As you get closer to retirement age, you may be wondering about required minimum distributions, or RMDs.
What are they?
How do they work?
And what happens if you don’t take them?
Here’s everything you need to know about RMDs.
What’s Ahead:
What Is an RMD?
An RMD is a required minimum distribution. This is the minimum amount of money that you must withdraw from your retirement account each year.
The amount of the RMD is based on your account balance and life expectancy. The IRS requires the RMD to prevent people from using their retirement accounts as a tax shelter.
By requiring people to take money out of their accounts each year, the IRS ensures that people pay taxes on their retirement savings. The RMD is also important for another reason.
It ensures people do not outlive their retirement savings. Taking money out of your account each year forces you to spend down your account balance.
This ensures that you do not run out of money in retirement. There are a few things to keep in mind regarding the RMD.
First, you must begin taking your RMD by April 1 of the year after you turn 70 ½. Second, you must take your RMD even if you are still working.
Finally, you must calculate your RMD for each account separately if you have multiple retirement accounts. The RMD can seem like a hassle, but it is an important part of retirement planning.
By taking your RMD each year, you can ensure that you do not outlive your retirement savings.
The Gist: The RMD is a required minimum distribution that must be taken from your retirement account each year to prevent tax sheltering and to ensure you do not outlive your savings.
How Much Must I Withdraw Each Year?
Are you in your 20s and dreading the day you have to start withdrawing money from your retirement accounts?
Don’t worry, we’re here to help! You first need to know that you don’t have to start withdrawing money from your retirement accounts until you’re 70.
So, if you’re in your 20s, you have plenty of time to let your money grow. However, there is one exception to this rule.
If you have a traditional IRA, you must start taking distributions starting at age 70 1/2. This is known as the Required Minimum Distribution, or RMD.
The RMD is the minimum amount you must withdraw from your retirement account each year. The amount of the RMD is based on your life expectancy and the value of your account.
For example, let’s say you’re 70 years old and have a traditional IRA worth $100,000. Your RMD would be $3,571.43.
While the RMD may seem like a pain, it’s actually a good thing. The RMD forces you to take money out of your retirement account and use it.
This is important because it ensures that you don’t outlive your money. You won’t have to start taking distributions until you’re 70 years old.
And, even then, the RMD is a good thing because it ensures you don’t outlive your money.
The Gist: The RMD is the minimum amount of money that you must withdraw from your retirement account each year, starting at age 70 1/2. The amount of the RMD is based on your life expectancy and the value of your account.
When Do I Have to Start Taking Distributions?
In your 20s, you’re probably thinking about many things – your career, your love life, and your future. But one thing you might not be thinking about is your retirement.
And that’s okay!
Retirement can seem like a long way off, and there’s plenty of time to start saving later, right?
Wrong. The truth is, the sooner you start saving for retirement, the better.
Why?
Because the earlier you start, the more time your money has to grow. And the more time your money has to grow, the less you’ll have to save overall.
So how do you start saving for retirement in your 20s?
One way is to start contributing to 401(k) or other employer-sponsored retirement plans. If your employer offers a match, contribute at least enough to get the full match.
Another way to start saving is to open an IRA. Once you have a retirement account, you’ll need to consider distributions.
A distribution is simply a withdrawal from your account. You’ll need to start taking distributions from your retirement account at age 70 1/2.
The amount you’ll need to withdraw each year is your Required Minimum Distribution, or RMD. Your RMD is based on your account balance and your life expectancy.
The IRS provides a life expectancy table that you can use to calculate your RMD. You can take your RMD lump sum or installments throughout the year.
However, if you choose to take your RMD in installments, you must take your first RMD by April 1, following the year you turn 70 1/2. For example, if you turn 70 1/2 in 2022, you must take your first RMD by April 1, 2022.
You can also choose to delay your first RMD until April 1 of the year after you retire. However, if you do this, you’ll need to take two RMDs in the year you turn 70 1/2 – one for the year you turned 70 12 and one for the year you retire.
Taking distributions from your retirement account can seem daunting, but it’s important to start thinking about it now. The sooner you start, the more time your money has to grow.
And the more time your money has to grow, the less you’ll have to withdraw later.
The Gist: The sooner you start saving for retirement, the less you’ll have to withdraw later.
Are There Any Exceptions to the Rule?
As we all know, the rule of thumb is that you should never put more than 10% of your income into savings.
But are there any exceptions to this rule?
For example, let’s say you’re in your 20s and making a good income. You may be able to afford to put away 15% or even 20% of your income into savings.
Or, let’s say you have a lot of expensive debts, like student loans. In this case, you may want to put more than 10% of your income towards debt repayment to get rid of your debt sooner.
There are no hard and fast rules when it comes to personal finance. It’s important to do what makes sense for your unique situation.
If you’re unsure what to do, talk to a financial advisor. They can help you figure out a savings plan that makes sense for you.
What Happens If I Don’t Take My Required Minimum Distribution (RMD)?
Like most people, you probably don’t think about your required minimum distribution (RMD) until it’s time to take it. And even then, you may not be sure what it is or why you must take it.
Here’s the deal:
An RMD is the minimum amount of money that you must withdraw from your retirement account each year.
The purpose of an RMD is to ensure that you don’t keep your money in your retirement account forever and to prevent you from deferring taxes on that money indefinitely.
So what happens if you don’t take your RMD?
First, you’ll owe a penalty of 50% of your RMD. So if your RMD is $10,000 and you don’t take it, you’ll owe a penalty of $5,000.
In addition to the penalty, you’ll also owe taxes on the money you should have withdrawn. So if you’re in the 25% tax bracket, you’ll owe $2,500 in taxes on the $10,000 you should have withdrawn.
Not only will you owe a penalty, but you’ll also owe taxes on the money you should have withdrawn.
The Gist: If you don’t take your RMD, you’ll owe a 50% penalty and taxes on the money you should have withdrawn.
FAQs About What Is RMD
What is an RMD, and how does it work?
It is the minimum amount that you are required to withdraw from your retirement account each year.
How do I calculate my RMD?
The answer to this question depends on what type of retirement account you have.
If you have a traditional IRA, you would calculate your RMD by taking the total value of your account as of December 31st of the previous year and dividing it by the distribution period.
The distribution period is based on your life expectancy as listed in the IRS life expectancy tables. If you have a Roth IRA, there is no required minimum distribution for Roth IRAs during the owner’s lifetime.
How do I avoid paying RMD on my taxes?
You can avoid paying RMDs on your taxes by rolling your 401k over into a Roth IRA. This way, the money in the Roth IRA will never be subject to mandatory distributions, and you’ll be able to keep it tax-free for as long as you like.
If you’re not sure how to roll over your 401k, most financial institutions can help walk you through the process. And if you have any questions or concerns, don’t hesitate to contact a tax professional for advice.
What is the purpose of an RMD?
The purpose of an RMD is to ensure that taxpayers do not avoid paying taxes on their retirement account balances by taking advantage of the tax-deferred status of those accounts.
By Peter Anderson11 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited July 14, 2017.
Our economy is in a downturn, investments are tanking, and every day the market reaches new lows. It can be hard to stay focused through it all and not panic. Unfortunately it seems like most investors in the market HAVE panicked already, and their fear is self-fulfilling. They’re afraid the market will tank, so when they all panic and sell, it DOES tank.
If you want to retain your sanity during these hard times, there are a few things that you shouldn’t do.
credit: dipfan
7 Things You Shouldn’t Do In An Economic Crisis
You shouldn’t listen to the media: Remember the old saying, “If it bleeds, it leads”. The media will report the bad news first, and often gloss over the good or encouraging news. Try not to take the news reports too seriously as good reporting is becoming harder to come by.
You shouldn’t forget to be positive: If you can’t stay positive, and look at the silver linings of a situation, your feelings of loss and panic will start to surface. Remember that money doesn’t bring happiness, and that the market will rebound. It may not happen as quickly as we’d like it to, but it will come around.
You shouldn’t continuously check your 401k: If you’re like me, you can’t resist the urge to be constantly checking your 401k every day. The DOW dropped 400 points? Oh my gosh, I wonder how much money I lost today! Resist the urge to keep checking your balance. Make sure you have good diversification and good allocations, and then set it and forget it.
You shouldn’t count on the government to help you: Don’t waste your time waiting around for the government to turn things around, bring you a bailout plan, and turn things around. Things will only get better for you if you make things better yourself. Create your own bailout plan, make some extra income and make a plan to succeed!
You shouldn’t stop investing for retirement: The old investing adage says, “Buy low, sell high”. The markets are tanking right now, so you’ll probably be able to find some investments in good strong companies at a fraction of their normal price. Buy it while it’s low!
You shouldn’t try and time the market: It’s a fools game to try and time the market. It’s impossible to know when the market is at it’s lowest, and when it’s at the highest. I thought it was at the low point the other day, and its dropped over a 1000 points since then. Don’t try to beat the market. Invest for the long term. Put together a nicely diversified portfolio, and then let it ride.
You shouldn’t forget that it’s only money: No matter how bad things get, remember that the sun will rise tomorrow. Even if you lose it all, your heavenly father will still take care of you. “Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own. Matthew 6:34”
Remember, this country has gone through hard times before, and we have always come out of it sooner or later. I have no doubt that this time will be the same.
So what are some things that you are going to try not to do during this economic crisis?
