In spite of decades of the women's movement some attitudes are difficult to change. Many more women are in the workforce than 30 or 40 years ago. Many women make substantial salaries - some even make more than their spouses. A recent survey showed that 56% of married women still leave major investing and financial decisions to their spouses. 61% of that group, qualified as millennials, fall into that category. (Those born between 1981 and 1991.)
Women who have experienced divorce or widowhood plead with their colleagues to pay attention to important financial decisions that will profoundly impact their future! These women suffered the consequences of lack of involvement in financial decision making and urge others to break the cycle of financial abdication.
Some of the surprises that surfaced:
- outdated or lost wills making the estate distribution more costly and time consuming.
- hidden debt and credit cards,
- shared beneficiaries,
- hidden spending,
- secret accounts,
- undisclosed IRA's or 401k plans,
- lack of adequate life insurance or huge loans against life insurance policies.
Remember, women usually live longer than men. Whether you choose to be single or become single as a result of death or divorce, you will need the confidence and experience of being financially savvy.
Be $ Smart - make financial decisions a partnership. You need to protect your future.
Showing posts with label 401k. Show all posts
Showing posts with label 401k. Show all posts
Monday, April 30, 2018
Sunday, April 15, 2018
Investment Tax Categories
Last week I addressed tax-efficiency in your portfolios. Here I shall review the differences among those classifications of taxable, tax-deferred and tax-exempt to make tax-efficiency more readily understood. The following are simple explanations. For expert tax guidance please speak with your accountant or tax attorney.
Taxable: an account that holds money on which you have already paid taxes - e.g. bank checking or savings accounts or brokerage accounts. These accounts may have stocks, bonds, CD's, etc. Every year you receive a 1099 of all reportable earnings: dividends and interest as well as reportable proceeds: stock or bond sales. You enter these numbers on your tax return and pay taxes accordingly.
Tax-exempt: refers to bonds (loans) issued by municipalities (states, cities, towns, counties). These bonds are exempt from federal taxes. As an incentive to its residents to buy these bonds, which finance local projects, you pay no state taxes on the interest. As a NY resident, if you purchase a NY State bond, it will be double tax exempt as you will pay no state or federal taxes on the interest. However, NY reserves the right to tax the interest earned on other states' bonds.
Tax-deferred: means you pay no taxes now but when you withdraw the money both state and federal taxes are due. IRA, SEP, 401k, 403b all grow tax-deferred. Your 401k or 403b plan from work will take money from your paycheck before deducting taxes, deposit the money into your plan where it will grow tax-deferred (you will not receive a 1099 each year). Taxes will be paid when you start withdrawing money from these accounts later in retirement. The money will be taxed, as your income is taxed, both by the state and the federal government. Hopefully, in retirement you will be in a lower tax bracket and, consequently, pay less in taxes.
Tax-free: refers to a Roth IRA where money grows without paying taxes each year and is distributed without being taxed. Actually, the money contributed to most Roth IRA's is money on which you have already paid taxes; it is the earnings (growth) that are tax-free.
Be $ Smart - Learn about the impact of taxes on your investments. Position your assets effectively to pay less in taxes.
Taxable: an account that holds money on which you have already paid taxes - e.g. bank checking or savings accounts or brokerage accounts. These accounts may have stocks, bonds, CD's, etc. Every year you receive a 1099 of all reportable earnings: dividends and interest as well as reportable proceeds: stock or bond sales. You enter these numbers on your tax return and pay taxes accordingly.
Tax-exempt: refers to bonds (loans) issued by municipalities (states, cities, towns, counties). These bonds are exempt from federal taxes. As an incentive to its residents to buy these bonds, which finance local projects, you pay no state taxes on the interest. As a NY resident, if you purchase a NY State bond, it will be double tax exempt as you will pay no state or federal taxes on the interest. However, NY reserves the right to tax the interest earned on other states' bonds.
Tax-deferred: means you pay no taxes now but when you withdraw the money both state and federal taxes are due. IRA, SEP, 401k, 403b all grow tax-deferred. Your 401k or 403b plan from work will take money from your paycheck before deducting taxes, deposit the money into your plan where it will grow tax-deferred (you will not receive a 1099 each year). Taxes will be paid when you start withdrawing money from these accounts later in retirement. The money will be taxed, as your income is taxed, both by the state and the federal government. Hopefully, in retirement you will be in a lower tax bracket and, consequently, pay less in taxes.
Tax-free: refers to a Roth IRA where money grows without paying taxes each year and is distributed without being taxed. Actually, the money contributed to most Roth IRA's is money on which you have already paid taxes; it is the earnings (growth) that are tax-free.
