Sahel Rafael Tamayo

It’s tax time again! While you probably hear experts telling you to file your taxes as soon as you can, does it mean it is always the best and wisest choice? Believe it or not, depending on your unique situation, you might benefit more if wait to ensure the accuracy of your return. How long should you wait to file your taxes, then?

When Should You File Your Taxes?

Millions of Americans have their tax returns filed to report to the federal government their taxable income and reconcile the tax bill every year. Most of the filed returns in 2019 resulted in almost $2,900 in tax refunds.

Since you own the money that doesn’t accrue interest, it’s financially sensible to file your taxes sooner than later to have this money in your pocket.

For most people, however, your best option is to file your taxes early or as soon as you can at the least. Doing so can offer the following perks:

• • The IRS might process your tax return as well as agree on the tax liability much sooner.
  • You will also know sooner if you owe anything, giving you some time to save up money.
  • You can evaluate if you have to file an amended tax return if there is an omission or error.

There are a few more considerations to make when deciding when you should file your taxes. These include:

• • Revised 1099 Forms
  • Tardy Schedule K-1s
  • Retirement plan contribution limits

Should You Wait a Long Time Before Filing Your Taxes?

For simpler tax situations, you may be able to receive your refund much sooner if you file your tax early. This money will now belong to you and it doesn’t often incur any interest while it is under the monitoring and handling of the IRS.

When you file your taxes early, you can also:

• • Save yourself from the need to file for an extension
  • Gain enough time to save some cash for tax bills in case you have any. Remember that just because you file your tax returns early doesn’t necessarily mean that you also need to pay them at that very time as well. In general, you can pay for your owed taxes until the deadline for filing.

Many taxpayers today prepare their returns with just 1099s and W-2s. You need to mail everything by the end of January. Most of the time, you don’t have to wait until you file your return.

Once you discover that you have a revised 1099 Form after you file your return and there was a major change, you might need to file your amended tax return.

You might also have to wait to file at least until mid-March if you happen to have an ownership stake in a certain partnership or any other pass-through entity.

At the end of the day, filing your taxes shouldn’t be made early all the time. There are certain cases when waiting may benefit you more.

 

Variable APR or annual percentage rate means that the interest you will pay when you carry a balance on your credit card might change after some time. A credit card’s APR is generally connected to the federal interest rate. It means that federal rate changes will also result in changes to the APR of the credit card. Let’s discuss it more in the detail What is Variable APR?

While most credit cards come with variable APR, some come with fixed APR. A notable benefit of a fixed interest rate is the fact that the issuer of the credit card must inform you before any changes to the rate are made. Although most credit card providers will also inform you about imminent changes to your credit card with a variable rate, they are not obligated to do so.

Basics of Variable APR

The interest rate on credit cards with variable APR might change for various reasons. However, a broader economic change is the most common one.

A credit card with a variable interest rate will come with details in the cardholder agreement on how to calculate the rate. Many credit card companies identify the APR by adhering to the prime rate, which is the Wall Street Journal’s published economic index.

The prime rate is ultimately affected by the federal loan rate, or the rate that the Federal Reserve, also known as the US central bank or simply the Fed, designates for banks to borrow cash from each other.

While the system is a bit complex, you can try to think of it this way: every time the federal interest rates increase, it is also likely for your credit card APR to rise as well. On the other hand, a decrease in the federal rates will make the rate of your card possibly follow suit, too.

The prime rate has remained relatively low for quite some time, so the credit card APR was also a bit lower. The Wall Street Journal has so far reported a 3.25% prime index in April 2021, substantially lower than the 8.75% it was set at in 2000.

To know your current APR, you can contact your credit card provider or check your credit card statement. While the prime rate has a large role to play in determining the interest rate of your card, It might change after some time because of several reasons.

Factors That Influence APR

Your APR may change due to bigger factors in the economy although you may also experience interest rate changes not connected to the prime rate in any way. Penalties, reviews, promotions, and special programs are among the most common reasons for changes in your APR.

After you review the statement of your credit card, you might notice a change in its APR. If a prime rate adjustment didn’t cause the change, it may be because of any of the reasons below:

• • Penalties – Your credit card company might implement a higher penalty APR indicated in the cardholder agreement if you have one or several late payments during a particular timeframe.
  • Reviews – Your credit card company might review your card file and lower or raise your rate accordingly as changes occur with your credit score.
  • Special promotions or programs – Some promotions and programs such as those for service members may result in lower APR. Once these end, your statement may indicate a higher APR.

