At some point you may turn to a financial advisor for help with your retirement plan. How can you ensure that you find a planner that will have your best interest in mind?
Start by identifying a couple reputable companies and meet with an advisor from each to describe your situation. Find out what their qualifications are and if they have the experience and skills to help you. You want someone that is a good fit for your particular situation. You can do a background check at FINRA.org.
Last but not least, the advisor should be able to tell you how he or she will be compensated. Is the advisor paid on commission based upon the types of investments you have or are they a salaried employee? Either way this is a long term relationship so take your time.
If you have a son or daughter, at some point you may be tempted to tap into your retirement account or reduce your future contributions to help them pay for college but doing so puts your retirement savings at risk. In retirement who is going to help you out?
To borrow a phrase from the aviation industry, put your oxygen mask on before helping others.
This does not mean that you shouldn’t help. They still need your advice and guidance.
If you still have time on your side consider opening a 529 plan for your son or daughter. Get started as early as possible and exhaust all grants scholarships and federal student loans before turning to private loans.
Another consideration is to start at a community college and then transfer to a four year program.
Federal regulation places a monthly limit of six transactions that you can make remotely from you savings or money market accounts. If you exceed the limit you are going to incur unwanted fees.
How can you avoid the fees?
If you are at your limit and still need to transfer money before the end of the month if you do this at an ATM, in person at a branch, or through the mail and it doesn’t count. Think of it this way. If you leave your home or office it does not count.
Another option is having a line of credit attached to your checking account versus your savings account.
If you haven’t noticed, as the Social Security Administration is only mailing annual paper statements to those who are 60 or older you may not be getting a statement.
The good news is that you can now access your Social Security Statement on-line. It only takes a few minutes to create an account and you have access anytime.
As your future benefit is based upon your earnings, checking the accuracy of your statement is important as it’s much easier to fix problems now than to try and get the full amount of the benefits you are owed once retirements hits.
Take a close look at your estimated benefit. Will this along with your other investments be enough to reach your goals? If not, put a plan in place to fill the gap.
To help ensure that your child or grandchild is not burdened with excessive student loan debt, consider opening a 529 college savings plan. There are plenty of misconceptions so let’s try to address a few of them.
• You are not limited to 4-year undergraduate colleges; rather, trade, vocational, graduate schools and community colleges are all possibilities.
• It is not a use it or lose it proposition. You can use the money for your own education or pass it on to another beneficiary. Worst case, if you withdraw the money for non- qualified expenses you would pay income taxes and a 10% penalty on the earnings.
• As it is considered your asset and not your child’s, it will only have a minor impact if any, on financial aid.
Applying for new credit creates what is known as an inquiry on your credit report and multiple credit requests in a short period of time can impact your credit score but there is an exception.
When it comes to shopping for a single loan such as an auto, home, or student loan inquiries made in the 30 days prior to scoring are ignored.
Here’s the bottom line. When searching for a mortgage, auto, or student loan do your homework ahead of time to decide which companies to approach for a quote, but don’t be afraid of getting multiple quotes, just make sure you do your rate shopping in a reasonably short period of time.
If you have never had any credit, or if you need to rebuild your own credit, getting positive credit behavior reported going forward is critical.
This may require that you get a loan that is secured by a deposit at your financial institution.
A “secured” credit card is certainly one option, but an installment loan secured by your savings account or a certificate of deposit may be a better option.
With an installment loan it is simple, automatic, and reflects positive repayment history as a major purchase vs. a revolving credit card.
Remember, you still have to make all of your payments on time.
After the purchase of a home, the purchase of your automobile is probably the second largest purchase you’ve made.
While we often consider refinancing our mortgage, for those who have taken out a loan to purchase a car or truck, the idea of refinancing our auto loan does not often come to mind but depending upon your situation, it could save you hundreds of dollars.
Perhaps you did not get the best rate when you made your purchase or your credit has improved. If you still have two or more years left on your auto loan you may want to see if refinancing is an option. You do not need to increase the term of your loan, however, if you can reduce your interest rate you can use the savings to pay your loan off sooner.
Common sense would tell us that paying our credit card down to zero each month will boost our score but that may not be the case.
This is certainly a great habit to get into but when it comes to how this will impact your credit score, what it important is what the lender reports which is usually the balance on your monthly statement in relation to your credit limit. This is often referred to as your “utilization” and accounts for 30% of your credit score.
If at all possible you want to keep this below 25%. For example, if you have a $1,000 credit limit you want to make sure that the balance on your monthly statement does not exceed $250.00.
Pay attention to what is reported on your statement and if it is higher than what you would like consider making additional payments prior to your lenders billing cycle.
If at all possible we never want to tap into our IRA or other investment account before retirement, however, perhaps for some unforeseen circumstance you were forced to do it.
With the ROTH IRA you are not going to pay any taxes or penalty on the amount that was originally principle that you contributed, however, with a traditional IRA you are going to owe income taxes and possibly a 10% penalty if you are under 591/2.
However, there are exceptions. If you are disabled, or if the money was used for unreimbursed medical expenses, qualified higher education expenses, or the purchase of a first home you may not have to pay the penalty. If you fall into any of these categories make sure you talk to your tax preparer. If this was overlooked in the last three years look into amending your return.
