Category: Articles

While tapping into your 401(k) is not the first choice that you should make, it is
sometimes unavoidable. During the most recent economic crisis, you may have
needed to withdraw from your retirement funding in order to make ends meet or
cover certain types of expenses. The good news is that you can recover from this in
the long run with some prudent actions right now.

The first thing you can do is to immediately begin contributing the maximum
amount allowable to your 401(k). This will not only maximize your tax savings, but it
can also take advantage of the employer match. In fact, when you do not grab every
penny that you can from your employer, you are leaving money on the table. Of
course, there are limits to the amount that your employer will match.

While your 401(k) investment options are limited to what your employers offers,
there are ways to play catch-up to make up for some of what you lost if you had to
withdraw from your account.

You can periodically shift between bonds and stocks depending on your feeling
about the market. For example, if you are using an 80-20 split between stocks and
bonds, you can go 90-10 when the market has dropped, so you can try to time the
market. Then, you can reallocate your portfolio when the market rises again.
However, we caution against doing that with more than a small part of your
portfolio.

If you tapped into your 401(k) by taking a loan, you should pay it back as quickly as
possible to recover account value. When you have a 401(k) loan outstanding, that
money is not invested in the stock market and earning returns. The hope is that you
are able to pay the money back as opposed to a straight withdrawal so you can
avoid having to pay taxes on the money you took out of your account.

Finally, another thing that you can do to get your retirement plan back on track is to
take advantage of the ability to make catch-up contributions to your 401(k) when
you turn 50. The law allows you to give up to make a special contribution beyond
the money that you are already allowed to set aside. For 2020, this amount rises to
$6,500. While you may not receive an employer match on this money, it is a way to
contribute additional money to your retirement from your pre-tax dollars. When you
take advantage of catch-up contributions each year until retirement, it could add
hundreds of thousands of dollars to your nest egg.

Before you take money out of your 401(k), you should have a plan for getting your
retirement back on track. You will need to make sure that you are disciplined and
return to saving at the first possible opportunity. The most important thing to
remember is that a dollar today grows several times over thanks to the power of
compounding. To the greatest extent possible, you do not want to miss out on that.
I am are here to help guide you to a plan that fits your desired future. Call or Email
me any time!

A healthy credit score and an accurate credit report are key to accomplishing important financial milestones like buying a home. You can check both by obtaining a free copy of your credit report from one of the credit bureaus. If after receiving your credit report you notice inaccurate or outdated information, you need to dispute the information right away. You can do this with the credit bureau or directly with the reporting business. The process could take a bit of time, but it’s well worth doing especially when it comes to your financial health.

https://money.com/get-items-removed-from-credit-report/

When we pass, there will be debts that are left unpaid, even if we stay caught up with our financial obligations. At the very least, the medical bills accrued towards the end of life and any bills that can end up delinquent as a result of illness. There are more ways you’ll leave unpaid debts behind after you die, so knowing how to prepare for them in advance with a proper estate plan is essential.

What Happens at Probate?

When someone dies, their estate goes through the probate process. This process can take anywhere from a month to up to two years. The length of time your estate remains in probate will depend on a variety of factors, including the laws of your state and the number of creditors seeking payment. A larger number of creditors, or a more significant overall claim against the estate, will prolong this period.

During probate, the estate is used to pay off death taxes and debts. If there isn’t enough cash to cover these obligations, items in the estate, such as valuable works of art and real estate, may be sold to cover the remaining amounts owed. Once taxes and debts are paid, the probate process ends with the executor satisfying the terms of the will by providing heirs with their inheritances.

Which Assets are Protected?

You may be concerned that cash or personal items you intend to leave to your loved ones will be liquidated and used to satisfy your debts. There are many ways an estate planning attorney can help you sidestep this situation and protect the inheritances you want to leave for your spouse, children, or others.

First, it’s essential to know that life insurance policies, retirement funds, and similar investment tools are separate from your estate. Upon your death, the value of these accounts will be passed to the beneficiaries you name in each document. Since these assets aren’t named in the will, they aren’t a part of the probate process.

