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SEE, THAT’S WHAT THE APP IS PERFECT FOR. Sounds perfect Wahhhh, I don’t wannaLOONA-CRY
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403B RETIREMENT PLANS My sister-in-law who is a teacher was the first one to ask me about these types of accounts. Take advantage of my research by reading below on what is a 403b and what are the advantages of them. A 403(b) is very similar to a 401(k). Essentially, 403(b)s are 401(k)s for people who are employed by a 501©3, which is the IRS’s designation for a tax-exempt organization. Teachers at public schools also can open a 403(b). Being similar to 401(k)s, 403(b)s have the same benefits. These are five advantages of 403(b)s.Tax Shelter
403(b)s have two tax advantages. First, initial investments can often be deducted from one’s taxes. In many cases, this holds true both for the individual and the employer, if a match is provided. Secondly, any growth in the account is tax deferred. No taxes are paid on earnings in a 403(b), until they are withdrawn Matches from Employers In many instances, employers provide matches for their employees with 403(b)s. Even though the organizations must be a 501©3 or public school system, they often match employee contributions. This helps the non-profit attract and keep quality employees. Any match to a 403(b) is often restricted to a certain percentage of an employee’s income. An employee can contribute beyond that limit to a 403(b), but the excess will not be matched. The match itself is usually a percentage of the contribution made by the employee. As an example, assume an organization matched employee contributions up to two percent of their income. Also assume an employee earned $30,000 annually, and the match was 25%. If the employee contributed $600 each year (two percent), then the organization would add $150 annually. This amount does not seem like much initially, but it makes a huge impact on one’s nest egg over time. Annual matches combine with compound interest to provide a substantial addition toone’s savings.
Flexibility
403(b)s are vehicles for retirement savings. Their primary advantages are tax deferments and employer matches. As vehicles for investments, 403(b)s can hold a variety of investments. Individuals can select from tax-deferred annuities, mutual funds (which is a 403(b)7), and retirement accounts from churches. This flexibility allows one to customize the 403(b) to meet one’s individual risk tolerance and goals.Elasticity
When an employee separates from an employer and has a 403(b), the employee is not locked into a single option. The 403(b) is elastic; four different things can happen to it. First, it can be left alone and remain where it is. Depending on its size, some organizations may charge maintenance fees for this or not allow this option. Secondly, it can be rolled into an IRA. IRAs are similar to 403(b)s, but there are a few notable differences. Among them, loans cannot be taken from an IRA, but it can hold stocks. A 403(b) cannot be rolled into a 401(k). Third, it can be rolled into a new employer’s 403(b) plan, if there is a new employer that offers a 403(b). Fourth, the money can be withdrawn. If it is cashed out, then there will be severe penalties and taxes. This is usually not awise choice.
Borrowable
Money in a 403(b) can be borrowed. As mentioned earlier, this is a distinction from an IRA. People can take out a loan against their 403(b), although the interest rates are typically high. This is usually not the best place to secure a line of credit, but can be useful in emergencies. In many ways, 403(b)s are identical to 401(k)s. However, the neither can be converted into the other. The 403(b) is the government’s way of providing for those in public service, whether it is through a religious, charitable or educational organization. For moreinformation
click: https://www.nerdwallet.com/blog/investing/best-retirement-plans-for-you/1 note
Dec 11th, 2018
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401K RETIREMENT PLANS From novice to informed, the following is my research on the types of 401ks, the benefits and tips from around the web. Enjoy! There are many ways people can use to save for retirement: savings accounts, brokerage accounts, IRAs, 403bs, 401(k)s and more. Of all these methods, most people are best served by 401(k)s. Not everyone can open a 401(k). However, for those who can, they have many advantages. Here are five benefits of 401(k)s.AVAILABILITY
401(k)s are retirement savings plans provided by employers. They are not available for anyone who is self employed, an independent contractor or unemployed. Nor are can teachers at public schools or employees of nonprofits open them, although these two later groups can open 403(b)s, which are similar. Moreover, not all employers provide401(k)s.