With the economy in the middle of a giant plunge, it is getting harder and harder not to feel a little panicked when you watch your 401k balance drop by $10-20,000 or more.
In the last 6 months my wife and I have watched our 401k do just that.
A poll on CNN Money says that 60% of Americans feel that a depression is somewhat or very likely to happen.
So what should we do when we’re facing an uncertain economy, and uncertain markets? Do you try to time the markets, and get out before you lose it all? Do you buy more stocks in the hopes that the markets won’t go down much more?
What is the correct course of action in a market like this?
With that in mind I decided to take a look around the blogosphere to find out what other personal finance bloggers and regular folks are saying right now.
Advice From Around The Web
One of the first places I looked for input today was on Twitter. I asked my 15,000+ followers what they thought of the current market, and if they thought people should get out of the market, keep their regular investments or if they should buy now while the market is down. Some of the responses:
Keep plugging, unless you think this is the end for the US and we won’t ever recover.
Buy at a bargain!
I am staying put. I haven’t bought anything new, but definitely not selling now. No selling unless you need funds in the immediate future
Stay! Buy low, sell high, not the opposite! Unless you need the money right now for an emergency, leave it be.
Buy more, assuming you’ve got time on your side.
Run, my vote is to get out now.
Buy now! If my grandparents had been able to buy right after the 1929 crash, they’d have been rich.
For the most part the responses all seemed to be along the lines of saying that they don’t plan on getting out of the market, they’ll just keep plugging along with their normal 401k contributions, especially if they have time on their side. Many of them also said they’re considering contributing even more to their retirement plans right now in the hopes that they’re getting some rock bottom bargains on stocks right now. One or two people said that they were getting out of the market completely, and converting stocks to low risk fixed value investments.
Blogger Commentary And Advice
In browsing the blogs in my reader, I am seeing a lot of opinions on the topic of what to do right now. Jeremy over at genxfinance.com, who is a financial advisor, talks about how with the market plunging, people are viewing the situation differently depending upon their personal situation:
Depending on who you are and how close you are to retirement, you might view this situation as a great opportunity, or a complete disaster that’s going to force you to delay retirement. I’ve had some people in my office this week recognize the long-term opportunity and increase their contributions to their retirement plan significantly. I’ve also had people in my office that completely break down and start crying because of the impact this is having on their lives.
If you are investing for the long term and aren’t planning on delaying your contributions, you still may want to take this time to re-examine your investing strategy. Depending upon how much risk you’re willing to take, when you plan to retire and other factors -you may need to make some changes.
This might mean readjusting your portfolio, putting more money into bonds, or even increasing how much you’re investing. If you’re doing all the right things, taking on the appropriate level of risk, and understand the role each investment plays in your financial plan, then staying the course isn’t such a bad thing after all. But if you’re doing the wrong things and are taking more risk than you’re willing to stomach, it might be time for a change.
Jim over at WalletHacks.com gives the advice that if you have lots of time before retirement, you shouldn’t get too worried about the current situation. If you’re closer to retirement, you may want to be more conservative.
If you’re like me, about forty years away from retirement, the answer is that you should do nothing differently. Make your regular contributions, check your asset allocations, and do something else with your time. A lot can happen in forty years so you shouldn’t do anything rash like liquidate all of your assets. We had a recession in the 80’s, a mere twenty years ago, and since then we’ve seen the longest bull market period in a very long time. Trying to time the market is a fool’s errand and, honestly, your time is better spent enjoying life rather than fretting about your balance sheet.
If you’re slightly closer to retirement, say ten years away, now’s a good time to adjust where your new contributions are going and go towards a more conservative allocation.
Over at gatherlittlebylittle.com the advice is simple. Stay the course.
I wrote a few months back about what to do if you started seeing your 401k losing money. My advice then was to hang in there and keep investing. The market at the time was beginning a downward trend, but only gradually. Since then the overall decline has become far more significant. Now what do we do?
I’m sure I’ll get a great deal of replies from people that disagree, but I’ll stick with my initial advice: Stay the course.
He goes on to explain that because of dollar cost averaging we’re getting a pretty good deal on stocks right now:
Right now, you’re buying more shares for the same money..lots more. When the market does turn (and contrary to all of the stock market chicken little’s running around screaming the sky is falling, it will return) all of that stock purchased at a low cost will yield high returns.
Miranda in her article “Stop Panicking. Seriously. Stop.” tells us to calm down:
Try to avoid looking at your retirement account statement, and remind yourself that over the long haul, the stock market gains. Consider unloading only the especially vulnerable investments. If something still has solid fundamentals, stick with it.
Over at mytwodollars.com David offers up some CNN advice for a few safe places to put your money right now, especially if you’re not sure you want to stay in the market. Among the are money market accounts, CDs, Bonds and money market funds. Click here for more details.
Flexo over at consumerismcommentary.com tells us that while it can be tough emotionally to ride out a down market like we have, in many cases that is the best decision.
While some pundits are calling for a Dow as low as 8,000 before we hit bottom, it doesn’t make sense to make reactionary decisions, particularly when the money is invested for the long-term. It does help to review your risk tolerance to determine if you can face downturns and to find a way to strive to separate your emotions from financial decisions. Emotions are there to guide us, to let us know what may be right for us, but when emotions form the basis of financial decisions, investments suffer.
My Conclusion? Don’t Panic.
In reading all of the advice out there it seems like most of them have come to the same conclusion (as long as you have plenty of time before you retire – 10+ years)
Don’t panic.
Evaluate your investments and rebalance your portfolio based on your willingness to take on risk.
Stay the course.
Staying the course may be easier said than done, but in the long run you’ll most likely come out ahead.
By Peter Anderson5 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited May 27, 2010.
Learning To Invest
A while back I talked about investing tips that we learned in our Financial Peace University class. Among the key things we learned was that you should be out of debt before investing (except mortgage), you NEED to diversify your holdings or risk losing it all, and only work with financial advisers with the heart of a teacher.
He also talked about his preferred method of investing – mutual funds. He believes that long term they hold the most value for the average consumer. There are a ton of other options out there, but they all have drawbacks and catches. Sticking with mutual funds is probably your best bet.
Before you even decide what mutual funds you want to invest in, you need to decide where you’ll be buying those shares. Ramsey suggests that people invest up until the maximum of their company match in a 401k, then switch to funding a Roth IRA. Once the Roth IRA is maxed out, switch back to the 401k all the way to the maximum. If you can, you should try to do this for 15% (or more) of your income.
I like Ramsey’s plan, and it certainly makes it easier for me as an investor to just go along with his plan as it has been tried and true for many, many people.
So what kind of funds should you buy in your Roth IRA or 401k?
Deciding what type of investments to choose within your Investment vehicle of choice can be a daunting task. There are international funds, small company funds, large company funds, etc etc. For a new investor it can be enough to make you throw up your hands and give up. I know I have been close to that point at different times in the past few months. Ramsey makes it a bit simpler for us and suggests that you follow this rule of thumb – 25% of your allocation should go to each of these categories:
Growth and Income Funds
Growth Funds
International Funds
Aggressive Growth Funds
Choosing such an allocation helps you to be diversified across a broad category of company types, and should help to keep your investment portfolio going up.
Are you obsessed with checking your balance like me? Just set it and forget it.
I know that one problem I’ve run into since starting to invest is that I constantly have to resist the urge to check my 401k balance, to see what funds have gone up, which have gone down, and then try to outguess the market by re-balancing the amounts. When the balances go up, it can be fun. But when the number in that account goes down as it has this past year, it can be quite scary.
I’ve found that the best thing that I can do is just make my investing automatic. I pay myself first, and then I only check my 401k every few months, instead of every day. I need to remember that investing is for the long term, and as long as I stick with it, and keep putting money in, I’ll be fine.
What is your investment strategy? Do you have a hard time not keeping a super close eye on your investments – and are you able to set it and forget it?
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
People are constantly looking for ways to save money, but it can be difficult. If you’re like me, that uncertainty keeps you from taking action.
If this sounds familiar to you and your friends or family members who want the best way possible in saving some cash, then I have good news: there is a secret formula!
Money Saving Charts! A simple way to save more money. For many Money Bliss readers, it has changed their lives completely.
We have the most popular money saving challenges around!
If you are looking for a chart on how to save money, then you are in the right place.
Money saving charts are one of the ways that individuals can save money. There’s a wide variety of different types and each type has its own purpose, depending on what you want to achieve with your savings.
By using a money saving chart, you can easily track your progress, stay motivated overtime, and save more money overall.
What are Money Savings Charts?
Money savings charts are a great way to keep track of your money.
We have a slew of saving money charts to choose from here at Money Bliss! Use fun gel pens or highlighters for a colorful way to stay motivated.
They allow you to visually see how much money you are saving and help you stay on track with your goals.
Living below your means is a difficult task, especially if you are a one-income family. However, with careful planning and execution, it is possible to save money and increase your liquid net worth.
One way to do this is by using money saving charts. These charts allow you to track your progress and make adjustments as needed.
Why Use a Saving Money Chart?
One of the best ways to save money is by tracking your spending and savings. One way to do this is through a monthly budget, which can help you stay on track with your goals and avoid unnecessary spending.
A money saving chart will help you see where your money goes and how to spend it wisely.
This is a great way to visualize the data and make sure you aren’t wasting any money.
By seeing how much money you save each month, you can better understand where you can cut back, make informed financial decisions, and save more money.