Be $ Smart - Learn about the impact of taxes on your investments. Position your assets effectively to pay less in taxes.
Monday, January 25, 2016
Riding the Roller Coaster
I have never been a fan of roller coasters; I consider them torture. Yet my older son can spend an entire day riding them - the higher, twistier, upside-down/inside-out, the better! But even he is not enjoying the volatile ride the markets have been taking these past few weeks and months.
Some folks view roller coasters as frightening.
Some find them exhilarating. How do you react to market volatility?
I will assume you have some money invested in the stock/bond/commodity markets. Maybe you have a 401k through work, an IRA or a 529 plan that holds a variety of funds.
Hold on tight, close your eyes, go for the ride!
1. DO NOT, repeat Do Not watch the TV constantly monitoring the daily market moves. We all know TV sensationalizes events.
2. Do Not check your accounts hourly, daily or weekly. This breeds dread, confusion and despair. Reviewing quarterly reports will suffice.
3. Take advantage of the opportunity to buy low if this is part of your investment strategy to increase certain positions. Yes, stocks may go a bit lower but they are way down from frothy highs. Remember "buy low, sell high".
4. Reassess your risk tolerance. Have you been anxious, upset and losing sleep these past few weeks? Perhaps you thought you could handle more risk. Or maybe you are closer to retirement or buying a house and feel the need to be more protective of your money. Give yourself some time before reallocating.
5. Hopefully you have an investment strategy, If so, stick with it. If not, now is not the time to implement one.
A good investment strategy will help you ride out the peaks and valleys of the market and provide guidance in achieving your financial goals.
In times like these it is helpful to remember, in order to generate the type of long-term returns that create wealth, you must accept a certain amount of risk. With that risk comes volatility. The key is not to take steps to avoid the risk altogether, but to manage the risk where possible.
Be $ Smart - Imagine the market as a living, breathing organism. It cannot inhale or exhale indefinitely. Have a plan to take advantage of market moves.
Some folks view roller coasters as frightening.
Some find them exhilarating. How do you react to market volatility?
I will assume you have some money invested in the stock/bond/commodity markets. Maybe you have a 401k through work, an IRA or a 529 plan that holds a variety of funds.
Hold on tight, close your eyes, go for the ride!
1. DO NOT, repeat Do Not watch the TV constantly monitoring the daily market moves. We all know TV sensationalizes events.
2. Do Not check your accounts hourly, daily or weekly. This breeds dread, confusion and despair. Reviewing quarterly reports will suffice.
3. Take advantage of the opportunity to buy low if this is part of your investment strategy to increase certain positions. Yes, stocks may go a bit lower but they are way down from frothy highs. Remember "buy low, sell high".
4. Reassess your risk tolerance. Have you been anxious, upset and losing sleep these past few weeks? Perhaps you thought you could handle more risk. Or maybe you are closer to retirement or buying a house and feel the need to be more protective of your money. Give yourself some time before reallocating.
5. Hopefully you have an investment strategy, If so, stick with it. If not, now is not the time to implement one.
A good investment strategy will help you ride out the peaks and valleys of the market and provide guidance in achieving your financial goals.
In times like these it is helpful to remember, in order to generate the type of long-term returns that create wealth, you must accept a certain amount of risk. With that risk comes volatility. The key is not to take steps to avoid the risk altogether, but to manage the risk where possible.
Be $ Smart - Imagine the market as a living, breathing organism. It cannot inhale or exhale indefinitely. Have a plan to take advantage of market moves.
Thursday, January 21, 2016
With the New Year Comes a New Set of Numbers
Every January brings updates from the IRS and Social Security. It helps to know those numbers relative to your cash flow and tax situation. I'll mention a few for you to consider:
Social Security cost of living increase for 2016............$0
The government deemed there was no inflation in 2015, so no increase in monthly payouts.
Kiddie tax amount (children under 19 and dependent full time students under .............................................$1,050
This pertains to investment income not earned income.
Social Security earning base.......................$118,000
You must earn over $118,000 before your employer stops deducting SS taxes.
Social Security earnings limit......................$15,720
Maximum earned income under Normal Retirement Age 66.
Annual Gift Exclusion...............................$14,000
You may gift $14,000 to any number of individuals and not pay a gift tax.
401(k), SEP, TSA maximum contribution...............$18,000
Catch up for those over 50...........................$1,000
Make sure you contact HR to increase your contribution to reach the max. Contributions may lower your taxable income for the year.
Contribution limit for IRA's........................$5,500
Catch up for those over 50 .........................$1,000
If you turn 50 any time during 2016, you may contribute $6,500 max.