 

 

 

Congress passed the SECURE 2.0 Act as part of a spending bill for the end of the year. The retirement plan legislation is the expanded version of the SECURE Act of 2019 whose goal was to improve the retirement laws when it comes to savings accounts. US President Joe Biden signed the bill into law on the 29^th of December 2022.

What’s Included in the SECURE 2.0 Act?

The SECURE 2.0 Act is meant to serve as an upgrade to the SECURE or Setting Every Community Up for Retirement Enhancement Act of 2019. Congress passed it on December 23 as a part of the Consolidated Appropriations Act of 2023. The president signed this legislation into law after just six days.

This expanded legislation has made some substantial changes to qualified retirement plans. One of these changes is the age increase in 2023 from 72 to 73, and 75 by the year 2023 for the RMDs or required minimum distributions. RMDs in 2022 as the minimum cash amount that a holder of a retirement plan account is mandated to withdraw per year before reaching 72 years old.

The SECURE 2.0 Act also contains provisions for improving the retirement savings accounts in the United States, which get rid of RMDs for Roth accounts in 403bs and 401ks, together with other provisions starting in 2024.

It was in late March 2022 when the House passed its version of the SECURE 2.0 Act called the EARN or Enhancing American Retirement Now Act.

Significant Changes in SECURE 2.0 Act

The SECURE 2.0 Act is expected to enact to low the following significant changes:

• • The age for RMDs will go up to 73 years old for those who will turn 72 in 2023, and 75 by 2033.
  • Many of the new 403bs and 401ks established after passing the SECURE 2.0 Act as a law will be obliged to automatically enroll employees and escalate the contributions after the 31^st of December 2024.
  • Retirement savers with low income could be eligible for a 50% tax credit of up to $2,000 after the 31^st of December 2026. The amount must be deposited into an IRA or a retirement plan of the individual.
  • RMDs are removed from Roth accounts in 403bs and 401ks for tax years after the 31^st of December 2023.
  • The catch-up distribution limits will increase for those people who are 60 and 63 years old after the 31^st of December 2024 to the great two. It can be either 150% or $10,000 of the usual catch-up amount for people aged 50 and above.
  • Penalties for early withdrawal will be removed for hardship distributions that terminally ill employees make as well as those who live in declared disaster areas to a maximum of $22,000.
  • An online database will be developed by the Department of Labor within two years after the SECURE 2.0 Act has become law for employers and employees alike to look for orphaned retirements and match these to current plans.

 

 

 

 

 

 

 

 

 

 

 

 

An ETF or Exchange-Traded Fund is a type of investment fund holding assets including stocks, bonds, foreign currency, or commodities. ETFs are traded similarly to stocks at fluctuating prices throughout the trading day. They usually track indexes including the Dow Jones, the Russell 2000, the S&P 500, and the Nasdaq. Keep reading to understand all about What is an ETF.

ETF investors are not the direct owners of underlying investments. Instead, they have an indirect claim. They are also entitled to a part of the residual value in the case of fund liquidation and the profits. Their ownership interest or shares can also be readily sold and purchased in the secondary market.

Different Types of Exchange-Traded Funds

The following are some of the most common types of ETFs:

• • Actively Managed ETFs

An investment team or manager handles these ETFs and decides the portfolio assets’ allocation. Their active management means their portfolio turnover rates are higher than index funds, for instance.

• • Bond ETFs

These ETFs are exclusively invested in bonds and other types of securities with fixed incomes. These might be focused on a certain type of bond or provide a broadly diversified portfolio of different types of bonds with different maturity dates.

• • Commodity ETFs

Commodity ETFs hold physical commodities like precious metals, natural resources, or agricultural goods. Some commodity ETFs might also combine investments in physical commodities with relevant equity investments.

• • Currency ETFs

These are ETFs invested in one basket of several currencies or a single currency. These are often extensively used by those investors who want to be exposed to the forex market without making direct trading of futures in it. These ETFs often track the most common internal currencies like the US dollar, British pound, Japanese yen, Euro, and Canadian dollar.

• • Index ETFs

These ETFs copy a particular index, like the S&P 500 Index, covering certain sectors, particular stock classes, or emerging or foreign market equities.

• • Inverse ETFs

Inverse ETFs are made by using different derivatives to acquire profits via short selling if there is a broad market index or decline in a group of securities’ value.

