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Happy Holidays

Given this very busy time of year with work, family, and celebrations, we decided to hold off on any blog posts until after the first of the year.

We wanted to thank all of our loyal readers who have helped make the blog what it is today; we enjoy writing relevant content and we definitely look forward to what 2013 may bring!  

In the meantime, please subscribe to our e-mail distribution list (located on the right of each page below the “Search” function). This will allow you to be notified automatically when new posts are written. We also recently added some functionality where you can follow us on Twitter, Facebook, GooglePlus, or through an RSS feed by clicking any of these icons on the right of the page or in the header of the website.  Lastly, we added a feature where you can share relevant content through your favorite social media by clicking the icons at the bottom of each post.

In 2013, we hope to keep the same cadence that we have been with posts on Monday and Thursday of the week.

Feel free to leave us comments on this post with any topics or ideas you would be interested in reading in 2013, so we can continue to expand on our posts and provide relevant content!

And on that note…happy new year to all! 

Kirby & Angela

Happy Holidays is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

To Roth or not to Roth

KJ: To Roth or not to Roth: that is the question.

Many people have the misconception that Roth IRAs (or Traditional IRA) are a type of investment. Well, they are an ‘investment’ in your future, but they are not an investment like a stock is an investment. They are merely an account type much like a checking account is a type of an account, but they enjoy special tax characteristics.(1)

I personally prefer a Roth IRA over a Traditional IRA because I’m a young saver with hopes to be in a much higher tax bracket by the time we retire (read higher tax bracket = filthy rich). Additionally, with our savings outside of our Roths, we can spend down those assets first in retirement and can leave the money in our Roth as long as we need, so we can maximize the tax-free benefits of the Roth.

Key points of differentiation between a Traditional IRA and Roth IRA:

  • A Roth IRA is contributed to with after-tax dollars (you pay payroll (Social Security & Medicare) and federal income tax on the money in the year you earned the income), but the money grows tax-free and you will never pay taxes on what is earned within a Roth.(2) Additionally, you can defer taking money out of a Roth IRA indefinitely.
    • These accounts are best if you think you will be in a higher tax bracket in retirement (believe it or not, income tax rates – especially the top tax rates – are at historic lows), and/or if you prefer to spend down other assets first.
  • A traditional IRA is tax deductible (typically – with some limitations) in the year of a contribution, but you must pay income taxes on it when you take money out. Also, you must begin taking distribution out beginning at age 70 1/2.
    • These accounts are best if you need or want the tax deduction now and expect to be in a lower tax bracket in retirement.

Tips to help in your quest for savings:

1) Set up a Roth today: Consult your financial planning professional for more information or consider managing our your own account at a company like: Vanguard, Fidelity, TD Ameritrade, etc.

2) Know what you can contribute: For 2012, you can contribute $5,000 ($6,000 if over the age of 50) to a Roth IRA provided your income is less than $173,000 for married couples and $110,000 if you are single.(3) Even if one spouse doesn’t work, you can potentially contribute to a Roth IRA for both individuals and sock away $10,000. Haven’t contributed yet? There’s still plenty of time.(4) You have until the tax-filing deadline in April 2013 to make a contribution for the 2012 tax year.

A Roth is a really approachable way for individuals to begin saving at a higher level.

(1) You can open a Roth account at a bank, credit union, or brokerage firm (Schwab, Fidelity, Scottrade, eTrade).
(2) http://www.irs.gov/publications/p590/ch02.html#en_US_2011_publink1000231057. Provided the IRS doesn’t change their tax treatment in the future.
(3) http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2012
(4) http://www.irs.gov/publications/p590/ch01.html#en_US_2011_publink1000230424

To Roth or not to Roth is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

Don’t be afraid to ask for help

A sea of debt

AJ: Our nation’s debt is a constant source of anger for Americans regardless of political party. So why do so many individuals think it makes sense to take on enormous amounts of personal debt?

Everyone wants to think that they’re unique, but the reality is that most people struggle at some point or another. You absolutely cannot anticipate and plan for everything that comes up, but you can choose how you address the setback.

Don’t buy a car that costs more than you make in a year. Don’t spend more on eating out during the weekend than you make in a week. Don’t go to Vegas to take a break from your life before starting your child’s college fund. It’s all obvious, but in a moment of stress or excitement people seem to lose the ability to make rational choices, choosing instead to make small purchases on credit that ultimately cost significantly more in the long run.

It’s easy to get behind

It’s really easy to get behind, especially in relationships where communication isn’t consistent, but make a plan to dig yourself out quickly. If you’re fully extended each month and an over and above expense comes up, find another source of income, even if it’s temporary.

If you let $1,500 sit on a credit card with an interest rate of 15% and only make the minimum payment (not adding any purchases…), after about 2 years you will end up paying almost $3,000! That takes your cost from about $63/mo to about $125/mo.

Seek help

I don’t know many people who would be too proud to ask a chef about how to use a certain ingredient in a recipe, so it makes no sense to me why anyone would be too proud to ask for help with their finances. Where did this idea of secrecy around money come from? If you are in trouble and need help, ask. Everyone pulls from different experiences, and you don’t have to be a financial advisor to have great tips on living a reasonable lifestyle.

Many financial advisors charge 1% of assets under management to provide you with financial guidance. Take the time to at least have a conversation with someone who is trained to help people invest wisely.

Change can be good

KJ: What your parents’ parents did to save might not be what you should do. In our rapidly changing landscape, consider seeking a financial consultant with the know-how of today’s world.

When was the last time you got an illness and just said ‘it’s okay, I can take care of that in a couple months.” No! You address the ailment as it arises. Putting it off to address at a later time only makes the problem worse.

Since so many products didn’t exist decades ago, why think what worked then will work now? The concepts of a mutual fund, ETF, hedge fund, 401(k), 403(b), IRA, SEP, SIMPLE, HSA, MSA, and FSA have become alphabet soup! It is important now more than ever to seek a competent professional who can walk you through your goals, investments, and financial picture, and can help update all areas periodically given the constantly evolving financial industry. Life isn’t going to sit on the sidelines and wait for you to figure things out: you have to go figure life out, so it doesn’t leave you in the dust.

No one said it would be easy

It can be a challenge to open up about your finances with someone else. As Americans, it’s so much engrained in our culture to not speak about money and to keep that behind closed doors. No one said working through problems is going to be easy, but it’s not something most people are prepared to do on their own – they need a great support system. Just like losing weight or trying to achieve a goal, you need to know where you stand and where you are headed (Budgeting: a very good place to start). With the credit binge that the U.S. has had for the last 30 years (consumers, corporations, and the entire country), it hasn’t been easy cleaning it up these past four years (we have a long ways to go), but we can get there if we put our minds to it! It starts with you!

Don't be afraid to ask for help is copyrighted by TheSimpleMoneyBlog.com without consent to republish.

Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.

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