In this blog post I want to go just a little bit beyond the basics of traditional IRAs and how they work.
An IRA is an individual retirement account by definition, with the emphasis on individual. One IRA means one owner, so there can be no joint titling. In order to contribute to an IRA you must have earned income. That is, income from compensation defined as wages, salaries, tips, alimony, and separate maintenance payments. These are all earned income. Income from capital gains, dividends, and interest is not considered earned income by the IRS – they classify it as investment income.
Your contribution limit is $6000 per year (2020). If you’re over 50 an additional $1000 catch up contribution is allowed, so the limit becomes $7000. Age limits on contributions have been repealed in the 2020 CARES Act, so as long as you have earned income you can contribute.
Nobody plans for a disability. In our experience, people are more willing to incorporate life insurance into their financial plan than disability insurance. Why is this? Let’s first get into the differences between disability and life insurance.
Here are a few key differences between these two types of insurance:
I’ve been pondering this.
It sort of hit me one day after having noticed This Page is Intentionally Left Blank in clients’ brokerage account statements.
Seems to me that if there’s printing on the page, it is not blank, is it? Brokerage statements go on for pages and pages. Who formats these things? Why not print on it and save a tree?
Sometimes business written communication makes me crazy. Why not say use instead of utilize? Or even worse, why not say complete instead of effectualize? Seems the more jargon the better. Or how about our deliverables? Deliverables indeed! We sell deliverables? I though we sold planning and investment management.
Personally, I’d rather eschew obfuscation. (That’s a joke.)
Ok, I'm ranting. I guess we should close the flight plan on this. (Really? Why not simply conclude?)
In the previous installment of this 2-part series, I discussed how you can prepare yourself for a mortgage application in terms of your credit report and credit score. In this installment I’ll look at the criteria that lenders use when evaluating your application.
You may obtain a mortgage from a commercial bank, a savings and loan institution, a mortgage company through a loan originator, or even a private individual.
To answer that, let me give you a term and define it. The term is PITI: Principal, Interest, Taxes, and Insurance. PITI is, in other words, the out-of-pocket expense that it takes to keep you living in the home you buy. PITI also includes association maintenance or condo fees.
Lenders use two qualifying ratios in determining how much mortgage you can afford. They will loan you 28% to 36% of your monthly gross income for PITI...
So you’re getting ready for your first home purchase. Congratulations! This is the first in a two-part series that should be helpful to you. Your First Home Purchase Part II is all about the criteria lenders use when evaluating your application.
In buying your first place you’ve got two main considerations: Coming up with a down payment is #1. #2 is being able to qualify for a mortgage loan. This post assumes you're on track to save your down payment, and that you're looking into credit and mortgage qualification issues. Specifically, you’ll learn how to get a good credit score in order to qualify for a mortgage.
Your first mission is to make sure that your credit report is accurate. I say project, because it may very well be just that – a mission. There are three major credit bureaus: Experian, Transunion, and Equifax. Each...
Student loans are often top of mind for many people in the early stages of a professional career. You’ve made an investment in yourself by getting a great education, and now you’ve got to make enough money to build a life, but also to repay those loans. The main piece of advice we give most of our clients with student loans is not about numbers. It’s about overcoming the feeling that this debt is very heavy burden. So if you’re in that camp, we have some thought to share:
Taking out these loans was ultimately your choice, so own it. You DID in fact have other options – you could have gone to a cheaper school, or stretched your education out as you worked your way through. Whatever the case, ultimately it is your signature on the loan form. Take responsibility.
As many of you know, I am a CFP® instructor with Zahn Associates and have been for many years. As I write I'm reviewing the material for General Principals of Financial Planning, which I’ll be teaching again soon. Part of that course is college funding.
In the context of the material, this section teaches the time value of money calculations. For example, if the client has a newborn who absolutely will be attending Harvard at age 18, how much new annual saving is necessary assuming 5% inflation and 8% earnings? Siri tells me that the full freight now is $78,200.
Ready for the answer? Sitting down? $18,743.42/year. Something most new parents can do, right?
I personally feel that if I have brought a child into the world, I have a responsibility to that child to give him or her the best start possible, and that includes a solid education. Yet college funding numbers look stratospheric. In this example, one year of college may...
The fundamental reason to buy life insurance is that someone else is depending upon you for a living. Plain and simple. It is risk transfer: in exchange for premium dollars, the insurance company will make a payout at your demise.
The life insurance industry is one that responds to market demands. In Part I of this series I’m going to give you a little history. What kind of policy should you buy – term? whole life? In Part II I'll discuss the other jobs life insurance can do for you, and talk a little about underwriting. In Part III I'll examine some common reasons for procrastination.
Original insurance contracts were for one year only – term policies, in other words, which renewed each year. As the insured ages, year-by-year the premiums would rise, reasonably enough, as one’s mortality age comes closer. So fundamentally we...
If you dropped dead tomorrow your family would be in a world of hurt. You know this. Yet you haven't purchased life insurance. Why not? Before you get into it, check out Part I and Part II of this 3-part series.
Why Haven't You Purchased Your Life Insurance?
You think you have enough insurance coverage through work. Do you know how much is there? Typically anywhere from $50K to $250K. Is that anywhere near sufficient?
It isn't the product that bothers you but the process. You put the life insurance agent/broker in the same category as a stereotypical used car salesman. He’s got greasy hair, you’re his newest best friend in the world, and he wants to know, What do I need to do to get you into a policy today? You think he’s out solely to earn a commission. You have nothing against anyone making a living, but you just don’t...
It used to be the case that you went to work for one employer and remained with that employer for the entirety of your working life. You received a pension from that employer when you retired – in other words, you continued to get paid a lesser amount even though you’d stopped working.
This arrangement is no longer the norm – people expect to change jobs several times during their working lives. A 401K retirement plan suits this kind of work environment. When you leave one employer, you can move your 401K funds into the 401K of your new employer, or over to a Traditional IRA. In any event, the responsibility for providing a retirement income lies firmly with the worker!
Contributions are limited by IRS regulation. The maximum deferral that a plan participant can make in 2020 is 100% of salary up to $19,500. If you are age 50 or older, you may be able to make an...