What Can You Track With Money Savings Charts?
Money savings charts are used for tracking the progress of a specific goal or project.
They can be created in Excel, Google Sheets, or a simple printable to hang around the house.
A money saving chart is a great way to keep track of your progress.
It helps you stay motivated and inspired as you watch your net worth grow. Additionally, it’s easy to see yourself making progress when using a money saving chart – which can encourage you to save even more money!
#1 – Debt Payoff
Debt payoff is the process of paying off debt. The goal is to pay off your debt faster than the payoff date.
When you’re trying to pay off your debt, it’s important to track your progress. This will help you stay motivated and see success.
You can use a free debt payoff tracker or printables to help you out. With these tools, paying off your car loans, student loans, and more will be a breeze!
#2 – Emergency Fund
An emergency fund is an account where money can be stored for short-term financial emergencies. You should save $1,000 as a starter emergency fund. Figure out how much emergency fund you need.
A well-funded emergency fund is one of the smartest things you can do for yourself both financially and emotionally.
This money should be set aside in case of an unexpected expense, such as a car repair or medical bill if you don’t have sinking funds.
Use these charts to help you save for your emergency fund more quickly.
$3 – Car Fund
A car fund is money set aside to purchase a car. The goal is to pay for the car in full and not take out a car loan.
Just remember… a car is a depreciating asset, so you only should buy what you are willing to lose, but still have the safety features you want.
You can use this car fund tracker to save for anything related to a car, such as the cost of a new or used car, down payment, or ongoing maintenance. This tracker is simple and easy to use, and it’s also very cute!
#4 – Vacation Fund
It can be tough to save up for a vacation while you’re trying to live your everyday life, but it’s definitely not impossible.
One way to do it is by setting up a “vacation fund” and depositing a certain amount of money into it every month. That way, when the time comes to take that much-needed break, you’ll have the cash to cover it without breaking the bank.
The amount of money that can be deposited into the account can vary. Personally, we set aside a set amount each month to fund our love to travel!
#5 – House Down Payment or Home Improvement
This printable helps you save for anything on your house- including a down payment.
It is a pivotal moment in someone’s life and it is important to be financially ready for buying a house. Having this saving goal will help make the process easier.
If you are looking at remodeling or just wanting to set money aside for a furnace, this is a great way to keep you motivated (even if you are excited about the project or not).
#6 – Wedding Savings
Saving for a wedding can be a daunting task, but it’s important to remember that it will help avoid debt in the long run.
Creating and following a money saving chart can help you save for your dream wedding or any honeymoon you want to take. You will be able to see your progress and adjust your spending habits along the way.
There are many ways to save money for a wedding, and one easy way is to use a printable wedding savings chart.
#7 – Investments (401k, Roth IRA, etc.)
Saving for your future is one of the most important things you can do and the sooner you start, the better.
The money savings chart will help guide your investment goals so that you can save for a comfortable retirement.
You want to make sure to use a saving money chart each year for retirement. Then, it will help you save year after year and reach your goal faster.
#8 – Rainy Day Fund
A rainy day fund is a large sum of money saved specifically to cover unexpected expenses beyond just emergencies. This could be anything from job loss to a medical emergency.
Having a rainy day fund gives you peace of mind in knowing that you have the resources to take care of yourself and your loved ones in times of crisis.
The money in your rainy day fund should cover 3-6 months of expenses. At the bare minimum, you would need a $10,000 savings goal for your rainy day fund.
#9 – To Stop Working Early
This one can be a hotly debated topic, but if you don’t want to wait until retirement age to retire than you need to start setting money aside today in a joint brokerage account.
You need to start going your money through investments to pay for your future expenses.
This is part of the popular FIRE movement or I just want to don’t want to work anymore.
This is a longer term goal that will take you 3-10 years to complete depending on your hustle, but it is a great financial vision to strive towards.
#10 – Just Because
This one is my favorite! Because each of us is on our own journey and financial path.
Your saving goals are going to be different than mine. And that is okay!
The end goal is to be saving more than you were previously. So, comment below and let us know what you are saving for.
How to Use A Money Saving Chart
This money saving chart is a great tool for understanding where you are towards your goal.
More than likely, you want to place your chart in a very prominent place. Somewhere you need constant reminders to stay on track.
This chart is designed to help you save money.
Once you complete a square, line, or box, color in that section to show you finished it.
That way, you will steadily increase your savings over time!
Supplies Needed:
I truly believe tracking your savings goals come alive once you add some color. So, here are the supplies you need to get started.
Below are links to my favorite products 🙂
5 Tips to Help You Save More Money
There are a number of things you can do to help you save more money. Here are five tips to get you started:
1. Know Why You Are Saving
Remember, the best way to save money is when you have a purpose.
Make a list of your long-term financial goals and focus on achieving them first. This will give you something to work towards and stay motivated throughout the process!
2. Pay Yourself First
An easy way to start saving money is to pay yourself first.
Every time you get paid, put a small amount of your paycheck into savings before you spend it. By automatically transferring a fixed amount of money into savings or investments each month, you are guaranteeing you will hit your goals.
Then, you will always have money saved for emergencies and other important things.
It is not good to be tempted to spend the money sitting in your account. Move it to a savings or investment account and pay yourself first.
3. Set a Spending Limit:
It is important to set a spending limit for yourself and stick to it, even if you don’t want to.
If you are struggling financially, set a budget and make a plan to stick to it.
If you don’t, then you start a ridiculous cycle where you keep getting sucked back into spend-spend-spend, which leads to stressed-out, which leads to more spending.
The solution is to set a spending limit and stick with it.
4. Make Your Savings Automatic:
If you’re serious about saving money, you need to make it automatic.
That means that you have money automatically taken out of your paycheck and put into a savings account before you even see the cash. You can’t spend it if you never see it.
If a certain amount is taken out of your check each week, then you won’t even miss the money.
You can also set up an automatic transfer from your checking account to a savings account.
This is the best way to force yourself to save money and keep it out of sight, so you won’t miss it or spend it.
5. Make Saving Money Fun:
Saving money can be fun and it should be fun if you want to do it for the rest of your life!
One way to make saving money fun is to set up a savings challenge with friends.
Everyone puts in some money and at the end of the month, whoever has saved the most wins! You can also try to save money by playing games. For example, you can try to see how little money you can spend on a date or at the movies.
Top Fun Ways to Save Money:
6. Make Saving Money A Priority:
You can’t save money if you don’t make it a priority.
If saving money is important to you, then make time in your schedule for it.
Schedule savings just like you schedule meetings and other things. This is a planned date to move money and actually save!
If you want to save money, then make it a priority!
7. Increase Your Income
Increasing your income can be challenging.
However, it is more beneficial to increase the amount of money coming in rather than cutting more expenses.
You can also look into ways to make more money through side hustles or investments. Whatever route you choose, increasing your income can help improve your financial situation.
8. Track Spending:
There are a number of ways that you can increase your income without getting a second job. And many people enjoy this route, so your saving money tip.
You can start by evaluating your spending habits and looking for ways to cut back, like canceling unnecessary subscriptions or downgrading your cable plan.
It is important to track your spending in order to see where the money is going. You’ll be able to see what you’re spending on and then set a budget that includes only the essential expenses.
Avoid unnecessary expenses by being mindful of what you’re buying and where you’re spending your money.
9. Start Saving Early:
If you start saving early, it will be easier for you to save more money because you are in the habit of savings.
While we all cannot save at a young age, we can start now. That way you will have more saved up by the time you are older and ready to retire.
Saving money is very important in building up net worth.
With the help of compounding interest, you will reap the benefits of saving early.
10. Stay Positive
Last but not least, staying positive and motivated is key to saving money.
When you have a clear goal in mind and are determined to achieve it, it will be much easier to stick to your budget and save more money.
You have to stay motivated throughout your journey and staying positive will help your mindset and believe you can achieve anything!
Money Saving Chart Printable
There are many different ways to save money, and one great way to start is by using a printable money saving chart.
In our free resource library, you can find many free money saving charts printable to help get you started on your savings journey.
Above is an example of a chart that can be printed for saving money. Download your PDF copy.
Which Save Money Chart will You Use?
A savings chart plots out how much has been saved, thus allowing you to visualize how far you have come and have far you have left to reach your goal.
The whole concept of saving money is not a new idea, but you may want to break down your savings goals into smaller steps like cash goals, financial goals, and net worth goals.
More importantly, filling out this chart is a helpful way for personal finance to save money and gain more net worth.
The secret to saving money is in this easy step-by-step guide. What is the best way for you to save hundreds of dollars or even thousands? It’s all about planning and thinking ahead.
With this small guide in your hand, you’ll be able to save more than $100 a month and take the mystery out of saving money! Many of our readers save $10K in a year.
Start today and enjoy the benefits of living a richer life!
Know someone else that needs this, too? Then, please share!!
By Peter Anderson15 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited February 10, 2020.
When people talk about their investment plans, one of the first topics that invariably comes up is how much they should be investing.
Should they be investing 5%?
15%?
50% of their income?
Today I thought I’d look at the number that comes up most often as being conventional wisdom for most people when it comes to how much to invest – 15% of yearly income.
Investing 15% Of Your Income Into Post-Tax And Pre-Tax Retirement
For many folks the discussion of how much to invest is a moot point as they’re still struggling to get rid of debt, and get to the point where they’re able to start saving for their future.
