KnowledgeNews & Insights
By Ronn Yaish
Ok, so before you pass go, I need to share my approach when it comes receiving/earning a commission check, referral fee or bonus. I recommend putting aside 25 percent of the money. The tax obligation could be more or less than the 25 percent, so at least you’ll have planned for it, beyond ignoring its reality. (I was speaking with a very successful female entrepreneur about a year ago when she lamented the fact that she enjoyed the large volume of commission checks without planning ahead. Unfortunately, she was left with a hefty tax bill…of the six-figure variety!)
What You Shouldn’t Do With This Extra Money
I recommend being mindful of potential pitfalls and building better financial habits. When we come across a windfall, be it a Chanukah gift, inheritance or the lottery, the first question that comes our way from our friends and family is, “How are you going to spend it?” No one usually asks, “How do you plan on saving that money?” Or, “How are you going to have that money work better for you?”
Obviously, every person’s situation is different, as is the size of the bonus, but whether we are discussing a $400 or $40,000 bonus some basic suggestions apply. Of course, this advice comes with the caveat that it is always good to consult a financial professional regarding how to manage a lump sum influx of money.
1) Don’t spend it all without a plan.
2) Don’t count on these funds when you are making your budget or allocating how to cover financial obligations.
3) Don’t use the money as a down payment for something that will have recurring payments that will create a bigger financial burden well after the initial money was paid, i.e., home loan for renovations and car loans.
Things to Consider Doing With This Extra Money
Let’s not forget one of the golden rules of personal finance: “Live within your means!” It may not be a sexy concept but it helps those who are guided by this philosophy stay on a more stable and honest path. (Honest with themselves!)
1) Pay off high-interest debt such as credit card debt, private loans or Home Equity Lines of Credit. To demonstrate the benefits we’ll use David as an example. David receives a $2000 end-of-year bonus. First David socks away 25 percent to pay for taxes. Then he takes the $1,500 left and pays down his $20,000 credit-card debt for which he pays 23%. If you don’t think $1,500 will make a dent, think again. Do you know what David pays the credit card company each year in interest for having that $1500 balance? He pays them $345 (1500 x.23=345). Which means David just saved $345…He gets to keep this money instead of paying the credit card company. Now that doesn’t mean David is in the clear or has resolved his credit debt problem, but by bringing down the balance David alleviates part of his problem.
2) Save more for retirement. The earlier you save, the more time the money has to grow and compound. In this example, Aliza receives a $3,000 bonus. She put away 25 percent for taxes. She now has $2250 to save for retirement. Let’s say Aliza is 25 years old and has 40 years to retirement. Making an assumption of six-percent return, that $2250 invested for 40 years will become roughly 23K. However, let’s say Aliza got the “I’m too young to worry about retirement now” bug and waits until age 35 to save for retirement; that same $2250 invested for 30 years with a six-percent return will become 12K at retirement. Wow! The difference is over $10,000 just because she decided to wait. Lesson of the day, start saving early and you will reap the benefit of how time compounds your investment. (Disclosure: The six-percent return was not meant as investment advice or prediction, simply used to demonstrate an example.)
3) Bulk up your emergency fund. (See my 12/29/2016 Jewish Link of New Jersey Article for details on “Start Building an Emergency Fund.”) Don’t let this one throw you. You don’t need to put all your “found money” here, just some of it.
Lastly, Don’t Forget to Reward Yourself
You clearly earned this bonus or gift and deserve to pay yourself first by taking a piece of the action and splurging. Whether that means getting a massage, getting that decadent something that is usually out of your budget (for me that would be the Delmonico steak at Prime Grill), getting your nails done, adding to a collection or hobby, don’t forget to reward yourself.
I know what some of you may be thinking… “I can’t do that.” I’ve got bills to pay, college, camp and school tuition to worry about. All very true, but you work hard and sometimes it’s important to invest in yourself. Some of us feel like we’re standing in between two cars of a fast-riding express train, juggling life’s obligations and managing everyone else’s needs. There is no reason to feel guilty.