EMPLOYER MATCH
In an effort to reduce costs, some companies no longer provide a match on employee contributions to a 401(k). Yet, many still do. Employees who receive a match on their 401(k) contributions should take full advantage of it. This is the best benefit of 401(k)s. An employer’s match is free money, for the employee. Typically, companies limit the match to a certain percentage of the employee’s paycheck. To the 401(k), the company will add a certain percentage of the amount invested into the 401(k) by the employee. This amount is often partially based on one’s tenure with the organization. Consider an example. Assume an employee earns $1,000 per week, the employer matches on up to four percent of the paycheck, and the employee contributes 50% of the employee’s investment. If the employee invests $40 each week, the company will add $20. Over the course of the year, the employer will provide a “bonus” of $1,040, which was added to the 401(k). That $1,040 is a bonus of two percent of the employee’s salary. More importantly, it will increase over time. By the time the employee is ready to retire, one year’s $1,040 could be worth over $10,000. (This calculation assumes an eight percent return for 30 years).TAX ADVANTAGE
All 401(k) contributions are made with pre-tax income. The government does not deduct taxes on any amount put into the 401(k), nor on any interest, dividends or capital gains when they are earned. Of course, people cannot completely evade paying taxes. Any withdrawal made is taxed when taken, but until then (ideally retirement), taxes can be delayed. When novice investors open a 401(k), they can focus on the pre-tax contributions. It is important to realize that taxes will eventually be paid on all the money in a 401(k), whether it is earned through salary or through investments. The 401(k) is only a tax shelter in the sense that taxes can be delayed, perhaps to a time when one’s personal tax rate will be lower than it currently is.CUSTOMIZATION
The investments in a 401(k) can be customized to fit an individual’s needs. Everyone has different goals, time for investing, and levels of risk tolerance. Within a 401(k), employers allow people to select the asset allocation that best fits their needs. These options range from low-risk to high-risk, and often include stocks, bonds, equities and other investment options. For employees who are novice investors, employers have people who will help them choose the mostsuitable plan.
While 401(k)s offer great flexibility, they are not as customizable as other investments. In an IRA, whether Roth or Traditional, an individual has complete control over the investments. With 401(k)s, people often must select from several options the employer provides. Employees are limited to these options, but there is almost always a choice to meet everyone’s goals, time frame and risk tolerance.ROLL OVER
In today’s world, few people will work for the same employer their entire life. Most college graduates will have several different employers, if not different careers. Thankfully, 401(k)s areportable.
When an employee leaves their occupation prior to retirement, they are faced with four options. The first option is status quo. The 401(k) can be held at its current institution, which will likely charge administrative fees. Second, if there is an immediate job offer, then the 401(k) can be rolled over into the new employer’s program. If the new employer has a generous 401(k) plan, then this can be a wise choice. Third, the 401(k) can be rolled over into an IRA. There are differences between a 401(k) and IRA, but they both are retirement saving plans. Anyone can open an IRA, so this is often what people do if they are going to be unemployed or self-employed. Finally, if the money is needed, it can be withdrawn from the account. It is usually best to avoid this, as taxes must be paid, along with a 10% early withdrawal penalty.LOAN AND WITHDRAWAL
In dire circumstances, the investment in a 401(k) can be used to secure a loan or withdrawn. Both actions are strongly discouraged, unless they are absolutely necessary. (If facing bankruptcy or foreclosure, most financial advisors recommend withdrawing from a 401(k)). Loans have steep interest rates and withdrawals face severe penalties. In light of these stipulations, it may be hard to consider these an “advantage” of the 401(k). Yet, it is reassuring to know the money is always available if it is needed.LIMITS
As with all retirement accounts, 401(k)s have limits on how much can be contributed annually. The maximum contributions, though, are fairly high for 401(k)s. For 2012, the maximum individual contribution is $17,000. Anyone over 50 years old can contribute an additional $5,500, for a total of $22,500, to “catch up.” Combined, the most employees and employers can contribute to one 401(k) in 2012 is $50,000. This is a very generous limit, if your employer provides the largest match allowed.VARIATIONS
The above information applied to Traditional 401(k)s, but there are several similar retirement accounts. 403(b)s serve the same purpose as 401(k)s, but 403(b)s are designed for nonprofits and public schools. Anyone who works for a 501©3 and public school teachers should investigate 403(b)s. Although they are similar, there are minor differences. 401(k) solos are almost identical to 401(k)s, but they are restricted to business owners and their spouses only. The third variation of the 401(k) is the Roth 401(k). The difference between a Traditional and a Roth 401(k) is similar to that between a Traditional and a Roth IRA. In Traditional 401(k)s, taxes are not paid when money is contributed, but when it is taken out. In the Roth 401(k)s, taxes are paid on contributions only; they are not paid when money is withdrawn. Whether a Traditional or Roth 401(k) is wiser depends on one’s time frame for investing. Since contributions to the Traditional 401(k) are not initially taxed, this type of 401(k) will initially have more money that can grow. However, the Roth 401(k) will eventually outperform the Traditional 401(k), assuming all other variables are equal. The Roth 401(k) will grow less initially, but taxes will not be withheld against the growth. Thus, the Traditional 401(k) is better for people nearing retirement, because it performs better in the short term. The Roth 401(k) will be a wiser choice for people far from retirement, since it performs better in the long term. Despite the different versions of the 401(k), individuals rarely have a choice between two types. Employers usually decide what they will offer, and the employees simply decide whether to take advantage of it. If they choose to invest in the 401(k) retirement plan, then there are different investment options. However, the type of 401(k)cannot be selected.
