Get smart with your money
Today’s top story: Goofed on your tax returns? Here’s what to do. Also in the news: 5 awful reasons to buy a stock, what newlyweds need to know about insurance, and does free shipping make you spend more money.
Goofed on Your Tax Return? Here’s What to Do
Don’t panic.
5 Awful Reasons to Buy a Stock
Be cautious when buying.
What Newlyweds Need to Know About Insurance
Changes you need to make.
Does Free Shipping Make You Spend More Money?
When free shipping gets costly.
Today’s top story: Distinguishing between needs vs. wants and how to budget for both. Also in the news: The pros and cons of an LLC, the bull market’s 8th anniversary, and why you shouldn’t lie on your taxes.
Needs vs. Wants: How to Distinguish and Budget for Both
An important distinction.
LLC: Pros and Cons of a Limited Liability Company
An option for structuring your business.
The Bull Market’s 8th Anniversary in 8 Numbers
8 remarkable facts.
Tempted to lie on your taxes? Here are 4 reasons you shouldn’t
Not worth the risk.
Today’s top story: Manage your debt for a smoother divorce. Also in the news: Giving your child the gift of stocks, how to donate credit card points and miles to charity, and six ways to make the most of your holiday bonus.
Manage Your Debt for a Smoother Divorce
Making a difficult situation a bit easier.
Give Your Child the Gift of Stocks
The gift that keeps on giving.
How to Donate Credit Card Points, Miles or Cash Back to Charity
Put those forgotten miles to good use.
6 Ways to Make the Most of Your Holiday Bonus
Stretching it out.
Today’s top story: How to break up with your financial advisor. Also in the news: How to save on remodeling costs, what happens to your debt after you die, and the perfect stocking stuffer for your future investor.
Breaking up with your Financial Advisor
Protecting your best interests.
Remodeling? Refinancing With a 203(k) Loan Can Help
Better interest rates could make remodeling more affordable.
What Happens to Your Debt After You Die?
You can’t take it with you, so to speak.
A Stock Gift Card for Your Little Investor
A great STOCKing stuffer.
6 Strategies to Get Out of Debt
Finding the one that works for you.
Dear Liz: With my father’s recent passing, I received a substantial inheritance, much of it in the form of stocks and mutual funds. If I sell these assets, do I calculate the capital gains and losses based on the date I took possession of the assets? Or do I use their value on the date of his death?
Answer: Typically you’d use the date of his death. If your father’s estate was very large and owed estate taxes, however, the executor may have chosen an alternative valuation date six months from the date of death. This option is available if the value of the estate would have been lower on the later date.
There is a circumstance in which your basis would be the value on the date the assets were turned over to you, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting U.S. If the executor elected the alternate valuation date, but the assets were actually distributed to you before that date, then the basis is the fair market value on the date of distribution, Luscombe said.
Inherited assets usually get a “step up” in basis when someone dies, so there’s no tax owed on any of the growth in those assets that occurred while the person was alive. Inheritors have to pay taxes only on the growth that occurs between the date of death (or the alternate evaluation or distribution date) and when the assets are sold.
The assets would get long-term capital gains treatment regardless of how long you’d owned them, which is another helpful tax break.
For every rule of thumb, there are hundreds of people who would quibble with it.
We saw that just recently with a USA Today columnist who quantified exactly how much you need to save for retirement (his answer, via an analysis by T. Rowe Price: $82.28 a day). Lots of people didn’t like that the number was an estimate, an average, and that their own mileage may vary.
But many more people don’t have the patience, knowledge or energy to sort through all the potential factors for every financial decision. Sometimes, they just want an answer.
Over the next few days, I’m going to share the most helpful rules of thumb I know. They aren’t going to apply to everyone in all situations. But if you’re looking for guidelines (or guardrails), there are a starting point.
Let’s start with retirement:
Retirement comes first. You can’t get back lost company matches or lost tax breaks, and every $1 you fail to save now can cost you $10 to $20 in lost future retirement income. You may have other important goals, such as paying down debt or building an emergency fund, but you first need to get started with retirement savings.
Save 10% for basics, 15% for comfort, 20% to escape. If you start saving for retirement by your early 30s, 10% is a decent start and 15% should put you in good shape for a comfortable retirement (these numbers can include company matches). If you’re hoping for early retirement, though, you’ll want to boost that to at least 20%. Add 5-10% to each category for each decade you’ve delayed getting started.
Don’t touch your retirement funds until you’re retired. That pile of money can be tempting, and you can come up with all kinds of reasons why it makes sense to borrow against it or withdraw it. You’re just robbing your future self.
Keep it simple–and cheap. Don’t waste money trying to beat the market. Choosing index mutual funds or exchange-traded funds, which seek to match market benchmarks rather than exceed them, will give you the returns you need at low cost. And cost makes a huge difference. If you put aside $5,000 a year for 40 years, 1 percentage point difference in the fees you pay can result in $225,000 less for retirement.