So you received a bonus. That’s great. Hopefully this article gave you some ideas to consider as you plan what to do with it. (Notice how I didn’t state “how you would ‘spend’ it”…)
By Ronn Yaish, MBA
Ronn Yaish, is Wealth Advisor and CEO of Yaish Financial Services, a New Jersey-based investment and wealth management firm. Ronn earned a master’s in Education and an MBA in Finance. He has been featured in Forbes, AOL Finance, Credit.com, GoBanking and US News and World Report. His goal is to educate and help clients “keep things simple” when managing their money.
By Ronn Yaish, MBA
During each of the last Jewish Link of New Jersey issues in 2016, I have been sharing Money Moves to consider before the end of the year. This being the fifth and final part of this series, in this article I will share Money Moves 19 & 20.
#19 Start Building an Emergency Fund
No one knows what lies ahead. We can come home one day to find out that the furnace broke or that the car needs a new thingamajig, both costing a couple thousand dollars. It’s not so simple for a family to swallow such a sudden expense. Well, what happens if a parent gets laid off or chas v’shalom gets sick and is out of commission for six months? How will the family manage with this sudden emotional, physical and now financial crisis? The answer is that an emergency fund can soften the blow or at least part of the financial burden.
Although setting up an emergency fund makes sense, committing to building an emergency fund seems to be challenging for many. It’s too tempting to have money sitting in an account; it’s hard to have the discipline to leave the money alone. I usually don’t suggest having multiple accounts, but in this case I think an exception can be justified. Consider opening another account within the bank you currently use and label it Emergency Funds (some banks allow you to add names/tags to accounts). If this isn’t enough of a barrier then you may want to open a savings account at a different local bank. This will help keep that money out of sight…and hopefully out of mind, until you need it.
Ok, so you’ve bought into this concept of setting up an Emergency Fund; how much should your goal be and how much money should you start to put away each month? Many financial professionals recommend six to eight months of living expenses. (See YaishFinancial.com/budget to learn simple ways of determining your actual or estimated monthly expenses.)
So, for example, if the Jones family determined their monthly expenses to be $10,000, I am suggesting having an emergency fund goal of $60-$80K. Don’t let this number scare you. Remember, the heading of this section is “Start to Build an Emergency Fund”—you need to start somewhere. Of course, it will not happen overnight and may take months and even years to reach your goal.
Now that you’ve established a goal, next come up with a number that you can afford to “take out” each month from the money coming in: salaries, parent or in-law financial help, commission checks from the telephone MLM you once tried, or any other side business. Start with a percentage or dollar figure ($100 a month or 2%) and have that money go to your saving account by direct deposit. Slowly but surely the money will accumulate. Once it does, it may be helpful to segment the money into two tiers; one being the one-time shot in the arm of $2-$3K to pay for a sudden one-time large expense. The rest of the money should only be designated for major/long-term life need like loss of a job or illness.
Don’t procrastinate because your personal goal seems out of reach today; start today and you’ll be better off than the person who gets analysis paralysis.
#20 Review Beneficiaries:
A 20-minute review once a year of a handful of documents can save you and the people you care about a lot of heartache. When opening up bank, brokerage, annuity contracts, retirement and pension accounts and insurance policies, we often face mounds of paper covered with fine print and dozens of disclosures. We are usually alert when reviewing our name, basic information and summary of terms. By the time we are asked to name beneficiaries our eyes are glazed or we are rushed to get this form done. So we either skip this part of the form or enter a name (to be yotzeh) without giving this important section much thought.
Unfortunately, even when we receive the annual beneficiary notice sent by many institutions, we give the notice a once-over and toss it out. (Good idea to shred forms with personal info.) After some time passes, we go through any number of life events: marriage, child, divorce, death etc. Life events may very often be a cause or a reason to update the list of beneficiaries. The problem is that it is usually an afterthought to make the change, which doesn’t get done or get the attention it deserves, since most of us do not know when our time will come and when the beneficiaries will be exercised. Things get complicated when your loved ones lose out on benefiting from your hard-earned money and carefully saved funds because they weren’t listed, or the wrong people were listed.
