower tax bill when you sell the securities in the future.

Track College Expenses

Deduct only qualified expenses and make sure that any distributions from your 529 college-savings plans coincide with expenses incurred in the same calendar year. I use an Excel spreadsheet to keep track of this for my son’s education. It itemizes tuition, books, and room and board fees offset by scholarship amounts.

Don’t forget to deduct your annual contributions to your state 529 if you get a state tax break. I often notice that clients forget to tell their CPA about these contributions or forget to include this info when they prepare their own return. Since South Carolina, where I live, provides a dollar-for-dollar tax deduction for contributions to the Future Scholar 529 plan, this results in a 7% instant return on your money, for example. (I recommend the Future Scholar Direct program, which is no-load and includes index funds with low expense ratios.)

Optimize Your Investments

Capital gains: Review the capital gain distributions for your funds to see if you can improve the tax efficiency of your investments. It may make sense to sell one of your funds if it continually throws off high capital gains. Replacing an active high-expense fund with a more tax-efficient index mutual fund or exchange-traded fund will reduce your taxes and will likely perform better over time due to lower expenses.

U.S. bonds: If you have taxable bond funds in your after-tax (non-retirement) accounts, don’t forget to adjust for U.S. government bond income. You can contact the fund, or it may mail you a sheet that breaks down income by source. The interest from Treasury bills and bonds as well as U.S. government agency securities is taxable at the federal level only.

Municipal bonds: Likewise, adjust your municipal bond dividends and interest for ‘in state’ income as you are not taxed on municipal bond income from your state. This should also be provided by the mutual fund or broker where the bonds are held.

Foreign mutual funds: If you invest in foreign mutual funds, you can take a foreign tax credit or deduction for income, such as dividends, that you received from outside the U.S. The tax credit is generally more beneficial than the deduction. Contact the mutual fund company to find out the percentage of the dividends that are from foreign holdings and adjust accordingly.

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A recent study conducted by Timothy Gubler and Lamar Pierce from the Olin Business School, Washington University in St. Louis shows that poor physical health is driven by the same psychological factors that determine whether or not you contribute to your retirement plan at work.  See this related article in the NY Times:

In the study, employees who contributed regularly to their 401(k) plan were not only more likely to take steps to improve their health but also had a 27 percent improvement in their blood scores. “Non-contributors continued to suffer health declines,” the paper said.

This study underscores the importance of having a mindset that is focused on planning for the future.

The same mentality that drives you to increase your 401K contributions also inspires you to enhance health measures such as weight and blood pressure. The participants who improved their health scores were incentivized to make changes to their physical health after receiving information and education from the study coordinators. Once informed, they took the appropriate action and their health improved.

Whereas some people are motivated to save and are more future-oriented, others apparently only act when they are forced to make a change. This is something I see frequently in my practice. The clients who are able to pull together their financial statements easily and quickly and who are more organized and committed, fare far better than those who are not as concerned about the future and do not have their financial life organized and top of mind. The key is to be intentional about making the changes you need to improve your future. Helping the client creating a clear vision of the future often helps motivate someone who up to that point had been procrastinating savings and unwilling to address key areas of his or her financial life that needed to be addressed.

A fee only financial planner can act as a personal fiscal fitness coach to provide motivation as well as a well defined action plan to ensure that steps are taken to improve the clients financial independence now and in the future.

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