If you can't contribute the maximum, contribute something!
Health Savings Account contribution:
Single.....................................................$3,350
Family.....................................................$6,750
Catch up for those over 50 .........................$1,000
Since you are not required to spend down an HSA at the end of each year, this is a good way to grow retirement savings.
These are just a few numbers that may have meaning for you. Consult your tax person to determine which apply to you and to learn additional tax ways reduce your tax bill.
Be $ Smart - Take advantage of all opportunities to save on taxes, especially those that grow tax-deferred.
Social Security cost of living increase for 2016............$0
The government deemed there was no inflation in 2015, so no increase in monthly payouts.
Kiddie tax amount (children under 19 and dependent full time students under .............................................$1,050
This pertains to investment income not earned income.
Social Security earning base.......................$118,000
You must earn over $118,000 before your employer stops deducting SS taxes.
Social Security earnings limit......................$15,720
Maximum earned income under Normal Retirement Age 66.
Annual Gift Exclusion...............................$14,000
You may gift $14,000 to any number of individuals and not pay a gift tax.
401(k), SEP, TSA maximum contribution...............$18,000
Catch up for those over 50...........................$1,000
Make sure you contact HR to increase your contribution to reach the max. Contributions may lower your taxable income for the year.
Contribution limit for IRA's........................$5,500
Catch up for those over 50 .........................$1,000
If you turn 50 any time during 2016, you may contribute $6,500 max.
If you can't contribute the maximum, contribute something!
Health Savings Account contribution:
Single.....................................................$3,350
Family.....................................................$6,750
Catch up for those over 50 .........................$1,000
Since you are not required to spend down an HSA at the end of each year, this is a good way to grow retirement savings.
These are just a few numbers that may have meaning for you. Consult your tax person to determine which apply to you and to learn additional tax ways reduce your tax bill.
Be $ Smart - Take advantage of all opportunities to save on taxes, especially those that grow tax-deferred.
Monday, June 15, 2015
Minimize your taxes
It makes sense to find ways to reduce your taxable income. One place to start is your portfolio. Your investments generate a certain amount of taxable income each year as witnessed by the number of 1099's you receive in the new year.
If you want to reduce the taxes generated by your portfolio, put the big tax generating investments in your tax-deferred retirement accounts - IRA, Roth IRA and 401k. These include real estate investment trusts (REIT's), taxable bonds and actively managed mutual funds (which usually have high, annual portfolio turnover).
Put stocks and stock indexed mutual funds in your taxable accounts where you will be happy holding them for 12 months or longer. After 12 months, they are taxed as long-term capital gains not as ordinary income, a much lower rate. If you pass this account on to your heirs, they could pay virtually no capital gains tax when they sell.
Be careful as you reconfigure your portfolio. Do it slowly and methodically. If you sell too many investments with gains in any given year in your taxable accounts you may increase your tax obligation and push yourself into a higher tax bracket. Best to consult your account first.
Be $ Smart - re-position your investments to minimize your taxes.
If you want to reduce the taxes generated by your portfolio, put the big tax generating investments in your tax-deferred retirement accounts - IRA, Roth IRA and 401k. These include real estate investment trusts (REIT's), taxable bonds and actively managed mutual funds (which usually have high, annual portfolio turnover).
Put stocks and stock indexed mutual funds in your taxable accounts where you will be happy holding them for 12 months or longer. After 12 months, they are taxed as long-term capital gains not as ordinary income, a much lower rate. If you pass this account on to your heirs, they could pay virtually no capital gains tax when they sell.
Be careful as you reconfigure your portfolio. Do it slowly and methodically. If you sell too many investments with gains in any given year in your taxable accounts you may increase your tax obligation and push yourself into a higher tax bracket. Best to consult your account first.
Be $ Smart - re-position your investments to minimize your taxes.
Monday, June 8, 2015
Another Type of Diversification
Over the past few weeks we have talked about diversification within your portfolio. We use diversification to reduce potential risk. Another kind, tax diversification, occurs with the types of accounts in which you hold your assets and how withdrawals are taxed.
No matter how you make your money, Uncle Sam is waiting to take his share. You can structure withdrawals to be tax efficient and lower your tax burden. This is especially effective during retirement. For you to have income choices you must build these accounts prior to retirement, while you are young and in the "accumulation" phase of your life.
A well diversified portfolio will hold a mixture of assets - stocks, bonds, cash, real estate, precious metals, etc. Creating a tax-diverse portfolio means you hold assets in taxable, tax-deferred and tax-free accounts.
A trained advisor will scrutinize a retirement plan for tax efficiency. You want to minimize taxes by taking income from specific accounts.