To illustrate a point, here is the story of Samuel, who started at his law firm when he was 25 and single so he listed his married sister as the beneficiary to his pension. His sister passed away 5 years later. Over the next 30 years Sam got married and had four children. At age 60 Sam was in a devastating car accident and died. His wife tried to access the pension Sam created 35 years earlier, which was now valued at a little over $2 million. The problem is that the beneficiary was never changed and a beneficiary designation overrides your will. Sam’s sister was still listed as the beneficiary, so the funds went to her widower. Sam’s wife and children lost $2 million and had no recourse.
I suggested taking a few minutes once a year to review each account that has beneficiaries listed and update them accordingly. Either login online to review the current beneficiaries listed the same time every year or wait to receive the end-of-year statements from these institutions with the exception of the insurance policy and go through a simple checklist as you file or review these statements.
By Ronn Yaish, MBA
Ronn Yaish, is Wealth Advisor and CEO of Yaish Financial Services, a New Jersey-based investment and wealth management firm. Ronn earned a Master’s in Education and an MBA in Finance. He has been featured in Forbes, AOL Finance, Credit.com, GoBanking and US News and World Report. His goal is to educate and help clients “keep things simple” when managing their money.
By Ronn Yaish, MBA
# 14. Should I Contribute to a 529?
December 31 is the deadline to contribute to most state 529 accounts.
It’s a good idea to consider the benefits of saving money for college. Costs are skyrocketing. To use a New Jersey example, Rutgers State University tuition is $14,372 for the 2016-2017 academic year. According to Savingforcollege.com, within the next 10 years public college tuition like Rutgers will be over $36,000 a year. (Average private colleges today cost $33,480, so in 10 years…yikes!) Any saving opportunities for college will help to make a dent in this obligation.
Families may want to consider investing in a 529 college account. Put money in today. Allow it to grow federal-tax free and enjoy tax-free withdrawals. Unfortunately, those living in New Jersey will not benefit from a state tax deduction. (Those from New York and Connecticut can benefit from a state deduction.) The criteria is very flexible; grandparents, aunts, uncles and cousins may open a 529 and start saving for your child. Also, the funds can always be redirected to another beneficiary.
# 15. Gifting
We don’t really know what the future holds for estate taxes. In New Jersey, the estate tax is changing January 2017 from $675K to $2M and will be repealed altogether in 2018. (At this point there is still a federal estate tax.) New Jersey has both an estate and an inheritance tax and has five beneficiary classes, each with its own separate tax rate. The type of class between the family members can change the tax owed. For example, in a Class “A” family of spouse, child and parent, to avoid having to strategize, if Bubby, AKA Grandma wanted to “share the wealth” today and help her children and grandchildren, she can gift each person $14K this year (before Dec 31) without having to file with the IRS. In this area, it is always a good idea to get advice from a financial/tax/legal professional!
#16 Charity in 2016 and Donor-Advised Funds
For the individual or family that itemizes their deductions, a charitable donation may help reduce that taxable income. In order to take advantage of such a deduction, the non-profit/charity must qualify as a 501 (c) (3) organization. So although it may be altruistic and part of our Torah culture, the cash we give someone who isn’t considered a qualified charity may not be counted toward our tax deductions. (We’ll get the dividend in our personal mitzvah account, which carries a lot of weight.)
Charity doesn’t need to be cash. If there are gifts you never opened, consider donating them to organizations like the Jewish War Veterans or Salvation Army. Consult your accountant to make sure you followed all the requirements, such as getting a receipt. This type of giving can help get other members in your household involved in the collecting and sorting of items to donate. I like to take my kids with me and ask them for “help” carrying the items to the car and into the organization’s office. Besides the experiential educational experience, this also helps to clear the home of unneeded stuff.
Now, what if I have some money to give away but am not sure who to donate to right now? Maybe you wanted to do more research or maybe it’s a good time to benefit from a tax-deductible donation before December 31, but it may not be the right time for you to determine where those funds should go. This situation may warrant the consideration of a donor-advised fund. You make the donation of money or securities now and benefit from the deduction now. And then “later” you get to decide which qualified charity will benefit from your generosity. Fidelity, Schwab and Vanguard have donor-advised fund accounts as well as major charities and foundations. It’s like having your own family foundation without the expense of running a foundation.