If you’re beyond that point, congratulations, you should be applauded.
For me getting to the point where you really start to save and build wealth for your future is so exciting! A variety of financial gurus suggest saving 15% of your household income in good solid long term investments in order to have enough for your future.
So why is that number brought up?
Why Should I Save 15%?
To give a visual demonstration of why some folks suggest that you save 15% for your retirement, I went to Dave Ramsey’s website and used his investment calculator. I put some numbers into the calculator based on these factors:
Making $100,000 a year
Saving 15%
Starting at age 30
Saving for 30 years
10% return on the investments
When you put in those numbers above, it comes up with a return of well over 2.8 million dollars by the age of 60.
If you were to keep it going even for 5 more years until the age of 65, the account would grow to over 4.8 million dollars. That’s not half bad!
So how much money would you really need in order to have a comfortable retirement? Assuming that you would want 80% of your pre-retirement income to live on as many suggest, and a withdrawal rate of 4% per year and a 30 year retirement, you would need to have about 2 million dollars.
If you invest 15% of your 100k income, that would allow you to withdraw $112,000 a year for 30 years. (which assumes the money would still continue growing at a rate of at least 8% while you are withdrawing) That is 12% more than your pre-retirement income! 4.8 million would allow for $192,000 per year!
Now if you were to invest 10% using the same assumptions you’d end up with substantially less money, 1.5 million over 30 years, and 2.4 million over 35 years. Still not bad, but maybe not as much as you might want to have that comfortable retirement. At the 30 year point you’d have enough to withdraw 60% of your income, and at 35 years you’d have 96% of your pre-retirement income.
All of these numbers are of course assuming that you don’t have money coming from social security. I have my doubts it will last until my own retirement. That is obviously up for debate, and hopefully the system will be fixed. But why depend on it if it might not be there?
The point of all this to me is that 15% is usually going to be more than adequate to get you to where you need to be. 10% may not be, depending upon how much of your previous income you want to live on, and how much time you have until retirement.
The longer you have until retirement, the bigger the gains you’ll see through compounding interest!
Play it safe and start saving 15%. You won’t be sorry!
Another caveat; if you’re older and have less time until retirement, or if you want to retire early, you may need to be investing a higher percentage than 15%. You started late or want to finish early, so you have some ground to make up!
Starting earlier? You might not need to invest all of the 10%. But why not do it anyway!
What Should I Invest In?
Once you’ve decided on how much you want to invest, the next step is to decide on what types of investments you should be holding. What to invest in will vary greatly on your situation, but here’s what we would do:
Company 401k or other plan up to the match
Roth IRA for you and your spouse (Where to open a Roth IRA)
Back to the 401k or other plan
When choosing what types of funds to invest in I would highly recommend doing your research first, however, for us we prefer investing in low cost index and retirement target funds through companies like Vanguard where the costs remain low (Try a 3 fund portfolio!).
If you want an option that costs a tiny bit more than DIY, but is less work, Betterment or Wealthfront may be good options (after maxing tax preferred investing).
What do you think? Will 15% be enough for your retirement? Do you think you should save more or less?
By Contributing Author10 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited May 20, 2013.
The Roth IRA (and its cousin, the Roth 401k) are getting press lately and with good reason. There is a fear that taxes will need to rise over time and we will all find ourselves retiring in a higher tax bracket than we are in today.
Let’s first take a step back to understand what these account are and how they work.
What Is An IRA, And How Does It Work?
A traditional IRA account or 401(k) account allows you to deposit money into an account prior to having it taxed. If you are in the 25% bracket ($67,900 taxable for married filing joint or $33,950 filing single) you can put $5000 into the IRA ($6,000 if you’re over 50 this year) or you can pay $1,250 in taxes and clear $3,750.
With the introduction of Roth a number of years ago, you have a new choice, to pay the taxes now, clearing that $3,750 and after depositing into the Roth account (or Roth 401(k) where the limits are $16,500 or $22,000 if 50 or older) and not paying any taxes when you withdraw these funds at retirement.
At some level this is a simple choice, pay tax now or pay it later. Let’s think about this a moment. Do you know your current marginal rate? Do you know what “marginal rate” means? A simple way to look at this is that your marginal rate is the (federal) tax you’ll pay on the next $100 of taxable income. You may make over $80,000 and see that your taxes aren’t quite $10,000, but the next $100 is taxed at 25% or $25. An important distinction to understand. Fairmark offers a nicely presented chart to see marginal rates, it’s important that you understand this concept before making any decisions. Knowing your current marginal rate is easy, projecting what it will be at retirement, not so easy. It’s this ‘not knowing’ that may prompt you to go one way or the other, but there are steps you can take to improve your decision process.
When To Put Into A Roth IRA
At the beginning of your career (and younger, if you are working as a teen), there’s a good chance you are in the 15% bracket. Now is a good time to put some money away in Roth accounts.
As your salary increases, you are likely to take on a mortgage, and perhaps start a family. This gives you deductions for the mortgage as well as the additional exemption (and perhaps earnings) of your spouse. If despite that, you are in the 25% bracket or higher, I’d suggest using pretax savings, the traditional 401(k) and IRA accounts. Now is the time in your life to learn to project out what your retirement will look like. Are you on track to have $2 million dollars in pretax accounts? If not, continue to save pretax. Why $2 million? A conservative withdrawal rate is about 4%/yr. This results in $80,000/yr upon retiring, and right now that will put you toward the top of the 15% bracket. Also, keep in mind that few people work 40 years with no break or disruption to their income. Use these disruptions (times you will drop into a lower bracket) to convert funds from a traditional IRA to a Roth, in essence “filling up the bracket” just enough to top it off but not go into the next.
Last, toward the end of your working career, the decision becomes very simple. With retirement only a few years away, you should be able to calculate what your marginal rate will be after you retire. If the same or higher, go with Roth, if it will be lower, go with traditional.
Once retired, continue to take advantage of the Roth conversion option. In 2009 a married couple can have $86,600 in gross income and still be in the 15% bracket. If they are withdrawing say $40,000 per year from pretax accounts, they should consider converting right up to the $86,600 figure and pay the 15%. This money will never be subject to RMDs (required minimum distributions) and when you pass, your heirs will not have to pay income tax on the withdrawals as they would from a traditional account. This also will help you avoid that higher 25% bracket as the equation to calculate your RMD continues to force you to take a larger portion of your account out each year.
Are you currently taking advantage of a Roth IRA? Why or why not? What types of retirement accounts are you investing in and why? Let us know in the comments!
This is an article by Joe from JoeTaxpayer.com. Stop by his site and subscribe to his feed for more great articles!
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
We are going to under the cover and discover $13 an hour is how much per year.
For most Americans, this is hovering near minimum wage.
Let’s get this straight… This is not a livable wage.
If you are in high school or college and have support from your parents, then this is great spending money for you.
However, if you are making it on your own, $13 per hour will not make ends meet each month.
For most people, being at minimum wage is common and the goal is to make your way up the payscale and quickly!
In this post, we’re going to detail exactly what $13 an hour is how much a year. Also, we are going to break it down to know how much is made per month, bi-weekly, per week, and daily.
That will help you immensely with how you spend your money. Because too many times the hard-earned cash is brought home, but there is no actual plan for how to spend that money.
When living close to minimum wage, you must be know how to manage money wisely.
More than likely, you are living paycheck to paycheck and struggling to survive to the next paycheck. Take a deep breath and make this minimum wage just a season.
The ultimate goal is to make the most of your hourly wage with inspirations to make more money.
If that is something you want too, then keep reading. You are in the right place.
$13 an Hour is How Much a Year?
When we ran all of our numbers to figure out how much is $13 per hour is an annual salary, we used the average working day of 40 hours a week.
40 hours x 52 weeks x $13 = $27,040
$27040 is the gross annual salary with a $13 per hour wage.
Breakdown of 13 Dollars an hour is how much a year
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, multiple the hourly salary of $13 times 2,080 working hours, and the result is $27,040.
That number is the gross income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
Work Part Time?
But you may think, oh wait, I’m only working part time. So if you’re working part time, the assumption is working 20 hours a week at $13 an hour.
Only 20 hours per week. Then, take 20 hours times 52 weeks and that equals 1,040 working hours. Then, multiple the hourly salary of $13 times 1,040 working hours, and the result is $13,520.
How Much is $13 Per Month?
On average, the monthly amount would average $2253.
Annual Amount of $27,040 ÷ 12 months = $2,253 per month
Since some months have more days and fewer days like February, you can expect months with more days to have a bigger paycheck. Also, this can be heavily influenced by how often you are paid and on which days you get paid.
Work Part Time?
Only 20 hours per week. Then, the monthly amount would average $1,127.
How Much is $13 per Hour Per Week
This is a great number to know! How much do I make each week? When I roll out of bed and do my job, what can I expect to make at the end of the week?
Once again, the assumption is 40 hours worked.
40 hours x $13 = $520 per week.
Work Part Time?
Only 20 hours per week. Then, the weekly amount would be $260.
How Much is $13 per Hour Bi-Weekly
For this calculation, take the average weekly pay of $520 and double it.
$520 per week x 2 = $1040
Also, the other way to calculate this is:
40 hours x 2 weeks x $13 an hour = $1040
Work Part Time?
Only 20 hours per week. Then, the bi-weekly amount would be $520.