• • Leveraged ETFs

These ETFs are mostly made up of financial derivatives that provide an ability to leverage investments and potentially increase gains. These are often used by speculator traders who want to make the most out of short-term trading opportunities in the major stock indexes.

• • Real Estate ETFs

Real estate ETFs are funds invested in REITs or real estate investment trusts, real estate development companies, mortgage-backed securities, and real estate service firms. These might also hold actual physical real estate, which can range from large commercial properties to undeveloped land.

• • Stock ETFs

These ETFs hold a certain portfolio of stocks or equities and resemble an index. These can also be treated similarly to regular stocks since these can be bought and sold for a profit. Stock ETFs are also traded on an exchange during the trading day.

Why Invest in an ETF

Investing in an ETF comes with several benefits such as:

• • Lower transaction fees and costs
  • Accessibility to markets
  • Transparency
  • Price discovery and liquidity
  • Tax efficiency

 

The 401k plan is one of the most renowned employee benefits that employees and job candidates alike find appealing and enticing. It is a one-of-a-kind savings account where participants are allowed to contribute a part of their wages on a pretax basis. It also provides several exciting benefits that help you establish future savings.

401k Plan: What is It?

The 401k plan is one type of retirement savings account under the regulation of the IRS. People can contribute a certain amount annually. All funds in 401k plans are qualified for tax benefits. A sponsoring employer administers most 401k plans, which lets employees contribute funds on a pre-tax basis to their plans. It makes it simpler and easier for most employees to prepare and save up for their retirement.

How 401k Plans Work

401k plans are traditionally set up through employers together with the rest of the benefit options. Once an employee becomes eligible for benefits, some plans use an auto-enrollment feature. They can also sign up for a plan to set their chosen 401k contributions as a part of the process of benefits enrolment. Self-employed workers can also use a qualified broker to enroll in solo 401k plans.

After initiating the plan, the designated amounts of the contribution of the employee will be processed through the payroll deduction on a pre-tax basis or post-tax in the case of Roth 401k. The employer will then take the deduction amount from the payroll together with the employer match contributions. All these acquired funds will be deposited in the designated account of the employee.

Upon making these contributions, employees are often given access to the online portal that makes it easier for them to track the performance and value of the account over time. They can also borrow money against the account’s value or choose the designated investment percentages when made available through the plan of the employer.

Different Types of 401k Plans

401k plans pertain to all plans governed by the Internal Revenue Code’s subsection 401k. Although the plans all have the same limitations and requirements, the IRS code is flexible when it comes to 401k plans and their different types.

You can enjoy tax savings from these plans’ different types, which include the following:

• • 403(b)

These are similar plans to 401k but are only available to some government employees and nonprofit organization employees.

• • PEP 401k Plan

The PEP or Pooled Employer Plan allows all sizes of employers to pool assets into a 401k plan under the administration of a professional Pooled Plan Provider. This is an ideal choice for businesses looking for a turnkey and easy-to-manage 401k plan with lower fiduciary risk, simplified administration, and less cost.

• • Profit-sharing

It is a unique plan where employers are allowed to contribute on the employee’s behalf based on the company’s profits. The employer is the only one who can contribute to the plan, and elective contributions by employees are not permitted.

• • Roth 401k

It is a plan that combines the features of traditional 401k and Roth IRA to give employees an option to contribute to the plan after taxes to avoid taxation later on.

Other types of 401k plans include safe harbor 401k, simple 401k, solo 401k, and traditional 401k.

 

It is easy to assume that you can expect the best results if you work with a professional stock picker who will buy securities and supervise your portfolio for you. However, studies revealed that a hands-off investment approach is often a savvier strategy. So what are the Indexed funds? Let’s discuss it in detail.

Investors in the past used to rely a lot on active mutual funds. Here, fund managers time the market through active selling and buying of shares. They also predict stocks that are starting to lose steam and those undervalued ones that are poised to win soon. But based on research, beating the market doesn’t always work.

Indexed funds provide an alternative investment strategy. Instead of trying to outdo the market, indexed funds just match the performance of the market by letting people invest in it. The logic behind the strategy is that the market increases over time. It means that if your portfolio copies the trajectory of the market, your earnings will also rise.

How Indexed Funds Work

A stock market index measures the performance of the market according to the value of several stocks. There are three most extensively followed indexes. The first one is S&P 500 which includes the United States 500 largest publicly traded companies.