#17. Converting an IRA to a Roth-IRA: Good Idea?
Maybe. It depends on your goals and income. The first question I am usually asked is why in the world anyone would want to pay the government more taxes than they need to. The rudimentary answer is that one will need to pay taxes on the money at some point anyway. The only real question is if it’s better to pay that tax today or sometime in the future. Let’s use the following example: Sam puts $10K into an IRA in 1987 and wants to take the money out when he reaches 60 in 2017. The money has grown to a little over $100K. Because Sam is in a 28 percent tax bracket, he will need to pay $28K. However, if Sam would have put the 10K into a Roth IRA he would have paid taxes in 1987 of $2.8K (assuming he was in a 28 percent tax bracket) on that money and then no tax when taking the money out 30 years later 2017. In this simplistic example, Sam could pay taxes of $28K in 2017 or $2.8K, leaving him with either $72.K or $97.2K in retirement.
The problem is that no one has a crystal ball to know what their future taxes will be when making this decision “today.” When determining whether a conversion makes sense, current tax liability is probably one of the biggest considerations. Essentially it’s a tug-of-war between current tax liability and the opportunity to have tax-free distributions…without being forced to make a required minimum distribution.
There are many reasons why I like the Roth IRA, but it may not be the right financial instrument for you. Take a look at YaishFinancial.com/MoneyMoves for a Roth conversion report.
#18. Save Your Surplus.
This is the time of year when some of us may experience getting a bonus, a salary raise or other holiday money. Whatever the “extra” you come across, I like to recommend that my clients ignore the money. Not that they shouldn’t take it, but they shouldn’t count on it or even count on spending it. Your lifestyle, spending and budget were doing just fine before this “gift” and they will probably do just fine without the immediate benefit. So put it away. Add money to retirement, Roth IRAs, pay down some credit card debt, add to the holiday savings account or to the emergency fund account we discussed in the past. In other words, pay yourself first and set the money aside without frivolously spending it away.
Ronn Yaish is wealth adviser and CEO of Yaish Financial Services, a New Jersey-based investment and wealth management firm. Ronn earned a master’s in education and an MBA in finance. He has been featured in Forbes, AOL Finance, Credit.com, GoBanking and US News and World Report. His goal is to educate and help clients “keep things simple” when managing their money.
By Ronn Yaish, MBA
During each of the last Jewish Link of New Jersey issues in 2016, I will be sharing Money Moves to consider before the end of the year. This being the third part of this series, in this article I will share Money Moves 11 through 13.
#11 Spending Mindfulness:
Although companies and not-for-profits live and die by their cashflow and budgets, there are very few people I know who enjoy living on a detailed budget, unless you’re like the regimented super geek Sheldon Cooper from “The Big Bang Theory” who thrives on details. Most people I come across wouldn’t and couldn’t handle this monotonous and arduous lifestyle. Also, the thought of sitting down to create a budget seems painful and overwhelming. So, instead, I want to suggest spending mindfulness—being aware of how much you spend on different things.
This information can empower you make better decisions. “Wow! I can’t believe I spend so much on that…” or “holy cow, I can’t believe that I spend 60 percent of my funds on frivolous things.” Maybe you’d be more interested in focusing on bringing down your credit card debt, stashing money away for your kids in a 529 account (will discuss next week) or put more away for retirement if you had greater awareness. Spending mindfulness allows you to better answer the question of “Do you want to be one of those people whose life just happens by or do you want to be the person who makes your life happen?” I am not suggesting you write out how you plan on spending $104.72 each month and put yourself in financial shackles. I am also not intimating that those who keep to a strict budget are doing something negative or minimizing those who seek support from credit counselors. Rather, for many it is helpful to simply be more aware of where you’re spending your money. A few months ago I was quoted in a Credit.com article titled “You Can Make $100K by Skipping Your Morning Coffee” that brought home this point!
How can you be mindful without huge effort? Is there an easy way to see a report of your spending? I would like to suggest four options, two options using a one-page worksheet, and two using simple technology tools. Please see yaishfinancial.com/budget to learn the simple details to utilize each option.