You can also ask your estate planning lawyer to help you draft a living trust. The living trust is a private document that doesn’t become a part of the probate process, so it helps protect specific assets from being liquidated. You can include real estate, personal assets, or family heirlooms in the living trust to keep them within the family and ensure that your loved ones receive what you intend to leave for them.

What Can You Do About Unpaid Debts?

Some debts will automatically pass to your spouse upon your death. Primarily, this includes loans, mortgages, and credit cards that name your spouse as a co-owner on the account. Once you die, your spouse will be responsible for taking over these financial responsibilities until they have been repaid. Typically, the only option in eliminating these debts is to write a letter to each creditor, explaining that there has been a death and asking for debt forgiveness. This type of request isn’t always approved, but it can work in some cases.

If you have children in college, you can trust that their student loans won’t place an extra burden on the family. Federal student loans and Parent PLUS loans are forgiven upon the death of a parent, or if the student passes away. This ensures your children won’t be saddled with that debt, while they’re coping with the grief of loss.

Every person’s situation is different, requiring different estate planning tools. When you visit a lawyer skilled in probate and estate planning, they can tailor a plan to take your specific concerns into account. A good estate plan will help you ensure your family and your assets are protected after you’re gone.

If COVID-19 has impacted you and you’re closer to retirement than some, read through these tips to see what you can do to overcome the obstacles placed in front of you by the ongoing pandemic.

Check Your Savings

Check your savings account to see how much money you have. It’s a necessary exercise to ensure you have enough in your account to last your entire retirement. It would be best to verify you have more than you need. 2020 has shown you never know when you may face an emergency during your retirement.

Be proactive, don’t be surprised when your savings gets low. Find out if you have enough money to retire now! Will your savings last if you live into your 90’s? Take the time to look through your savings account properly. This way, you can avoid problems in the future.

Consider Freelance Options

Most people will try and find a job after they get laid off, but working isn’t an option for everyone. Consider looking into freelance or remote jobs you can do to create cash flow while looking for something more stable. This way, you can create a stream of income without relying on your savings to survive.

Remember, the internet provides multiple ways for you to turn your hobbies or skills into freelance opportunities. For example, you can take advantage of the “gig economy,” including food delivery, grocery delivery, or at home call center support jobs. If you feel you still have time before you retire and want to keep busy (and income coming in), check out the freelance world and see if you can make some money through it.

Look Into Businesses and Stock

Remember, you don’t need to work at a job to make money. Depending on your financial situation, you could either create a business or purchase stock to make some money before entering retirement. This way, you can work on the best schedule for your situation and look for ways to make money through these avenues.

Creating a business can be difficult, but it can be an excellent opportunity if you approach it correctly and know how to market. On the other hand, stocks can help you make money, but there are some associated risks, just like businesses. It comes down to deciding if either of those risks will be worth the potential rewards you could gain.

You may face some struggles if you get laid off right before you retire, but you can still try and make the most out of the situation. It comes down to assessing your current position and then looking for ways to overcome it. Let me know how I can help!

When it comes to retiring early, some of the benefits are obvious. You get to live your life without the constraints of work, and you can pursue your own interests. There are other good reasons for retiring early, and there are some reasons why retiring early is not the most excellent idea.

Your Dedication is Gone

One of the right reasons to retire early is that you are simply not dedicated to working anymore. When you are no longer emotionally interested in working, your performance deteriorates, and your company suffers. 

Working Took its Toll

In some professions, the physical and emotional demands of the job can become too much over time. For example, laborious and dangerous careers such as law enforcement and construction can cause wear and tear on the mind and body. After a few years in a high-risk profession, your body and mind have had enough, and it is time to go home and rest.

Your Finances Become More Flexible

Most people do not realize how expensive it is to work until they are no longer working. When you work any job, you incur expenses such as wear and tear on your car, transportation expenses such as gas or bus passes, work clothing costs, daycare, and miscellaneous medical costs for work-related injuries. If you have planned your finances to allow yourself to retire early, then you will find that your money goes much further when you are not working.