How Much is $13 Per Hour Per Day
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x $13 per hour = $104 per day.
If you work 10 hours a day for four days, then you would make $130 per day. (10 hours x $13 per hour)
Work Part Time?
Only 4 hours per day. Then, the daily amount would be $52.
$13 Per Hour is…
$13 per Hour – Full Time
Total Income
Yearly Salary (52 weeks)
$27,040
Yearly Wage (50 weeks)
$26,000
Monthly Wage (173 hours)
$2,253
Weekly Wage (40 Hours)
$520
Bi-Weekly Wage (80 Hours)
$1040
Daily Wage (8 Hours)
$104
Net Estimated Monthly Income
$1,720
**These are assumptions based on simple scenarios.
Paid Time Off Earning 13 Dollars an Hour
Does your employer offer paid time off?
As an hourly, close to minimum wage employee, more than likely you will not get paid time off.
So, here are the scenarios for both cases.
For general purposes, we are going to assume you work 40 hours per week over the course of the year.
Case # 1 – With Paid Time Off
Most hourly employees, get two weeks of paid time off which is equivalent to 2 weeks of paid time off.
In this case, you would make $27,040 per year.
This is the same as the example above for an annual salary making $13 per hour.
Case #2 – No Paid Time Off
Unfortunately, not all employers offer paid time off to their hourly employees. While that is unfortunate, it is best to plan for less income.
Life happens. There will be times you need to take time off for numerous reasons – sick time, handling an emergency, or even vacation.
So, let’s assume you take 2 weeks off without paid time off.
That means you would only work 50 weeks of the year instead of all 52 weeks. Take 40 hours times 50 weeks and that equals 2,000 working hours. Then, multiple the hourly salary of $13 times 2,000 working hours, and the result is $26,000.
40 hours x 50 weeks x $13 = $26000
You would average $104 per working day and nothing when you don’t work.
$13 an Hour is How Much a year After Taxes
Let’s be honest… Taxes can take up a big chunk of your paycheck. Thus, you need to know how taxes can affect your hourly wage.
This is why you always wondering why your take-home pay is so much less.
Also, every single person’s tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
Gross Annual Salary: $27,040
Federal Taxes of 12%: $3,245
State Taxes of 4%: $1,082
Social Security and Medicare of 7.65%: $2,069
$13 an Hour per Year after Taxes: $20,645
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$20645 ÷ 2080 hours = $9.93 per hour
After estimated taxes and FICA, you are netting $9.93 an hour. That is $3.07 an hour less than what you planned.
This is a very highlighted example and can vary greatly depending on your personal situation. Therefore, here is a great tool to help you figure out how much your net paycheck would be.
$13 an Hour Budget – Example
You are probably wondering can I live on my own making 13 dollars an hour? How much rent can you afford at 13 an hour?
Using our Cents Plan Formula, this is the best case scenario on how to budget your $13 per hour paycheck.
When using these percentages, it is best to use net income because taxes must be paid.
In this example, above we calculated that $13 an hour was $9.93 after taxes. That would average $1720 per month.
According to the Cents Plan Formula, here is the high level view of a $13 per hour budget:
Basic Expenses of 50% = $860
Save Money of 20% = $344
Give Money of 10% = $172
Fun Spending of 20% = $344
Debt of 0% = $0
Obviously, that is not doable when living so close to minimum wage. So, you have to be strategic on ways to decrease your basic expenses and debt. Then, it will allow you more money to save and fun spending.
To further break down an example budget of $13 per hour, then using the ideal household percentages is extremely helpful.
recommended budget percentages based on $13 per hour wage:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$68
Savings
15-25%
$135
Housing
20-30%
$676
Utilities
4-7%
$135
Groceries
5-12%
$203
Clothing
1-4%
$23
Transportation
4-10%
$135
Medical
5-12%
$225
Life Insurance
1%
$19
Education
1-4%
$11
Personal
2-7%
$35
Recreation / Entertainment
3-8%
$56
Debts
0% – Goal
$0
Government Tax (including Income Tatumx, Social Security & Medicare)
15-25%
$533
Total Gross Income
$2253
**In this budget, prioritization was given to basic expenses. Thus, some categories like giving and saving were less.
$13 An Hour Salary Calculator
Now, you get to figure out how much you make based on your hours worked or if you make a wage between $13.01-13.99.
This is super helpful if you make $13.12, $13.35, or $13.77.
Living on $13 Per Hour
Living close to minimum wage can be a very difficult situation.
Is it doable? Probably not for long.
You just have to be wiser (or frugal) with your money and how you spend the hard-earned cash you have been blessed with.
A lot of times when people are making under near the minimum wage mark, they feel like they are in this constant cycle that they can never keep up (which completely makes sense it is hard!).
When your thoughts are constantly focused on how you are struggling to keep up with bills and expenses, that is all you focus on.
You need to do is change your money mindset.
This is what you say to yourself… Okay, I am making near minimum wage for now. I have aspirations and goals to increase how much I make. For now, I am going to make sure that I am able to live on my 13 dollars per hour. I’m going to try and avoid debt and payday loans at all costs.
Other Tips to Help You:
Check your minimum wage for your state and city. You might find a higher minimum wage in a nearby city.
Look to living in a lower cost of living area to stretch your money.
Find ways to minizine your basic expenses.
Thrive with a minimalist lifestyle.
Decide if a roommate or moving back with your parents would help.
Bike or walk to work.
In the next section, we will dig into ways to increase your income, but for now, you must focus on living on $13 an hour.
5 Ways to Increase Your Hourly Wage
This right here is the most important section of this post.
You need to figure out ways to increase your hourly income because I’m going to tell you…you deserve more. You do a good job and your value is higher than what your employers pay you.
Even an increase of 50 cents to $13.50 will add up over the year. Even better $15 an hour!
1. Ask for a Raise
The first thing to do is ask for a raise. Walk right in and ask for a raise because you never know what the answer will be until you ask.
If you want the best tips on how specifically to ask for a raise and what the average wage is for somebody doing your job, then check out this book. In this book, the author gives you the exact way to increase your income. The purchase is worth it or go down to the library and check that book out.
2. Look for A New Job
Another way to increase your hourly wage is to look for a new job. Maybe a completely new industry.
It might be a total change for you, but many times, if you want to change your financial situation, then that starts with a career change. Maybe you’re stressed out at work. Making $13 an hour is too much for you and you’re not able to enjoy life, maybe changing jobs and finding another job may increase your pay, but it will also increase your quality of life.
3. Find a New Career
Because of student loans, too many employees feel like they are stuck in the career field they chose. They feel sucked into the job that they don’t like or have the potential they thought it would.
For many years, I was in the same situation until I decided to do a complete career change. I am glad I did. I have the flexibility that I needed in my life to do what I wanted when I needed to do it. Plus I am able to enjoy my entrepreneurial spirit.
4. Find Alternative Ways to Make Money
In today’s society, you need to find ways to make more money. Period.
There is no way to get around it. You need to find additional income outside a traditional nine-to-five position or typical 40 hour a week job. You will reach a point where you are maxed on what you can make in your current position or title. There may be some advancement to move forward, but in many cases, there just is not much room for growth.
So, you need to find a side hustle – another way to make money.
Do something that you enjoy, turn your hobby into a way to make money, turn something that you naturally do, and help others into a service business. In today’s society, the sky is the limit on how you can earn a freelancing income.
5. Earn Passive Income
The last way to increase your hourly wage is to start earning passive income.
This can be from a variety of ways including the stock market, real estate, online courses, book sales, etc. This is where the differentiation between struggling financially and being financially sound happens.
By earning money passively, you are able to do the things that you enjoy doing and not be loaded down, with having a job that you need to work, and a place that you have to go to. And you still make money doing nothing.
Here is an example:
You can start a brokerage account and start trading stocks for $50. You need to learn and take the one and only investing class I recommend. Learn how the market works, watch videos, and practice in a simulator before you start using your own money.
One gentleman started with $5,000 in his trading account and now has well over $36,000 in a year. Just from practice and being consistent, he has learned that passive income is the way for him to increase his income and also not be a slave to his job.
Tips to Live on $13 an Hour
In this last section, grasp these tips on how to live on $13 an hour. On our site, you can find lots of money saving tips to help stretch your income further.
Here are the most important tips to live on $13 an hour. Highlight these!
1. Spend Less Than you Make
First, you must learn to spend less than you make.
If not you will be caught in the debt cycle and that is not where you want to be. You will be consistently living paycheck to paycheck.
In order to break that dreadful cycle, it means your expenses must be less than your income.
And when I say income, it’s not the $13 an hour. As we talked about earlier in the post, there are taxes. The amount of taxes taken out of your paycheck is called your net income which is your home $13 an hour minus all the taxes, FICA, social security, and medicare are taken out. That is your net income.
So, your net income has to be less than your net income.
2. Living Below Your Means
You need to be happy. And living on less can actually make you happier. Studies prove that less is better.
Finding contentment in life is one thing that is a struggle for most.
We are driven to want the new shiny toy, the thing next door, the stuff your friend or family member got. Our society has trained you that you need these things as well.
Have you ever taken a step back and looked at what you really need?
Once you are able to find contentment with life, then you are going to be set for the long term with your finances.
Here is our story on owning less stuff. We have been happier since.
3. Make Saving Money Fun
You need to make saving money fun. Period.
It could be participating in a no spend challenge for the month.
