blog, personal finance

EXPENSES THAT COULD HARM YOUR RETIREMENT SAVINGS

If you have a good amount of money in your retirement savings account, you may feel like you’re ready when retirement comes. It’s natural to feel that way when so many senior citizens all around the world end up working past retirement age due to not having much money in their savings. However, you should be concerned about a few expenses you may run into.

With these expenses, you could end up emptying your retirement savings account at a rate much faster than you were expecting. Take note of these expenses you may run into once you retire.

Healthcare

Whether you’re healthy now or not, healthcare can easily become one of the most expensive things to worry about once you’re retired. The reason for this is that older people generally need to take care of themselves more, whether it be through regular checkups, surgeries, and much more. To help you with this, you should think about opening a health savings account.

With a health savings account, you can save thousands of dollars regularly since this account can be used for medical purposes without having to pay taxes. If you feel like you are too close to retirement to build your health savings account, make sure you look into various Medicare coverage plans so you’re covered in case anything happens to you. Ensure that you look into saving money for healthcare before you end up retiring.

Long-Term Care

As you get older, you might find it harder to take care of yourself. This can be a difficult period as you might still want your freedom, but you might start having to pay some else to take care of you when you’re older. This can be very costly though where you don’t want to expect your children to pay tens of thousands every year just to keep you in good care.

By saving money for long-term care, you’ll feel ok knowing that you’re always going to have your housing, food, and other care taken care of without finding some solution to pay for your life. Just make sure you look into long-term care solutions before you end up getting too old, as you want to find a long-term care system that isn’t going to scam you financially. Make sure you save up for long-term care so you’re covered once you retire.

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Estate Planning Simplified

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Nobody likes thinking about dying, but, if you die without a plan in place, you’ll be leaving your assets and your family in a difficult position. In that case, you’ll be taking the chance that the state’s probate laws will work in your family’s favor. It’s much more advantageous to develop a simple estate plan.

Start With a Will

Above all, you need a will to ensure certain arrangements will meet with your approval. Even if you don’t have many assets, you should use your will to identify your heirs and determine how assets will be divided up among them. More importantly, a will is the only way you can choose guardians for your minor children and make arrangements for their care.

Add a Living Trust

Your estate plan should also include a living trust. If you have significant assets, or if you want to make sure a loved one receives a specific piece of property, a living trust will serve this purpose better than a will. Since a trust is a private document, it typically won’t be included in the probate process. This means any property transferred via the trust will also be kept out of the probate process.

Care for Yourself With Powers of Attorney

An estate plan can also help you take care of yourself in the future by helping you choose people to make medical care and financial decisions for you. A healthcare proxy allows you to choose someone you trust to make decisions regarding your healthcare if you’re ever in a situation in which you can’t communicate your wishes. Under those same circumstances, a financial power of attorney will appoint someone of your choosing to take care of your finances until you’re able to act on your own behalf.

While you could probably create a simple will that’s legally binding, it’s a smarter move to consult an estate planning attorney. An experienced lawyer can help you draft the other documents you’ll need for your estate plan, and they can explain how the laws in your state will affect your final wishes. Creating a simple plan for the future may seem bothersome, but you’ll be surprised by the peace of mind it provides once it’s done.

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blog, John J. Bowman Jr Accountant, John J. Bowman Jr. Accountant, personal finance

Choosing Between a 401(k) and Roth IRA

When it comes to retirement savings, two of the more popular vehicles are the 401(k) and the Roth IRA. Both are tax-advantaged retirement accounts, but there are significant differences. Depending upon your specific situation, you may find that one fits your needs better than the other.

What are the savings limits?

For workers who haven’t yet reached age 50, it’s possible to save as much as $19,000 in a 401(k) as of 2019. Those who have passed 50 can save an additional $6,000 as a catch-up contribution. Depending upon their age, those who want to save in a Roth IRA can save $6,000 or $7,000 per year. Both are great savings vehicles, but those who are looking to max out their savings would most benefit from using a 401(k).

Read the full blog at JBowmanAccountant.org.

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Creating a Healthy Retirement Plan

Building a healthy retirement plan is possible. Sure, it may be more difficult for self-employed folks than those who have access to a workplace plan. However, no matter the source of an income, it’s possible to save for retirement. Here are some steps to take.

