Thursday’s need-to-know money news

009fbf535e76a5f4c22dfae6c5168d0bToday’s top story: How to declare your financial independence. Also in the news: What you need to know before becoming a landlord, how the financial crisis in Greece could effect your portfolio, and a little known Texas law that could save you from medical debt.

3 Ways to Declare Your Financial Independence This July 4th
Let financial freedom ring!

Things to Know Before Becoming a Landlord
Proceed with caution.

Does Greece Matter? The Bigger Picture For You And Your Portfolio
The ripple effect.

The Little-Known Texas Law that Can Save You From Medical Debt
Even if you don’t live in the Lone Star state.

Monday’s need-to-know money news

1403399192000-retire-workToday’s top story: Tips on cutting your tax bill. Also in the news: How to get a retirement match from the IRS, money-management tips for the self-employed, and what you need to consider before making a risky investment.

7 Ways to Cut Your Tax Bill
Keep more of your hard-earned money.

Get a $1,000 Retirement Match From the IRS
Introducing the Saver’s Credit.

9 money-managing steps every self-employed person should take
Tips for the 1099ers.

The Factors to Consider Before Making a Risky Investment
Look before you leap.

Q&A: Balancing savings vehicles and tax benefits

Dear Liz: I’m 26 and make $45,000 per year. I currently have about $60,000 saved with no debt. Roughly half of my assets are in retirement accounts, and the other half are in non-retirement accounts. I strive to save 30% of my income (about 15% in pre-tax retirement accounts and 15% in taxable accounts). I hope that my savings habits will provide me the option to retire early. But I am concerned that I am locking up too much of my money in retirement accounts and that a couple decades down the road, I will not be able to access my money when I would like to. How should I balance various savings vehicles and tax benefits, so that I have most options down the road?

Answer: Your savings habits are admirable, but you shouldn’t worry too much about “locking up” your money. There are a number of ways to tap retirement funds if you really need the cash. Ideally, you’d leave the money alone to grow tax-deferred until you’re ready to retire, but you’re not required to do so.

One way to save for retirement with plenty of flexibility is to fund a Roth IRA each year. You don’t get a tax deduction upfront, but you can withdraw your contributions at any time without penalty. If you don’t tap the money until you’re 59 1/2 or older, your contributions and your earnings are tax free if you’ve had the account at least five years. Another advantage of a Roth is that you’re not required to start distributions after age 70 1/2, as you are with other retirement accounts.

Q&A: Tax credit for Roth IRA contributions

Dear Liz: You told a reader that “contributions to a Roth are never deductible.” This statement is a common misconception and is not correct. You can get a tax credit for Roth IRA contributions as long as you fall under the income limits and itemize on your taxes. The credit phases out at $30,000 for singles and $60,000 for married couples.

Answer: A credit is different from a deduction, but thank you for pointing out a tax benefit that many people don’t know exists.

This non-refundable credit, sometimes called a Saver’s Credit, can slice up to $1,000 per person off the tax bill of eligible taxpayers. The credit is available to people 18 and older who aren’t students or claimed as a dependent on someone else’s return. The lowest income taxpayers — those with adjusted gross incomes under $36,000 for marrieds filing jointly or $18,000 for singles in 2014 — can get a tax credit of 50% of up to $2,000 per person ($4,000 for married couples) contributed to retirement plans. Those plans can include traditional or Roth IRAs, 401(k)s or 403(b)s, 457(b)s and SIMPLE IRAs, among others. The credit drops to 20% and then 10% before phasing out. The average amount saved isn’t spectacular: The IRS said credits averaged $205 for joint filers in 2012 and $127 for single filers, but every bit helps.

One of the problems with this tax break, besides so few people knowing about it, is that many low-income people don’t owe income taxes, so they have nothing to offset with this credit. Another issue is that taxpayers need to file a 1040 or 1040A and use Form 8880 to claim it. Low-income taxpayers often use the 1040EZ form, which doesn’t allow them to claim the credit or alert them that it exists.

Thursday’s need-to-know money news

downloadToday’s top story: There’s been a massive data beach at Anthem Insurance. Also in the news: Personal finance questions that should be answered before you say “I do”. learning your investment vocabulary, and assumptions that could hurt your retirement plans.