Remember, money held in tax-deferred accounts (traditional IRA, 401k,etc.) is fully taxed as ordinary income on withdrawal paying both state and federal taxes.
If all your assets are tax-deferred, every withdrawal will count as income and could push you into a higher tax bracket. For example, say you need $60,000 a year for income, you must withdraw $72,000 to cover the 20% withholding. Add that to Social Security or pension income, you could bet bumped into the next tax bracket. But, if you could take $40,000 ($48,000 less 20%) from the IRA, $10,000 from your taxable account(paying some capital gains tax) and $10,000 from your Roth (tax-free), you maintain a lower taxable income.
Be $ Smart - build your savings in different types of accounts for tax efficiency.
Be sure to consult your tax advisor for specifics.
No matter how you make your money, Uncle Sam is waiting to take his share. You can structure withdrawals to be tax efficient and lower your tax burden. This is especially effective during retirement. For you to have income choices you must build these accounts prior to retirement, while you are young and in the "accumulation" phase of your life.
A well diversified portfolio will hold a mixture of assets - stocks, bonds, cash, real estate, precious metals, etc. Creating a tax-diverse portfolio means you hold assets in taxable, tax-deferred and tax-free accounts.
A trained advisor will scrutinize a retirement plan for tax efficiency. You want to minimize taxes by taking income from specific accounts.
Remember, money held in tax-deferred accounts (traditional IRA, 401k,etc.) is fully taxed as ordinary income on withdrawal paying both state and federal taxes.
If all your assets are tax-deferred, every withdrawal will count as income and could push you into a higher tax bracket. For example, say you need $60,000 a year for income, you must withdraw $72,000 to cover the 20% withholding. Add that to Social Security or pension income, you could bet bumped into the next tax bracket. But, if you could take $40,000 ($48,000 less 20%) from the IRA, $10,000 from your taxable account(paying some capital gains tax) and $10,000 from your Roth (tax-free), you maintain a lower taxable income.
Be $ Smart - build your savings in different types of accounts for tax efficiency.
Be sure to consult your tax advisor for specifics.
Tuesday, February 10, 2015
Use Tax Season to Put Your Financial House in Order
My least favorite time of year has arrived - TAX season!
It takes days to gather all the 1099's, W-2's, etc. I take over the dining room table with papers spread over every inch. Fortunately, I also have a kitchen table where I eat my meals.
With everything out in the open, this presents a perfect opportunity to organize your finances.
Try to implement one of these suggestions:
1. Use a 3-ring binder to organize statements. Even if you receive statements online, it may be helpful to print the summary page for each financial institution. Use dividers to separate each. This helps you to compare monthly or quarterly values. Are you making money?
2. Create an annual Net Worth statement. List all the assets you own - house, condo, car, 401k, IRA, etc. and their current value. Add them up. List what you owe (liabilities) - car loan, student loan, mortgage, credit card balances, etc. Add them up. Subtract what you owe from what you own. That number is your Net Worth. Each year compare the bottom line. Are you growing your wealth?
3. Increase your savings amount. Pay yourself first.
Are you on track to buy that car or condo? Set up direct deposit from your checking account to your savings account.
For retirement, increase your contribution to your 401k/403b by 1%.
Be $ Smart - Use tax season to build your financial independence.
It takes days to gather all the 1099's, W-2's, etc. I take over the dining room table with papers spread over every inch. Fortunately, I also have a kitchen table where I eat my meals.
With everything out in the open, this presents a perfect opportunity to organize your finances.
Try to implement one of these suggestions:
1. Use a 3-ring binder to organize statements. Even if you receive statements online, it may be helpful to print the summary page for each financial institution. Use dividers to separate each. This helps you to compare monthly or quarterly values. Are you making money?
2. Create an annual Net Worth statement. List all the assets you own - house, condo, car, 401k, IRA, etc. and their current value. Add them up. List what you owe (liabilities) - car loan, student loan, mortgage, credit card balances, etc. Add them up. Subtract what you owe from what you own. That number is your Net Worth. Each year compare the bottom line. Are you growing your wealth?
3. Increase your savings amount. Pay yourself first.
Are you on track to buy that car or condo? Set up direct deposit from your checking account to your savings account.
For retirement, increase your contribution to your 401k/403b by 1%.
Be $ Smart - Use tax season to build your financial independence.
Wednesday, June 4, 2014
Taxable - Tax-exempt - Tax-deferred - Tax-free
Clients often ask me to explain the differences among their various accounts. Taxes play an important role in how you invest and how much money you will be able to keep after paying taxes.