Check out the 200 envelope challenge (which is doable on your income)
It could be challenging friends not to go to Target for a week.
Maybe changing your habits and not picking up takeout and planning meals.
Whatever it is challenge yourself.
Find new ways of saving money and have fun with it.
Even better, get your family and kids involved in the challenge to save money. Tell them the reason why you are saving money and this is what you are doing.
Here are 101 things to do with no money. Free activities without costing you a dime. That is an amazing resource for you and you will never be bored.
And you will learn a lot of things in life you can do for free. Personally, some of the best ones are getting outside and enjoying some fresh air.
4. Make More Money
If you want if you do not settle for less, then find ways to make more money. If you want more out of life, then increase your income.
You need to be an advocate for yourself.
Find ways to make more money.
It could be a side hustle, a second job, asking for a raise, going to school to change careers, or picking up extra hours.
Whatever path you take, that’s fine. Just find ways to make more money. Period.
5. No State Taxes
Paying taxes is one option to increase what you take home in each paycheck.
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
It is very interesting if you take into account the amount of state taxes paid compared to a state with income taxes.
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area. The higher taxes income tax states include California, Hawaii, New Jersey, Oregon, Minnesota, the District of Columbia, New York, Vermont, Iowa, and Wisconsin. These states tax income somewhere between 7.65% – 13.3%.
6. Stick to a Budget
You need to learn how to start a budget. We have tons budgeting resources for you.
While creating a budget is great, you need to learn how to use one.
You do not have to budget down to every last penny.
You need to make sure your expenses are less than your income and you are creating sinking funds for those irregular expenses.
Budget Help:
7. Pay Off Debt Quickly
The amount that you pay interest on debt is absolutely absurd.
Unfortunately, that is how many of these companies make their money is from the interest you pay on debt.
If you are paying 5% to even 20-21% or higher, you need to find ways to lower that debt quickly.
Here’s a debt calculator to help you. Figure out your debt free date.
Make that paying off debt fast is your target and main focus. I can tell you from personal experience, it was not until week paid off our debt that we finally rounded the corner financially. Once our debt was paid off, we could finally be able to save money. Set money aside in separate bank accounts and pay for cash for things.
It took us working hard to pay off debt. We needed persistence and patience while we had setbacks in our debt free journey.
Jobs that Pay $13 an Hour
You can always find jobs that pay $13 per hour. Polish up that smile, fill out the application, and be prepared with your interview skills.
Job Search Hint: Always send a written follow-up thank you note for your interview. That will help you get noticed and remembered.
First, look at the cities that require a minimum wage in their cities. That is the best place to start to find jobs that are going to pay higher than the federal minimum wage rate. Many of the cities are moving towards this model so, target and look for jobs in those areas.
Possible Ideas:
Cashiers
Back of the house restaurant staff
Landscape Laborer
Retail jobs
Paraeducators at schools
Janitors
Farm help
Warehouse workers
Fast Food Restaurants workers
$13 Per Hour Annual Salary
In this post, we detailed 13 an hour is how much a year. Plus all of the variables that can impact your net income. This is something that you can live off.
How much is 13 dollars an hour annually…
$27,040
This is under $30000 per year and you need to make at least $45k a year.
In this post, we highlighted ways to increase your income as well as tips for living off your wage.
Use the sample budget as a starting point with your expenses.
You will have to be savvy and wise with your hard-earned income. But, with a plan, anything is possible!
Learn exactly how much do I make per year…
Know someone else that needs this, too? Then, please share!!
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Investing in stocks can seem like a daunting task.
There are so many things to consider when it comes to investing, and the stock market is constantly moving.
Stock market investing is a popular option to increase net worth and make money.
Many people are looking for ways to invest their money, with the number of individual investors increasing rapidly in recent years.
This guide covers many important factors for how to invest in stocks for beginners.
Starting out as a newbie trader can be scary and overwhelming… don’t worry, all seasoned traders had to start at the beginning too!
Let’s take away that quell those thoughts and focus on why you want to learn to invest in stocks.
This guide will give you everything you need to know about how to invest in stocks as a beginner investor!
What Are Stocks?
In the most basic form, stocks are a form of investment. When you own a stock, you have a piece of ownership in the company’s equity.
The stock market is a real-time financial market in which investors buy and sell stocks and other securites. The stock market is made up of many companies and individuals who are actively investing in stocks.
Stocks are an excellent way for companies and individuals to invest in a company and receive a share of the company’s profits.
Many of the growth stocks (FAANG stocks) are those who investors want their stock price to increase over time. Thus, increasing their overall portfolio’s net worth.
FAANG Stocks is an acronym for: Meta (formerly known as Facebook), Amazon, Apple, Netflix, and Alphabet (formerly known as Google).
Some companies like Chevron (CVX) pay out a dividend each quarter to their investors.
There are thousands of stocks available to trade.
What Can You Invest In The Stock Market?
There are many investment opportunities in the financial market, so it is important to be informed about what you can invest in. Below are some of the places where you can invest your money:
Stocks
Bonds
Mutual funds
ETFs
Commodities
Futures
Options
Now, we are going to look at the most common.
Individual stocks
Individual stocks are a type of investment that you can make yourself.
You can choose how many shares of a certain company you want to purchase.
For example, you like Tesla for how they are innovative in the electric car space. You can choose to invest 20 shares of their stock.
As a long-term investor, you want to hold a portfolio of 10-25 stocks. Find a list of beginning stocks to build your portfolio.
Individual stocks can be bought or sold as a way to dip your toe into the stock-trading waters.
As a short-term investor, you are looking to make money as the stock price increases or decreases.
Mutual Funds
Mutual funds are managed portfolios of stocks.
As a result, mutual funds typically have load fees equal to 1% to 3% of the value of the fund.
One of the most popular mutual funds is VTSAX because of its expense ratio is .04%
Mutual funds are a clear choice for most investors because of the simplicity to invest in the market. This can be a good investment for both novice and experienced investors, as they offer decent returns with lower risk.
They tend to rise more slowly than individual stocks and have less potential for high returns. Mutual funds are a great way to diversify your portfolio and gain exposure to a variety of different securities.
All mutual funds must disclose their fees and performance information so that you can make an informed decision about whether or not to invest.
Exchange traded funds (ETFs)
Exchange traded funds (ETFs) are a type of exchange-traded investment product that must register with the SEC and allows investors to pool money and invest in stocks, bonds, or assets that are traded on the US stock exchange.
They are inherently diversified, which reduces your risk.
This is a good option for beginner investors because they offer a large selection of stocks in one go.
ETFs have a lower minimum to start investing, which is a draw for many investors starting out with little funds. Plus there are many different types of ETFs to choose from.
ETFs are similar to mutual funds, but trade more similarly to individual stocks. With ETFs and Index Funds, you can purchase them yourself and may have lower fees.
Why Stock Prices Fluctuate
Stock prices fluctuate because the financial markets are a complex system. There are many factors that can affect the price of a stock,
There are a number of factors that can influence stock prices, including:
Economic indicators like GDP growth, inflation, and unemployment rates
Company earnings reports
The overall health of the economy
Political and social instability
Changes in interest rates
War or natural disasters
Supply and demand,
Actions of the company’s management
Short squeezings like what happened with GME or AMC
The volatility in the stock market is the #1 reason most people stay out of investments. However, on average, the stock market has moved up 8-10% a year.
What is the best thing to invest in as a beginner?
The best thing to invest in as a beginner is your time.
You need to learn how the stock market works. Just like you would get a certification or degree, you should highly consider an investing course.
Learn and devote as much time as you can to investing in stocks.
How To Invest In Stocks For Beginners?
Investing in the stock market can be a great way to make money! If you’re looking for ways to make money or grow net worth, investing in a stock is a smart choice.
With online access and trading being easier now than ever, it can be easier than ever to start buying stocks.
Let’s dig into how to invest in stocks like a pro.
FYI…You should do your own research before investing.
Step #1: Figure out your goals
Figure out your goals to help with setting an investing strategy.
What are you trying to achieve with stock market investing? Is it supplemental income? A certain level of wealth for retirement? Are you looking for short-term or long-term gains?
Once you know what you’re aiming for, it will be easier to find the right stocks and make wise investment decisions.
Your reason to invest in stocks will be different than everyone around you.
Some people want to supplement their weekly income.
Others want to invest in companies for the long term.
My goal is to make weekly income from the stock market. That is my investment strategy for non-retirement accounts.
You need to spend time understanding WHY you want to buy stocks.
Knowing this answer will help you define what type of trader you will be.
Step #2. Decide how you want to invest in the stock market
When you decide to invest in the stock market, you need to choose what you want to invest in.
You can invest in stocks, which are shares of ownership in a company, or you can invest in bonds, which are loans that a company makes. There are also other options like mutual funds and exchange-traded funds (ETFs), which are collections of stocks or bonds.
Also, you can expand this to what types of investments will you have in various retirement or brokerage accounts. For example, you may invest in mutual funds with your 401k, ETFs with your Roth IRA, and stick with individual stocks for your taxable account.
This is a personal decision.
Many people when they are first starting to trade stocks choose to limit purchasing stocks with a limited percentage of their overall portfolio.
Step #3. Are you invest in stocks for the short term or long term?
The buy and hold investor is more comfortable with taking a long-term approach, while the short-term speculator is more focused on the day-to-day price fluctuations.
Once again, this is a personal preference.