Massive breach at health care company Anthem Inc.
As many as 80 million customers have had their personal information stolen.

Personal Finance Questions Before Marriage
Questions to ask before walking down the aisle.

The Many Different Types of Investments, and How They Work
Learning the investment vocabulary.

4 Dangerous Assumptions That Could Hurt Your Retirement Plan
You know what they say about assuming…

7 Home-Selling Mistakes to Avoid
Keeping your sale trouble-free.

Wednesday’s need-to-know money news

download (1)Today’s top story: The best low interest credit cards in America. Also in the news: How to have the money talk with your new significant other, why a new IRS rule could change your 401(k) contributions, and how to choose investments for your retirement account.

The Best Low-Interest Credit Cards in America 2014
The lower the better.

How To Bare Your Finances To Your New Love
Tips on having The Talk.

New IRS Rule Can Make Big Difference in 401(k) Contributions
Understanding the new rules.

How To Choose Investments For Your Retirement Account
Choosing for the future.

15 Personal Finance Experts Tell Us: ‘The Best Thing I Ever Bought for $20 or Less’
What to do with the twenty that’s burning a hole in your pocket.

Monday’s need-to-know money news

elephantToday’s top story: It’s time to stop ignoring your finances. Also in the news: The best ways to invest in real estate, how to get help for financially assisting your parents, and how you can get rewarded for saving money.

How to Stop Ignoring Your Finances
You can’t keep ignoring the elephant in the room.

The Best Way to Invest in Real Estate
You don’t have to flip houses in order to profit from real estate.

3 Ways to Get Help for Financially Aiding Your Parents
Help is available during difficult times.

Goal-Based Accounts Reward You for Saving Money
Get rewarded for reaching your goal.

How Your Friends Threaten Your Finances
You don’t have to keep up with the Joneses.

Friday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How to pay off your student loans. Also in the news: Understanding your mutual fund fees, the pros and cons of prepaid debit cards, and timeless money tips for new graduates.

The Wrong Ways to Get Rid of Your Student Loans
Not paying them is not an option.

A Guide to Understanding Mutual Fund Fees
Making sense of your investments.

Prepaid Debit Cards: With all the Scams, are They Worth It?
Choose wisely.

7 Timeless Money Tips for Graduates
You’re on your own now!

These kids are better with money than you are
But it’s never too late.

Wednesday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: Identity theft’s youngest targets. Also in the news: Tips to increase your savings and investments, how to cut your summer energy bill this spring, and who inherits your debts after you die.

When Should You Check Your Child’s Credit Report?
Kids aren’t immune to identity theft.

Six Steps To Financial Spring Cleaning For Divorce
Airing out your home and your marriage.

7 tips to increase savings, investments
Advice from the experts.

Do My Debts Pass On to My Kids After Death?
A different type of inheritance.

How to Reduce Your Energy Costs This Summer
Acting now could cut your bill later.

High fees can break your nest egg

Dear Liz: We have $130,000 invested in mutual funds, but the returns the last few years have been less than 4%. With the financial advisor taking 2% as a fee annually, we are not satisfied with the growth. A co-worker suggested buying blue-chip stocks with a strategy to hold and reinvest the dividends. If this is done in a self-directed plan to avoid the fees, we could be netting 4% plus. Is this a good plan or should we trust the advisor’s optimism that our returns will improve soon?

Answer: You don’t mention your age, your investment mix or your goals for this money. But if your portfolio isn’t doing significantly better this year — after all, the Standard & Poor’s 500 stock market benchmark is up about 30% over the last 12 months — you have cause for concern.

Even if your returns were better, a 2% fee is pretty high. Small investors need to keep an eagle eye on costs, since expenses can have a huge effect on your nest egg. Paying even 1% too much could shave more than $100,000 off your returns over the next 20 years.

That doesn’t mean, however, that an all-stock portfolio is a better choice. Individual stocks typically are much riskier than a diversified portfolio of mutual funds or exchange-traded funds (ETFs).

What might make more sense is consulting a fee-only financial planner who can design a low-cost portfolio for you. You can get referrals to planners who charge by the hour at http://www.garrettplanningnetwork.com.