#12 Required Minimum Distribution:
Pension plans such as 401Ks and IRA allow individuals to begin taking money out at age 59 ½, and at age 70 ½ required minimum distributions (RMD) kicks in. This RMD is an amount of money based on a formula that must be withdrawn from your retirement vehicle every year (except in a Roth IRA). If an individual messes up and doesn’t withdraw the RMD, the penalty is severe; 50 percent of what you should have taken out. For example, if you were required to take out $6,000 in 2016 but didn’t take any money out, the penalty would be 50 percent of the required RMD of $6,000 which would result in a $3,000 penalty. If the person withdrew too little; in our example the RMD was $6K but he only took out $5k in 2016, the penalty of 50 percent would be on the shortage of $1K, so the penalty would be $500.
The first year someone turns 70 ½ there is a little bit of leeway into the next year. It’s a good idea to seek advice from a tax or financial professional to help you calculate what the RMD is and when it needs to be paid. If you care for someone older it’s a good idea to make sure they have this matter sorted out and under control.
For more info, including a RMD calculator, check out YaishFinancial.com/MoneyMoves.
#13 Rebalance Your Portfolio:
It’s not a mystery that it’s a good idea to buy investments when they are low and sell when they are high. But all too often this seems counter intuitive. Why would I want to sell something that is doing well? Shouldn’t I double down and invest even more in that “winner”? No. Not really. (Note that this is investment philosophy, not literal investment advice.)
I can’t do this topic justice here because it’s beyond the scope of this article, but I do believe in having a disciplined investment approach. There is a lot of academic research to support my investment philosophy. According to my school of “investment thought,” a properly designed portfolio would include an investor’s time horizon, risk tolerance, targeted asset allocations and a strategy with an objective to meet the client’s goals.
For example, if it was determined that a client’s properly designed portfolio was a 60 percent equity and 40 percent bond allocation, and suddenly due to a rally in the market the portfolio shifted to 65 percent equity/35 percent bonds. This may not seem like big deal today, but before you know it that portfolio could become an 80 percent equity/20 percent bond portfolio and, based on this client’s goals and risk tolerance, this portfolio would now be considered inappropriate.
By rebalancing, the client will stay on course to have and maintain an appropriate portfolio to meet his specific needs. Professional money managers do this regularly for their clients. It would be prudent to do this at least once a year.
By Ronn Yaish, MBA
Ronn Yaish is wealth adviser and CEO of Yaish Financial Services, a New Jersey-based investment and wealth management firm. Ronn earned a master’s in education and an MBA in finance. He has been featured in Forbes, AOL Finance, Credit.com, GoBanking and U.S. News and World Report. His goal is to educate and help clients “keep things simple” when managing their money.
By Ronn Yaish, MBA | December 08, 2016
During each of the last four Jewish Link of New Jersey issues in 2016, I will be sharing five “money moves” to consider before the end of the year. This being the second part of this series, in this article I will share money moves six through 10.
#6. Flexible Spending Account—Use It or Lose It!
A Flexible Spending Account (FSA) may be offered by your employer as a benefit to set some money aside (2016 limit of $2,550) pre-tax in a special account to be used for paying health-related expenses. The employee benefits by paying less tax and has more money to spend.
So, for example, if John Smith was to earn $40,000 that year, in a 25 percent tax bracket, and decides to set aside $2,000 into a FSA, John would now only need to pay taxes on 38K (40K-2K) and would have more money to spend on health care; $2,000 instead of $1,500 if he would have been taxed on the 2K. ($2000 taxed at 25 percent =$1,500)
There is some risk involved in this account, in that you can lose your money if you don’t spend down all the funds set aside. To combat this concern, employers have been adding one of two provisions to alleviate the pressure. One option allows the employee to roll over $500 into next year’s account (without impacting next year’s contribution limits). The second option offers an extended deadline for 2 ½ months—until the middle of March, allowing the employee more time to spend the money in their Flexible Spending Account.
For some last-minute suggestions and a list of eligible expenses such as first aid kits or specific strength sunscreen, see YaishFinancial.com/MoneyMoves.