The second one is the Dow Jones Industrial Average which represents 30 stable large blue chip corporations from various industries. The last one is the Nasdaq Composite, which is a tech-heavy index of over 3,300 stocks.

The past ten years have seen stock market indexes thriving. The Dow Jones and the S&P 500’s 10-year average return is almost 12%. Almost 85% of the actively managed large-cap funds also failed the S&P 500 in the past decade.

With the excellent performance of indexes, it also follows that it would be a smarter approach to invest in stocks that mirror a specific index or even just a segment of one. The only issue here is that buying all index shares and buying and selling them as a valuation of constituent companies’ shifts will be time-consuming and expensive.

Indexed funds provide an ideal solution in this case. These funds pool money from several investors and use this communal cash to buy shares in a particular index. Investors just invest in the fund and enjoy the rewards of accessibly following the market.

Benefits of Indexed Funds

Indexed funds provide rock-bottom prices. This low cost is partly thanks to limited overhead and zero charges in terms of commission. Due to the passive management of indexed funds, as dictated by the changes in the market index they are replicating, there is no need for investors to pay advisors, analysts, or managers to spend time assessing, buying, and selling stocks.

Based on this, indexed funds provide another advantage. Unlike actively managed funds, many passive investors follow the buy-and-hold strategy by default because they are riding the market’s wave. Buy and hold has always been more lucrative and effective compared to the approach of timing the market.

Since a basket of shares is included in indexed funds from an entire market segment, they also provide a naturally diverse portfolio that reduces risk. Market indexes typically don’t plummet or leap dramatically. Your investments will likely retain a similarly stable state.

Capital gains taxes and transaction fees are minimal as well because of the rare buying and selling of holdings. All of these add up to more money in your pocket.

 

 

Romantic talks never include 401k plans and taxes. After all, finances are probably the least fun topics for spouses. However, making sure that the lines of communication are always open and clear is critical to ensure a healthy relationship. Further in this article, we will discuss how to discuss finances with your spouse

Unfortunately, money talks may feel a bit awkward. After all, bedroom talks are so much better, right? But for a marriage to work and last longer, discussing finances openly is one of the best-kept secrets that everyone should know.

Here are some tips on how to discuss finances with your spouse so you can tackle things as a solid team:

Highlight the Good Things First

Financial discussions can get extremely emotional most of the time. You can begin by giving your spouse much-deserved praise if he or she has taken some positive steps recently. Emphasizing financial mistakes and pointing fingers will only result in heated arguments with no solutions reached at all.

Schedule a Regular Money Date

Try to schedule a specific day every month or week when you will discuss your savings, budget, future financial goals, and retirement. Make sure you also pick a relaxed and peaceful environment free from distractions such as your phones, TV shows, or crying kids. Make it fun as much as possible instead of something you dread and want to avoid every chance you get.

Share Your Financial Story

Everyone has a money story to tell. Make sure your partner knows your financial past, starting from your childhood. What kind of money conversations did you hear while growing up? Did your parents have good money habits? Was money a scarcity when you were a kid?

Knowing and listening to each other’s money story will give the two of you a clearer insight into your respective financial mindsets. Sharing your stories out loud can also give you clarity about your financial behaviors.

You might want to grab a pen and paper at this point to write down your financial story. Some people feel more comfortable with writing than discussing it in the open. If you opt for the writing route, give each other time to ask questions about the letter of the other after reading it.

Embrace the Possibility of Change

It doesn’t matter if you or your partner is the spender or the saver, never play the blame game at all costs. Any money already spent is already gone and crying over spilled milk will be useless. Be ready for a fresh start instead.

Instead of focusing on financial blunders made in the past, try to come up with a more positive game plan you can use soon. You might have had a bad money story in the past but it doesn’t have to stay that way. A simple change today can go a long way to fix things.

Don’t forget that money problems usually run much deeper than what can be seen on the surface. If you always find yourself having money fights with your spouse, remember that a few simple changes, combined with consistency and a solid “we” mentality will help not only your bank accounts but also your marriage to thrive and flourish.

 

How much life insurance should you carry? What type do you even need in the first place? Is your current life insurance through work already enough? Do you need more life insurance even if you already bought one a long time ago? Let’s discuss about the Type of Life Insurance Should Be Carrying

These are just some of the many questions that people often have when it comes to life insurance. The thing is while the questions may be the same, the answers may vary from person to person. As an individual, you have your unique dreams and needs, not to mention that your family situation is also different from that of others.

