You’re an expert in many areas: performing your job, playing a sport, caring for your family, running your household, playing an instrument, engaging in a hobby, etc., yet when it comes to building and maintaining your financial security and well-being, you may need help.
According to a Harris poll by the National Endowment for Financial Education, about 36 percent of Americans don’t know what financial advisors do. Here is just a sampling of services they can offer:
- Advise on spending and debt repayment goals
- Prepare financial and retirement plans
- Assess savings and investment options
- Evaluate tax advantages
- Create estate plans
Contribute to Employer Retirement Programs
Although fewer companies provide traditional pension plans these days, many employers offer tax-deferred retirement savings plans, e.g., 401(k) and 403(b) accounts. Your contributions to these plans are tax-deferred, meaning that your contributions and any earnings on them are taxed only when you take the money out (usually after age 59 ½ when your tax liability should be lower).
- Have an employer plan? In addition to being one of the better tax shelters, many employers will match your contributions up to a certain amount, giving you free money toward retirement. Maximize your contributions to get the greatest contribution from your employer.
- Self-employed? You can set up your own tax-deferred retirement account, such as a Keogh plan, a simplified employee pension plan (SEP), savings incentive match plan for employees (SIMPLE), or IRA, and contribute the maximum amount possible.
- Don’t have an employer-sponsored plan? Save through myRA, a plan that has been established for people who can only save a little bit here and there or who otherwise lack tax-deferred programs in which to contribute. As of July 2017, the U.S. Treasury Department discontinued the myRA program. Existing myRA account holders are encouraged to log in to myra.gov and update contact information. Account holders will be notified of the deadline for rolling remaining myRA funds into a Roth IRA. Please visit myra.gov for more information.
A tax advisor can help you structure your contributions to these plans and suggest how to maximize tax advantages, grow your retirement savings rate and increase your net worth.
Live Off a Set Income When You Have a Windfall
When you start to make more money as you mature in your career or when you have a windfall such as a bonus, inheritance, sale of a property or tax refund, it is a good practice to continue to live off a set income. This sounds like another lesson in budgeting, but the focus here is using cash surprises to bolster your savings and increase your net worth.
No matter how these windfalls come to you, what you do with them matters. If you know your goals, and you’ve thought about your values, you can feel confident when making decisions about what to do with that extra money.
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