# 7. Sell losses to offset gains.
When an investor realizes he may have a big capital gain for a given year that will trigger a sizable tax bill, this investor may consider what is called harvesting tax losses. Meaning, if you also notice an investment that is doing poorly (below what you paid for it) and decide to sell it for the right reason, the investor can use the losses of the poorly performing investment to offset his capital gain liability.
Although at first glance it may be beneficial for an individual to utilize this approach, it’s not recommended to sell a stock just to use the loss as a tax break. It also goes without saying that it is recommended to seek the advice of a financial or tax professional to determine if this strategy makes sense for you and how you can benefit properly from exercising this strategy. For more information, see YaishFinancial.com/MoneyMoves.
# 8. Request a credit report.
There is no such thing as a free lunch. But there is such a thing as getting a free credit report once every 12 months. You can request a free report from each of the nationwide credit reporting companies, Experian, Equifax and TransUnion.
Reviewing your credit report is a way of practicing good financial hygiene. I would recommend looking over these reports once a year. You can set an annual Google or Outlook calendar reminder to request a copy of your report.
You should be looking for errors, inconsistencies between the agencies and irregularities such as accounts you don’t know about or loans you never requested. In fact, there are some organized individuals who make a request from one agency every four months to spot any glaring issues more immediately!
# 9. Make a will.
I wouldn’t ordinarily suggest someone take the “do-it-yourself” approach when it comes to estate planning, but for someone who currently has a simple estate, a state-specific online service can generate a rudimentary plan that may be better than nothing. An AARP survey revealed that 40 percent of “Americans over the age of 45 don’t have a will.” This statistic is shocking and troubling. If you, your friends or loved ones don’t have a will, please get on their case! This type of friend or family pestering is what I consider selfless and is called positive nudging.
This document is too important to be overlooked or caught in the procrastination muck that can plague pre-retirement Americans. You don’t need a lawyer to at least temporarily prepare a will. You may choose to find an online will service, estate planning software, materials at a bookstore or library. Seeking legal advice is always recommended. Professionals get paid to know how to set up a will while considering the state’s requirements and your personal needs.
# 10. Review benefits you should be receiving from your employer.
Health insurance and pension plans are usually the services individuals associate with an HR office. But you may be surprised to learn that there can be other services and opportunities available to help you save money. For example, there is a health insurance company that offers a free Fitbit to their policyholders and provides incentives such as Amazon dollars for meeting daily step goals. Some companies offer neat perks such as free gym access, free local museum passes or discounts for products or services.
So when the HR office runs a benefits meeting, try to attend, get the handouts or follow up with someone from HR to learn about the company’s general benefit offerings—health, pension and disability insurance. It may also help to meet with a financial adviser beforehand to discuss ways to utilize your employee benefits to the maximum.
By Ronn Yaish, MBA
Ronn Yaish is wealth advisor and CEO of Yaish Financial Services, a New Jersey-based investment and wealth management firm. Ronn earned a master’s in education and an MBA in finance. He has been featured in Forbes, AOL Finance, Credit.com, GoBanking and US News and World Report. His goal is to educate and help clients “keep things simple” when managing their money.
By Ronn Yaish, MBA | December 01, 2016
In each of the last four Jewish Link of New Jersey issues in 2016, I will be sharing five Money Moves to consider before the end of the year.
Residential Energy Efficiency Tax Credit
If you are considering an energy-saving update to your home, you may want to do it before the end of the year to benefit from a $500 tax credit. This credit expires on December 31, 2016. Be aware that a homeowner can only claim a maximum of $500 between 2011 and 2016. This means that if you have already claimed this $500, you’d be ineligible for a tax credit. This is a great way to improve the value of your home, save some money and make the world a better place. To get more info on this credit and how to utilize it, consult YaishFinancial.com/MoneyMoves.