The following are simple explanations. For expert tax guidance please speak with your accountant or tax attorney.
Taxable: an account that holds money on which you have already paid taxes - e.g. bank checking or savings accounts or brokerage accounts. These accounts may have stocks, bonds, CD's, etc. Every year you receive a 1099 of all reportable earnings, dividends and interest. You enter these numbers on your tax return and pay taxes accordingly.
Tax-exempt: refers to bonds (loans) issued by municipalities (states, cities, towns, counties). These bonds are exempt from federal taxes. As an incentive to its residents to buy these bonds, which finance local projects, you pay no state taxes on the interest. As a NY resident, if you purchase a NY State bond, it will be double tax exempt as you will pay no state or federal taxes on the interest. However, NY reserves the right to tax the interest earned on other states' bonds.
Tax-deferred: means you pay no taxes now but when you withdraw the money both state and federal taxes are due. IRA, SEP, 401k, 403b all grow tax-deferred. Your 401k or 403b plan from work will take money from your paycheck before deducting taxes, deposit the money into your plan where it will grow tax-deferred (you will not receive a 1099 each year). Taxes will be paid when you start withdrawing money from these accounts later in retirement. The money will be taxed, as your income is taxed, both by the state and the federal government. Hopefully, in retirement you will be in a lower tax bracket and, consequently, pay less in taxes.
Tax-free: refers to a Roth IRA where money grows without paying taxes each year and is distributed without being taxed. Actually, the money contributed to most Roth IRA's is money on which you have already paid taxes; it is the earnings (growth) that are tax-free.
Be $ smart. Know your tax rate. Learn about the impact of taxes on your investments.
The following are simple explanations. For expert tax guidance please speak with your accountant or tax attorney.
Taxable: an account that holds money on which you have already paid taxes - e.g. bank checking or savings accounts or brokerage accounts. These accounts may have stocks, bonds, CD's, etc. Every year you receive a 1099 of all reportable earnings, dividends and interest. You enter these numbers on your tax return and pay taxes accordingly.
Tax-exempt: refers to bonds (loans) issued by municipalities (states, cities, towns, counties). These bonds are exempt from federal taxes. As an incentive to its residents to buy these bonds, which finance local projects, you pay no state taxes on the interest. As a NY resident, if you purchase a NY State bond, it will be double tax exempt as you will pay no state or federal taxes on the interest. However, NY reserves the right to tax the interest earned on other states' bonds.
Tax-deferred: means you pay no taxes now but when you withdraw the money both state and federal taxes are due. IRA, SEP, 401k, 403b all grow tax-deferred. Your 401k or 403b plan from work will take money from your paycheck before deducting taxes, deposit the money into your plan where it will grow tax-deferred (you will not receive a 1099 each year). Taxes will be paid when you start withdrawing money from these accounts later in retirement. The money will be taxed, as your income is taxed, both by the state and the federal government. Hopefully, in retirement you will be in a lower tax bracket and, consequently, pay less in taxes.
Tax-free: refers to a Roth IRA where money grows without paying taxes each year and is distributed without being taxed. Actually, the money contributed to most Roth IRA's is money on which you have already paid taxes; it is the earnings (growth) that are tax-free.
Be $ smart. Know your tax rate. Learn about the impact of taxes on your investments.
Tuesday, November 29, 2011
Welcome to My Blog!
Hi! My name is Eileen Hawe . I’ve been working in financial services and personal finance for almost 30 years. It’s an industry that’s rife with conflict of interest. I witnessed it first hand and understand the need for basic, clear, unbiased information.
Have you ever had to make an important decision, looked for help or direction and didn’t know whom to trust? Or, while sitting across from a financial adviser heard that little voice in the back of your head wonder “what’s in it for him/her?”
I will answer your questions, even the “dumb” ones, clearly and simply. I will guide you through the rough times, get you back on your feet and help you realize that personal finance is not rocket science.
I love what I do. I have a skill which I am happy to share with you. It makes me feel good; we both benefit.
Follow my blog where I will post important financial facts on a regular basis.
For example: are you familiar with The Rule of 72?
Take the interest rate you are earning on an investment (a CD earning 2%).
Divide that number into 72 to show the number of years it will take to double your money. (72/2=36) Thirty-six years. An investment with a higher return of 6% would double your money in 12 years. (72/6=12) Twelve years. Higher returns may have higher risk.
Also, IRA Conversion: did you know that this year might be a good time to convert your regular IRA (individual retirement account) to a Roth IRA? Many portfolios have lost money in the second half of 2011 so the taxes due on the conversion may be less.
If these tips have helped you, contact me to schedule a meeting and I will guide you to financial security.
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