What to Consider Before Getting Life Insurance

Determining how much life insurance you should carry starts with checking who and what you wish to protect, and this is usually dependent on the current life stage you are in.

• • If you are a young parent or newly married, you might need to protect your income before anything else. If anything happens to you, you can leave behind just enough to help your family and spouse substitute the lost income for a specific timeframe.
  • If you have a growing family and you have upgraded or bought your house, you might need to add extra coverage for several of your most significant assets. You might also want to protect the future education needs of your children.
  • If you are going through a divorce process, you might need to consider several factors, particularly if you have kids.
  • If you are already nearing retirement, you might want to think about the needs of your spouse to help them live a comfortable life if they live much longer than you.

How Much Life Insurance Should You Be Carrying?

When planning to buy life insurance, you need to consider the size of your family, the value of your home, your income, your businesses if you have any, and the debt you have right now.

If you already have your own family, you will want to ensure that everything will be looked after properly, from their basic needs such as food, clothing, education, taxes, mortgage, and other essentials in the future.

What kind of needs will your family have if you are no longer there to provide for them? An easy way to determine an estimated amount of the life insurance you should carry is to multiply your present income by 10 to 15.

Is Your Current Life Insurance Coverage Already Enough?

People who already have life insurance through employment often assume that there will already be enough to cover their family’s needs in the future. This may be true depending on the specific life stage you are in right now.

However, there are instances when the amount might no longer be sufficient once you begin to factor in the future and basic costs. Most of the time, people realize that they require more than what their employer has to offer.

What Type of Life Insurance Should You Be Carrying?

What if you have already analyzed your needs only to discover that your budget cannot afford the premium? There are now several life insurance options available right now so you might want to consult the experts to determine what works best for you.

Two popular options you can consider whole life and term insurance. As your income starts to increase, you can assess your current life insurance again, especially if some of your liabilities already changed.

 

For the longest time, being in debt has long been stereotyped as a negative thing. It has also been assumed that people borrow money if they live beyond their means or they don’t have a lot of cash available. But did you know that not only low-income people borrow money and that the act of borrowing itself isn’t always a bad thing? Let’s discus more about Do Most Millionaires Get Wealth by Borrowing Money.

Believe it or not but data shows that millionaires borrow more money than the lowest earners. It is also this top 1% of the population that holds almost all debt while the bottom only makes up a small amount of outstanding debt.

Do most millionaires get wealth by borrowing money, then? Well, it may be safe to say that yes, that’s what happens, and here’s how it is possible.

There are several main reasons why millionaires borrow more money compared to lower earners. One of these is because their mortgage debt is generally higher than people with lower incomes.

Since they are also in a better position for mortgage loan approval, it increases their chances of home ownership. Lower-income earners who can’t get approved for a mortgage or can’t afford to buy a house won’t have any mortgage debt in the first place.

Millionaires also take out bigger mortgages and buy larger houses. This is because they can make the most out of the mortgage interest deduction that subsidizes the home purchase. After all, the government covers a portion of the cost of interest through tax savings.

Although this deduction is also available to lower earners, you need to itemize to get it. A big standard deduction usually means that it would be futile to itemize unless you are a millionaire who can claim a lot of individual deductions.

Mortgage applications also benefit millionaires since homeownership helps them establish their net worth. They also acquire equity in their properties while paying down their mortgage, with their wealth growing when the value of the property also goes up.

The top 1% of the population also holds a certain part of consumer credit, including credit card debt. But although millionaires usually charge a lot on their credit cards to earn rewards, they are also more likely to make full payments to their balance before they even owe any interest. While they pay off these balances, they still appear in the total outstanding credit of millionaires because card compares sometimes report a balance before its full payment.

The data also reveals that while millionaires borrow a lot of money, they do so in strategic ways and use debt as a form of tool. Their borrowing helps them to earn tax deductions, as is the case with mortgages, as well as credit card rewards. They also don’t pay a lot of interest since their card balances are paid in full, and since mortgages often have low rates. As for mortgages, they also take out loans to buy assets that usually grow their wealth and net worth further.

You see, borrowing money is not always a bad thing. As long as you follow the footsteps of these millionaires and use your credit strategically, you can also become one of them soon!