No matter what version of a 401(k) an employer offers, you are always wise to invest in it. The advantages of 401(k)s are why many people choose to invest in them. There are many investment vehicles available. Few offer “free” money, like the employer match, and the flexibility that people find within a 401(k). For moreinformation
click: https://www.investopedia.com/articles/retirement/08/401k-info.aspDec 11th, 2018
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HOW MUCH TO SAVE FOR RETIREMENT This is one question that keeps me awake at night. How do you know how much to save or how much is enough? As I researched I found out there is no one size fits all program (which is frustrating to me) but many variable to consider. One man’s food is another man’s poison. This saying applies to retirement savings quite aptly, as there is no fixed amount that can be recommended to everyone on a blanket basis. Rather, the answer depends on quite a few factors that are part of the bigger equation. Consider a few of them below:TIME IS YOUR ALLY
Albert Einstein is reported to have referred to compound interest rate as the single most powerful force in the world. This is because of the nature of compounding that allows money to grow one on top of the other; period upon period. It can be compared to a rolling snowball, which accumulates additional snow as it rolls down a slope. Hence, time is an investor’s ally, and the earlier you start saving the less you need to actually save in the long run; for the reason that savings will keep growing for a longer period. ESTIMATE YOUR GOLDEN YEARS The age at which you plan to retire plays a major role in determining the ideal size of your nest egg. The earlier you plan on stepping off the corporate ladder, the less time there is to contribute to a retirement fund. Likewise, the savings need to support you for a longer duration. In light of this fact, individuals are attempting to delay their retirement to maximize their earnings potential. However, many are being made redundant and hence forced to retire prematurely. To provide for this possibility, the only feasible and relatively lucrative option is to set up a small business that will supplement your current income, and potentially exceed your salary. It is also a good option to pursue if you plan on working from home,post-retirement.
MEDICAL EXPENSES
Although, state-sponsored medical insurance kicks in after 65 years of age for most citizens, there are plenty of expenses that are not covered by the policy. Coupled with the pace of medical advancement; the average life expectancy is constantly rising. As a result, many individuals can be expected to pay thousands of dollars from their own pocket. Apportion for these costs by taking your medical history intoaccount.
A TALE OF TWO CITIES The city/country you choose to retire in plays a major role in determining the duration your funds are likely to last. This is credited to the difference between living costs across the world. Many senior citizens opt to cross domestic and international boundaries, to maximize their dollars; made possible by enormous differences in purchasing power parity (PPP). PPP compares the purchasing power of a unit of currency in two different countries. Although it is not equal to the official exchange rate between the respective currencies, it is a useful measure to predict the number of years the funds will last, based on the average cost of a comparable or intended standard ofliving.
To demonstrate this point, let us examine the cost of a typical three bedroom home in various localities in the United States. At Port Charlotte, Florida such a property costs an average of $170,000 while another at Boulder City, Nevada costs around $315,000. No taxes are applicable on such properties in both states. Similarly, the average price of a three bedroom property in Palm Springs, California and Traverse City, Michigan is around $250, 000; however the applicable tax rate is 10.55% and 4.35%, respectively. Estimate your average living expenses for the year and multiply it by the number of years you expect to live off your savings. This can be done by using the cost of living in the area you wish to retire in. _Above figures quoted from CNN Money_INFLATION
Inflation is to savings as termite is to wood. Inflation erodes the purchasing power of money, thus directly impacting (reducing) the amount of goods and services purchasable from a given amount, and plummeting the real return of your portfolio. The yields quoted by fund managers etc., refer to the nominal rate of return, and inflation has not been accounted for. To simplify things, if the rate of return of a portfolio is 8% but inflation is recorded at 5%, the actual or real growth rate of your portfolio is a mere 3%. Hence, the rate of return that should actually be considered by investors is the one that has been discounted for inflation. Deflation, which is a reduction in the general price level of the economy, is somewhat rare, but positively impacts the value of aportfolio.
AN ALTERNATIVE APPROACH The universal approach towards retirement consists of saving in funds and employer sponsored retirement plans. Though it is slightly risky behavior, many would benefit from exploring alternative options for a residual income stream. For example, purchasing a residential or commercial property with retirement savings on an instalment basis would ensure lifelong income from renting out the property, irrespective of life expectancy. Similarly, if this idea or venture sounds too risky to explore, consider cultivating an online blog or website over the course of your lifetime, which has the potential to earn income through Google Adsense or affiliate marketing. These are just two of the many means of ensuring that you do not outlive your savings. CONCLUSION – SET REALISTIC TARGETS As a rule of thumb, those in the working class are advised to save anywhere between 10 to 20% of their take-home salary. However, the ratio is higher for those who earn less than $50,000 annually. With the performance of the financial markets in recent years, there is real concern that some people may outlive their savings; therefore it is best to err on the side of caution. There are instances where teenagers start contributing to a retirement fund generated from their pocket money and part time jobs. While it is best to contribute as soon as the pocket allows, those in their 30s and 40s can also build a respectable nest egg, provided they accelerate their efforts to make up for the lost time. Also, analyze and adjust your portfolio from time to time, to ensure the returns are in par with your age and attitude towards risk. For more information click: https://www.daveramsey.com/blog/how-to-save-for-retirement1 note
Dec 11th, 2018
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