One of the most common themes of many investing gurus is, “Remember that stock prices can go down as well as up, so it’s important to stay invested for the long term.”
However, this full-time trader wants to make money on those highs and lows.
Knowing your overall investment horizon will help you decide how much time you plan to hold onto your investments to reach your financial goal.
Also, you can choose different time horizons for different accounts.
Step #4: Determine your investing approach
Passive and active investing are two main approaches to stock market investing.
Passive investing does not involve significant trading and is associated with index funds.
Passive investing is a way to DIY your investments for maximum efficiency over time.
Thus, you would contribute to your investment account on the xx day of the month with $xx amount of money.
This happens with consistency regardless of where the market stands on that day.
You are less warry of where the stock market will go and focused on overtime it will continue to go up.
Active investing takes the opposite approach, hoping to maximize gains by buying and selling more frequently and at specific times.
Active investing is when an investor is actively acquiring, selling, or holding bought stocks.
This could be with day trading or swing trading.
You may hold stocks for less than a day, a few days, or a couple of weeks.
The purpose of having active investing is to make profits.
In the stock market, investors make efforts to increase their net worth over time or to make income off the market.
Step #5: Define your investment strategy
When it comes to investing in the stock market, there are a few key factors you need to take into account: your time horizon, financial goals, risk tolerance, and tax bracket.
Do you want to be an active trader or stick with passive investing? What kind of investor am I?
There is no right or wrong answer as this is a personal preference.
Ultimately, you want returns to be greater than the overall S&P 500 index for the year.
Once you’ve figured these out, you can start focusing on specific investment strategies that will work best for you.
Be aware of any fees or related costs when investing. Fees can take a bite out of your investments, so compare costs and fees.
Step #6: Determine the amount of money willing to lose on stocks.
Trading stocks online is inherently risky.
You want to consider what your “risk tolerance” is. Simply put, how much are you willing to lose in stocks before you want to quit?
The biggest reason most people quit trading stocks is that they do not know their risk tolerance and fail with risk management.
You will lose on trading stocks. The goal is to lose a small amount on some of the trades and gain a greater amount of more of your trades.
How much risk you can reasonably take on given your financial situation?
What are your feelings about risk?
What happens when your favorite stock drops 25%?
Understanding your risk tolerance and how much you are willing to lose will help you keep your losses small.
Start with a small amount of money when investing in stocks. Also, make sure you have enough money saved up so you can handle any losses that may occur.
How to Start Investing in Stocks
There are a variety of ways to start investing in stocks. Some methods include getting a small account balance and then buying shares, creating an investing club with friends, or researching the companies you want to invest in.
Now, that you have determined how and why you want to invest in stocks. Let’s dig into the nitty gritty of how to manage a stock portfolio.
On the other hand, if you don’t invest enough, you could miss out on potential profits. Try starting with an amount you’re comfortable losing if the stock market does go down.
1. Open an investment account
There are a few things you need to do in order to start investing in the stock market.
The first is to open an investment account with a broker or an online brokerage firm.
There are different types of accounts you can open:
Taxable accounts like an individual or joint brokerage
Retirement accounts like IRA or Roth IRA
These are the most basic investment accounts, here is a list of types of investment accounts.
If you plan to hold EFTs or mutual funds, Vanguard is a great place to start.
If you plan to be an active trader, I would look at TD Ameritrade or Fidelity. Be wary of Robinhood or WeBull.
2. Saturate yourself in Stock Market Knowledge
On the simplest level, it can be incredibly easy to begin your investing career with little-to-no knowledge, research, and expertise.
If you have even a remote understanding of stocks, then learn what you need from an easy-to-find YouTube video, followed by watching some of your favorite TV shows to learn more about the market and its secrets.
With that said, you need to be digesting the basics from start to end of getting your first investment started.
As the title reveals, investing can seem intimidating and complicated. Thus, stock market knowledge is invaluable.
3. Consider an Investing Course
A typical investing course would teach how to invest in stocks (and possibly other investments).
As a beginner trader, it is unlikely you will know the full extent of how the stock market works. There are many intricacies you must learn and understand.
Beginners should learn about stock investing basics, such as diversification and investment criteria.
Many investing courses offer a platform on how to make money by trading stocks.
Personally, I highly recommend buying this investing course.
If you choose not to follow my advice, that is fine. Come back when you have lost more money in the stock market than the price of the courses.
I CAN NOT STRESS ENOUGH… how important it is to have a solid foundation and practice in a simulated account before you use your real money.
4. Research the companies you want to invest in
When you’re ready to start investing in stocks, it is important that you do your due diligence and research the companies you want to invest in.
Look for trends and for companies that are in positions to benefit you.
Consider stocks across a wide range of industries, from technology to health care. It’s also important to remember that stock prices can go up or down, so always consider this before making any investment decisions.
5. Choose your stocks, ETFs, or mutual funds
Next, you have to decide what fits your investing strategy. Are you looking to buy:
Stocks
ETFs
Mutual Funds
Regardless of which type of investment you make, you must look for companies that have attractive valuations and growth prospects. In the case of index funds or ETFs, which fund has the companies you find attractive.
Most importantly, you should also take into account the company’s financial health and its prospects for future growth.
Make sure you understand the risks associated with holding a particular stock, including possible price fluctuations and loss of value.
7. Take the Trade
This is the hardest step for most people is to take their first trade.
Thus, why learning to trade stocks is great to learn a simulated account using fake money. Then, move to a LIVE account using your real money.
At some point, in your investing in stocks journey, you must press the buy button.
For many the investment platform may be overwhelming to use, so check out your brokerage’s YouTube videos to help you out.
8: Manage your portfolio
Managing your portfolio is important to keep your investments in good shape.
If you are a long-term investor, diversify your portfolio by investing in different types of investment vehicles and industries.
If you prefer to swing trade or day trade, then you want to make sure you always have cash on hand and are rotating your portfolio to take profit.
Investing can be difficult for beginners who often lack knowledge about the stock market.
It is important to remember to keep investing money and rebalance your portfolio on a regular basis. This will help ensure that you stay on top of your investments and achieve the desired result.
9. Selling Stocks
For most investors, it is harder to sell their stocks than to purchase them. There are a variety of factors for that. But, you must sell your stocks at some time to realize your gain.
Don’t panic if the market crashes or corrects – these events usually don’t last very long and history has shown that the market will eventually rebound. Most people tend to panic sell when stocks are low and FOMO buy when the market is at highs.
When you are ready to sell, aim to achieve a percentage return on your investment.
This will require some focus on your time horizon and the stocks you want to invest in.
Also, you need to consider any taxes that may be owed on the sale of stock.
If you’re new to stock investing, consider using index funds instead of individual stocks to gain broad market exposure.
10. Journal & Analyze your Trades
Journaling is a way of recording the important decisions you make during trading to help yourself remember what happened in your trades. It can be used as a tool for reflection, learning from mistakes, and reviewing your strategy.
Analyzing your trades means looking back on your trading history with the goal of improving it.
This is the most overlooked step of the investing process.
When it comes to buying and selling stocks, journalling what is happening in the market is an important part of being a successful investor.
Stock Market Investing Tips for Beginners
Ask any seasoned trader, and they will have a list of investing tips for beginners.
They have made plenty of trading mistakes they do not want to see newbies do the same thing.
When starting to invest in the stock market, beginner investors often seek out consistent and reliable investments.
This allows them to slowly learn about the stock market and take calculated risks while also earning a return on their investment. Over time, as they gain experience, they can expand their portfolio to include riskier but potentially more rewarding stocks.
1. Invest in Companies That You Understand
An investor should know the company they are investing in and have an idea of what type of return they expect.
When you are starting out, it is best to invest in stocks of companies that are easy to understand and have a proven track record.
Do NOT invest in stocks based on the advice of friends, what you read in the news, or on a whim – these can be risky moves. Be wary of the popular stocks you can find on the Reddit Personal Finance threads.
2. Don’t Time the Market
In the world of investing, there is one rule that no investors should ever break: do not time the market.
By following this rule, you will always be on top of your investments and will be able to reap the rewards.
There are times to buy stocks and sell stocks. This is something you will learn when investing in a high-quality investing course.
As an average investor, trying to time the market will leave you frustrated by your minimal returns or great losses.
3. Avoid Penny Stocks
Penny stocks are the lowest-priced securities on the market, and they don’t offer any significant upside potential to their investors. While you may hit a home run return on some, many penny stocks tend to trend sideways.
The risk is not worth the return.
If you plan to invest in stocks, avoid penny stocks and focus on healthy companies.
4. Consider Buying Fractional Shares
Fractional share investing lets investors buy less than a full share at one time. Many times, you may not be able to afford the price of a full share.
For example, buying a share of Amazon (AMZN) may cost you upwards of $2800 or more. Thus, you can invest a smaller amount with a fractional share.
You would have to check if your brokerage company allows the purchase of fractional shares.
5. Stay the Course
In order to be successful, a trader must stay the course and maintain their focus. By staying focused, they will have less chance of making mistakes that may lead to big losses or overtrading.
When you’re starting out in the stock market, it’s important to be disciplined with your buying. Don’t try to time the market, because you’re likely to fail. Instead, buy shares over time and stay the course.
That way, you’ll be more likely to see a profit in the long run.
6. Avoid Emotional Trading
In order to be successful in the stock market, you have to maintain a level head.
