Tuesday, February 28, 2012

Do yourself a favor....

I have been in the Financial Services for almost 30 years.  One of the best gifts I have seen people give themselves (men and women alike) is to rollover their 401k to an IRA when they change jobs.
Often, it's a small amount,  a few hundred or a few thousand dollars. They realize it takes some effort to open a new IRA rollover account; they convince themselves it will make a difference in the future; AND, they fight off every temptation to cash out and spend that money now!

On the road to retirement those small amounts, when added together, compound and grow over time.
That money has the wonderful benefit of tax deferral.  What that means is you will not receive a 1099 to add the dividends and interest to your annual tax bill..  The dividends and interest build the value of your account  and tax deferral, without taking a bite to pay taxes each year, allows it to grow even faster.

FACTS:  when you cash out a tax deferred account you pay full taxes (state and federal) on the account value.  On $10,000 with 25% federal and 6.5% NYState, plus a 10% penalty if you are under 59 1/2 you will pay $4150 in taxes leaving only $5850! You'll pay even more taxes if you are in a higher bracket.

Take good care; do yourself a favor; open an IRA Rollover and let your tax deferred money build for your future.

Tuesday, February 14, 2012

It's not rocket science!

Many years ago after I left teaching and was a stay-at-home mom raising my children, my husband shouted to me, as he ran out the door to catch his morning train,  “Call the bank and tell them to rollover the CD that matures today.”
“Okay”, I shouted back.
Bank? rollover? mature? CD? – I knew he was speaking English but I wasn’t sure what he had asked me to do!  (and this definitely was long before compact disc’s were available!)
So as a dutiful wife I called the bank.  I was somewhat embarrassed, but I asked the person to translate for me.  I was told that we (my husband and I) held a joint account at the bank.  Six months ago we (he) had put $10,000 into a Certificate of Deposit that would earn 8% interest (return) that would come due (mature) on February 14th.
The CD held a fixed amount of money - $10,000 that would never go down,
it had a fixed rate of return – 8% that would not go up or down during the period and
a fixed amount to time – 6 months.  If I wanted my money sooner I would forfeit the interest but if I waited to the day, six months later, I could have my money.
I had the choice of going to the bank and withdrawing my $10,000 plus interest or I could “roll” or redeposit the money (principal and interest) into a new CD for another six or 12 months.
That was easy!
Different language, new experience – it’s not rocket science!
If we take the time to learn the terms; if we are willing to ask simple questions and understand simple answers, and do some reading - we too can feel a level of comfort in the world of money and investments over time. 
If I could do it, so can you!

Tuesday, February 7, 2012

Update your beneficiaries.

There are so many things to remember as you transition in life.  If you have been recently widowed or divorced it is critical to change the beneficiaries on your regular IRA, your Roth IRA, your 401k or 403b, and your insurance policies.  Too often folks forget to make these changes and money goes to to an ex-spouse or other unintended person.  
Call your bank, your HR department or your brokerage adviser and make that change today.