Don’t Leave Money on the Table
I recently met with a family for a financial-planning consult. When I reviewed the wife’s work benefits, I noticed that she had been eligible for a 5 percent company match to her 401K for the past three years. Let’s say she was making 50K; after three years she had just given up $7,500. Meaning that her company was willing to put $2,500 in her 401K for each year she put in $2,500 (5 percent of 50K is $2,500). This financial task seems like a no-brainer. It’s like giving up “free money.” To be fair it may not be an easy task for a family to remove this amount of income from their budget. In that event, it still pays to at least put something away! In this example, if she had put away $100 a month, her savings would amount to $1200 for the year, and then her company would be able to place an additional $1200 into her retirement account; after three years without the impact of the investments, she would have had $7200 in her account. I would recommend to start by putting away whatever you think you can afford. It’s a good idea to seek guidance from a professional like a financial advisor or accountant. In sum, check with HR to see if your company has a 401K match before the year ends!
Although Roth IRA contributions of $5,500 can be made until April of next year, it’s a good idea to take action today. A family filing jointly with an income of up to $194,000 may each contribute $5,500 toward a Roth IRA account. I am a big fan of this type of account. The funds grow tax free. This is the only type of retirement account where funds are not taxed when they are taken out after age 59 ½ and there is no RMD, required minimum distribution.
Also, don’t forget to take advantage of 401K/403b/457 retirement contributions before the deadline, December 31, 2016 (unlike Roth IRA funds contributions cannot be made through April 2017). In 2016 the contribution limit is $18,000 for eligible employees and company-matched funds do not count toward this limit. If you are over 50, there is an additional $6000 called a catch-up to help those getting closer to retirement sock away a little more. Again, put away whatever you can. Between regular contributions and the power of compounding (beyond the scope of this article), the money adds up. Save something and save early.
Change Your Passwords
Hackers are clearly very good at their jobs. Let’s not make their jobs easier. We should all be changing our passwords regularly. At the very least consider changing your credit card, brokerage, banking accounts and other sensitive accounts once a year.
Having a hard copy of the passwords may make sense but remember to keep it in a safe and fireproof environment like a lockbox. (It is a good idea to let someone you trust like a spouse, parent or sibling know where the list of accounts and passwords is kept, in the event they need to help you during an emergency or death.) Another option is to use an online password management tool. Although this sounds counterintuitive for someone trying to protect their password and accounts, these password tools may be something to consider. The tool uses a really difficult and individual password for each of your accounts. In order to login you need only one password to enter the password tool. Then it signs you in. For more info on Password Management Tools see YaishFinancial.com/MoneyMoves.
Health Savings Accounts
If you have a High Deductible Health Plan (HDHP), you are eligible for a Health Savings Account (HSA). The IRS defines a high deductible health plan as any plan with a deductible of at least $1,300 for an individual and $2,600 for a family. If you fit this criterion then you can start a HSA via your employer (if they have one), bank or financial institution.
An HSA allows you to place money in this account before having taxes taken out where the money can grow tax free and can be taken out tax free. The purpose of this account is to help pay for medical expenses—except the actual premium. The reason why you want to make this move before the end of the year is that these contributions reduce your taxable income, so if, for example, you earn 40K and put 3K into a HSA you only pay tax on 37K. Also, unlike Flexible Spending Accounts that need to have funds spent before the end of the year, HSA money can roll over into the next year without penalty. For more info on HSAs, visit YaishFinancial.com/MoneyMoves.
By Ronn Yaish, MBA
Ronn Yaish is Wealth Advisor and CEO of Yaish Financial Services, a New Jersey-based investment and wealth management firm. Ronn earned a Masters in Education and an MBA in Finance. He has been featured in Forbes, AOL Finance, Credit.com, GoBanking and US News and World Report. His goal is to educate and help clients “keep things simple” when managing their money.
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Yaish Financial Services, LLC (Yaish Financial) is a registered investment adviser located in Bergenfield, New Jersey. Yaish Financial may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Yaish Financial’s web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Yaish Financial’s web site on the Internet should not be construed by any consumer and/or prospective client as RIA Firm Name’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Yaish Financial with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Yaish Financial, please contact the state securities regulators for those states in which Yaish Financial maintains a registration filing. A copy of Yaish Financial’s current written disclosure statement discussing Yaish Financial’s business operations, services, and fees is available at the SEC’s investment adviser public information website – www.adviserinfo.sec.gov or from Yaish Financial upon written request. Yaish Financial does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Yaish Financial’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
This website and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, or legal advice.