Your Health Could Suffer

For some people, retiring early means abandoning the daily physical activity working required and giving up a big piece of their identity. Retiring early can cause physical and mental problems that could become very serious over time.

You Lose Your Social Circle

After years of working, you tend to take for granted the notion that you will see most of your friends at work five days out of the week. Even people who think that the people they work with are only acquaintances suddenly find that the loss of the social circle they developed at work is devastating.

You Didn’t Plan Well

When you retire before the age of 65, you run the risk of losing out on health insurance. Medicare automatically kicks in for every American when they turn 65, but what would you do until that age? Did you plan your retirement finances right, or will you run out of money? Many people forget to take inflation into account when they plan their retirement, and that makes retiring early financially dangerous.

There are two sides to every story, and that includes the story that goes with retiring early. The idea of walking away from work before the age of 65 can sound appealing, but there are plenty of variables to consider before you make that decision. If you do want to retire early, then talk about it with your family and ask your financial advisor if you have structured your savings properly to be able to live without a paycheck for the rest of your life.

---

Being a parent means being responsible to a degree you have never been before. That elevated responsibility also impacts your financial decisions. You are now a provider and a protector, and that reality may make the following financial moves necessary.

Think about a budget. As a couple, you may have lived for years without budgeting. As parents, this may change. You will face new recurring costs: clothes, toys, diapers, food. Keeping track of weekly or monthly expenses will be handy. (The Department of Agriculture has an online calculator where you can estimate the total cost of raising a child to adulthood. The math may surprise you: the USDA puts the average cost at $233,610 for a middle-income family.)[1,2]

Take care of health and life insurance. Your child should be added to your health insurance plan quickly. Most insurance providers require you to notify them of a child’s birth within 30 days. You can get started before then; be aware that a Social Security number and birth certificate can take weeks to arrive in the mail. If you are in a group health plan, talk with the human resources officer or benefits administrator at work, and let them know that you want to add a dependent to your health care plan. (If you have coverage through a private plan, your premiums may go up after you notify the carrier.) Under the Affordable Care Act, a parent or legal guardian who has health coverage arranged through the federal or state Marketplace has 60 days from the date of birth or adoption to enroll a child as a dependent on their plan; once that is done, health care coverage for the child will apply, retroactively.[3]

Term life insurance provides an affordable way for new parents to have some financial insulation against a worst-case scenario, and disability insurance (which may be available where you work) provides coverage in the event of an extended illness or injury that stops you from doing your job. If you have a Health Savings Account (HSA), you can contribute more per year when you have a child. The maximum annual contribution for a family is currently set at $6,850 (and for the record, the I.R.S. is allowing families to contribute up to $6,900 in 2018).[4]

Draft a will and review beneficiary designations. A will can do more than declare who receives your assets when you die. It can also name a legal guardian for your child in the event both parents pass away. Additionally, you can specify a guardian of your estate in your will, to manage the assets left to a minor child. While you may have named your spouse or partner as the primary beneficiary of your IRA or investment account, you may decide to change that or at least add your child as a contingent beneficiary.[5]

See if you can save a little for college. The estimated cost of four years at a public university starting in 2036? $184,000, CNBC reports. That may convince you to open a 529 plan or have some other kind of dedicated college savings account with investment options. Most 529 plans require a Social Security number for a beneficiary, so they are commonly started after a child is born, rather than before.[2,6]

Review your withholding status and tax forms. An addition to your family means changes. You may also become eligible for some federal tax breaks, like the Earned Income Tax Credit, the Adoption Tax Credit, the Child Tax Credit, and the Child & Dependent Care Credit.[7]

Keep the big picture in mind. You still need to build retirement savings; you still need to have an emergency fund. Becoming a family might make accomplishing those tasks harder, yet they remain just as important.

After reading all this, you may feel like you need to be a millionaire to raise a child. The fact is, most parents are not millionaires, and they manage. Whether you are wealthy or not, you will want to take care of many or all of these financial and insurance essentials before or after you bring your newborn home.