Responding emotionally will only lead to bad decision making. Instead, stay the course and trust your research and analysis.
Know your weaknesses as well as your strengths.
7. Do Your Research
When you’re ready to start investing in the stock market, it is important to do your research so you can make informed decisions.
There are a lot of stocks to choose from, and it can be tempting to invest in them all.
But remember, you don’t want to spread yourself too thin. Invest in stocks that you believe in and that have a good chance of making you money.
8. Build Wealth
Stock market investing is one of the best ways to grow your money over time.
For long-term investing, you buy stocks in companies and hold them for a period of time, typically years. Over time, as the company grows and makes more money, so does your stock. This is one of the most common ways to build wealth over time.
The other way with short-term investing is to consistently take profit and grow your account over time.
Stock investing FAQs
Here is a list of the most common questions and answers on stock investing.
Q: What is the difference between investing and trading?
Trading is buying or selling financial products with the goal of making a profit. This is normally a day trader or swing trader.
Investing, on the other hand, refers to the process of putting money into an investment with the hope that it will grow. Someone who is focused on the long-term.
Q: Do you have to live in the U.S. to open a stock brokerage account?
No, you do not have to live in the U.S. to open a stock brokerage account. You must find a brokerage company in your area of residence abroad.
Q: How much money do I need to start investing?
The very common question of, “How much should you invest in stocks first time?”
It is recommended to start investing with $500 or more. However, you can start with Acorns with as little as $5.
Check out this investor’s story by starting with a small account of $500 and growing it over $35k in less than 6 months.
It is best to grow your account with your growth or profit.
Q: Do I have to pay taxes on the money I earn from stocks?
Yes, you will be required to pay taxes on the money you earn from stocks.
Q: What are the best stocks for beginners to invest in?
The best stocks for beginners to invest in are those that have a history of staying consistently on an uptrend. These companies’ stock prices have typically risen over the course of the year.
Find a list of beginning stocks to build your portfolio.
Q: How do beginners buy stocks?
Above, we outlined this in detail. In order to buy stocks, there are a few different steps that you should follow in order to maximize your chances of success.
The first step is making sure you have an account. Once you have an account, the next step is to decide which stocks you want to invest in. Then, you must buy your stock. Finally, you must decide when you want to sell your stock for a realized gain or loss.
Q: How many stocks should you own?
The best answer is it depends on your investing strategy.
As a short-term investor, you can only manage a smaller number of trades.
As a long-term investor, you need a more well-rounded portfolio. of15-25 stocks.
More likely than not, the short answer is “as many as you can afford.”
Q: What is the best thing to invest in as a beginner?
The best thing to invest in as a beginner is an index fund.
Indexes are great because they diversify across many different types of investments and don’t require much effort on the part of the investor to maintain. Index funds are also less risky than other investments, especially in the beginning stages of an individual’s investing career.
Q: How do we make money?
Traders make money in many ways. They can trade stocks, bonds, futures, and options on equities. They can go long when the market goes up and short when the market goes down.
Traders also use trading systems that are usually automated to manage the trades they make to maximize profit.
Trading is a risky investment and it’s not uncommon for traders to lose money. In order to keep losses small, many traders use the trading strategy based on minimizing risk in order to get the desired return.
Learn how fast you can make money in stocks.
Q: Why is Youtube Option Trading So Popular?
Video on how to trade options is very popular on Youtube. This is because of the high volume of interest on this topic.
For many people, learning options is an advanced strategy that takes more time and knowledge to learn.
This is my favorite youtube option trading channel as well as an overall investing strategy.
Additionally, traders are able to get a much higher return on motion trading versus going long or short on stocks.
Q: What is volume in stocks?
Volume is a measure of the number of shares traded in a given period, usually trading days.
This is an important metric if you plan to exit your trade to know there are enough buyers to buy your stock.
Q: How to invest in penny stocks for beginners?
Penny stocks are shares of a company that typically trade for less than $5 per share, which is also known as penny stock trading.
Investing in penny stocks can be a lot of fun and the highest risk, and there are many ways to get involved. For anyone who is new to the world of investing in penny stocks, it can be intimidating to know where to start.
However, there are a few things that you should keep in mind before diving into the world of penny stocks. One of these is researching what types of companies you want to invest in. Many of these penny stocks are not healthy companies and burning through cash.
It is important to always be careful when investing in penny stocks. Keep in mind that the risk of losing money is high and you should invest only what you are willing to lose.
Q: How to invest in stocks for beginners robinhood?
Robinhood is a stock brokerage company that allows users to invest in stocks without paying any fees. It also provides real-time quotes and charts. To invest, the user must have an account with Robinhood that holds at least $0.
Most major brokerage companies have zero commission fees on trading stocks as well.
Beware, Robinhood is known for stopping to trade various stocks during times of volatility whereas other’s brokers do not.
Q: What is a good price to buy at?
This is a hotly debated question as every investor sees the market from their view.
More often than not, people wonder the best time to buy stocks.
As such, you can read is now a good time to buy stocks?
Ready for Stock Market Investing?
If you are new to investing in stocks, there are a few things you take into consideration before diving into the market.
For starters, it is important to understand how stock markets work. You should also know the difference between a stock and an investment.
Investing in stocks can be a bit complicated, but this guide walked you through the basics of how to invest.
Before you invest in stocks, it is important that you understand your investment strategy. That way, you can make informed decisions about where to put your money and how much risk you are willing to take on.
Most people shy away from learning how to actively trade stocks because of the movies about Wall Street they have watched.
You will get a deeper understanding of investing in stocks the longer you educate yourself on the concept.
Overall, it is wise to diversify your portfolio and don’t put all your eggs in one basket.
So, what is your next move to start investing?
One of the best ways to improve your personal finance situation is to increase your income.
Here are the best investing courses to guide your path. With time and effort, you can start enjoying the lifestyle you want.
Learn how to supplement your daily, weekly, or monthly income with trading so that you can live your best life! This is a lifestyle trading style you need to learn.
Honestly, this course is a must for anyone who invests. You will lose more in the market than you will spend this quality education – guaranteed.
Read my Invest with Teri Review.
Photo Credit:
studentloanplannercourse.com
Learn how to reach a six figure net worth in 5 to 10 years, even if you have a massive amount of student loans.
This beginning investment course will help you pay off debt and start your path to six figures.
After taking a second job as a driver for Amazon to make ends meet, this former teacher pivoted to be a successful stock trader.
Leaving behind the stress of teaching, now he sets his own schedule and makes more money than he ever imagined. He grew his account from $500 to $38000 in 8 months.
Check out this interview.
Know someone else that needs this, too? Then, please share!!
By Peter Anderson7 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited January 22, 2010.
A couple of months back the IRS released their 2010 Traditional and Roth IRA contribution limits. It’s important to keep an eye on those limits year to year if you’re contributing to one of these account types. As was expected the 2010 Traditional and Roth IRA contribution limits remain the same for the coming tax year.
2010 Traditional And Roth IRA Contribution Limits
The Traditional and Roth IRA contribution limits for the 2010 tax year are $5,000 for those under the age of 50. If you’re over 50 you have the option of making catch up contributions to your account, which brings your limit to $6,000.
It’s important to remember that you can contribute to both a Roth IRA and a traditional IRA in the same year, but you can’t go over your limit ($5,000-$6000) when you combine the two accounts. So if you were under 50, and contributed $2500 to a Roth IRA, you would only be able to contribute up to $2500 to your Traditional IRA.
Here’s a table showing the 2010 Traditional and Roth IRA contribution limits, along with the limits in years past.
Year
Age 49 and Below
Age 50 and Above
2002-2004
$3,000
$3,500
2005
$4,000
$4,500
2006-2007
$4,000
$5,000
2008-2012
$5,000
$6,000
2013-2018
$5,500
$6,500
2019-2022
$6,000
$7,000
2023
$6,500
$7,500
2010 Traditional And Roth IRA Phase Outs Based On AGI
Traditional and Roth IRAs have phase outs if you reach certain compensation limits. Single filers with an annual Modified Adjusted Gross Income (MAGI) over $105,000 begin to see their contribution limit drop until at $120,000 it goes away completely. The limits for Married Filing Jointly investors are $167,000-$176,000.
IRA Type
Single
Married Filing Jointly
Roth IRA
$105,000 – $120,000
$167,000 – $177,000
Traditional IRA
$55,000 – $65,000
$89,000 – $109,000
Contribute To Your Traditional Or Roth IRA Until April 15th
If you haven’t already contributed the full amount to your Traditional IRA or Roth IRA for the 2009 tax year, keep in mind that you can still open a Roth IRA and contribute to the accounts up until tax day, April 15th, 2010. If you do make a contribution in 2010 before tax day, be sure to specify which tax year the contribution is being made for.
Differences Between Roth IRA And Traditional IRA Accounts
The main difference between Traditional IRA and Roth IRA accounts is how they are looked at for tax purposes. Traditional IRA account contributions are made with pre-tax money. Because of that your distributions will be taxed in retirement. Roth IRA contributions, however, are made with dollars that have already been taxed. Because of that the money will grow and not be taxed at withdrawal. For a complete look at choosing between retirement accounts, check out this article: Choosing Between 401k, Traditional IRA, Roth IRA.
Do you currently have a Traditional IRA or Roth IRA? Are you contributing to the limit? Which account type do you prefer? Tell us your thoughts in the details.