Open An Account

The first step toward building a healthy retirement plan is simply opening an account. Those who have access to a 401(k) plan from work can start there. Those who are self-employed can open up a Solo 401(k) or a SEP-IRA account. Both can open up a Traditional or a Roth IRA as long as they fit the income parameters. The important thing is to just start.

Pay Off Debt

Outside of a mortgage, it’s a good idea to pay off debt as soon as possible. Every dollar that goes toward paying off a previous debt is a dollar that cannot go toward retirement savings. Additionally, with debt, the power of compounded interest is acting against the borrower and in the favor of the lender. By paying off the debt, the power of compound interest begins to work in the favor of the saver, and over time, it can really lead to a healthy nest egg.

Think About An HSA

Health Savings Accounts, better known as HSAs, are intended to accumulate funds for medical expenses. Many people are unaware of another benefit of these funds. After age 65, account holders can access the funds without penalty. Only regular income taxes are due at that point. As long as the funds are used as intended before that point, the money is tax-free going in. They are also tax-free while invested and when disbursed to pay for medical bills. Every dollar that does not go to the tax man is a dollar that can be invested for retirement..

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How to Manage Your 401(k)

In the early 1980s, the Internal Revenue Service introduced a tax-deferred method for US citizens to set aside savings for their retirement. Today, a 401K investment option is provided for employees by a great majority of the nation’s employers. A 401K plan allows a participant to set aside a portion of their pre-tax earnings until the age of 59 and 6 months, at which time they can begin taking taxed distributions with no penalty.

If you have your own 401K plan, there are some things you can do to enhance your profits and protect your savings. Here are a few strategies you should consider to help you properly manage your account:

Maximize Benefits

If your employer offers a proportionate matching benefit, it would be prudent for you to maximize the amount of your contribution in order to maximize the amount your employer is offering. This is a pure benefit that simply increases your employment benefits package.

Risk Assessment

Most 401K accounts allow the participant to manage their own investments. It’s your job to decide how much risk you are willing to take. Remember, the higher the risk might be, higher the returns will usually follow. As a rule of thumb, you’ll want to invest a least a portion of your account on high return investments. Also, you might want to consider taking extra risks if retirement is multiple decades away.

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To continue reading, please visit jbowmanaccountant.info

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Essential Money Tips for Before and After Retirement

Throughout life, there are many different financial phases and stages that someone goes through.  From opening your first savings account to buying your first house, and so on.  It is important to build your financial structure over time, to ensure the best possible financial stability as you embark on a lifelong journey.  Here are a few simple money tips to follow before and after your retire.

Open a Savings Account

The first savings account you open independently is an important part of your quest to build financial stability, and a retirement plan that will keep you comfortable.  Start with your preferred banking institution, and sit down with a personal banker. Find out what type of savings accounts your bank offers, if there are any fees or perks, and do your best to contribute to it every paycheck.

Pay Down Your Debt

Outstanding debt is a major issue for many American adults.  Student loans, mortgages, credit cards, and car loans are all components of consumer or household debt.  In fact, by 2018, Americans accumulated a new record of $13 trillion in debt.  It is important, and wildly beneficial, to start tackling outstanding debt as soon as possible.  Establish payment plans for your student loans, and work on paying off credit card debt.

Consider Your Budget When Buying Your First House

Buying your first home can be very exciting; however, it can also be extremely expensive.  Always consider your budget when house hunting. Think about and understand what you can afford, while still being able to live comfortably, rather than what you want to afford.  Take time to do the required research on loans, mortgages, and lenders; a first home can often come with renovations, you will want to have some money set aside for this as well.

Invest In Retirement

Though it could be years away, it is essential to your future retirement to start planning as soon as possible.  Take a look into 401K plans that your company may offer, if they match or not, and if so, how much. If your company doesn’t offer a 401K, take a look into some independent options, like an individual 401K or an IRA (Individual Retirement Account).

Know Your Budget

While you will have resources like social security, and the retirement plans that you contributed to over the years, it’s important to understand your budget after you retire.  Not having a flowing steady income that you may be used to, can sometimes make understanding what your budget is a little more difficult. After you retire, take a look at the money you are still collecting, and your expenses; and don’t forget, part-time work is always available to stay busy and still collect an income.

Consider Downsizing

The idea of downsizing can be frightening, depending on what you’re used to.  First, try not to look at it in a negative light. Downsizing can be a great way to enjoy retirement and cut down some living expenses.  Not only can you potentially save on your living expenses, but also reduce upkeep, home maintenance, and taxes.

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