A quick review of the focus of the blog and the Miles Weekly Personal Finance Podcast, a vehicle by which to inform, educate, entertain, and cover the basics of personal finance, small business, investing, savings. The primary objective if there is one at all, to close the gap of “information asymmetry” and raise the minimum threshold of financial literacy to anyone that subscribes to the podcast or keeps up with the blog. In communications lingo The “A” End is the originating end or point of origination, for us that would be Episode #1 and Blog Post #1. Conversely the “Z” end is the terminating end, whereas the communications sent have been received. But don’t be fooled, the end also becomes the beginning and Z becomes A to start the cycle all over again. This is “Episode Number “Z”, we have reached the terminating end of these communications …successfully I might add. end.
401k’s and IRA’s Protected from Creditors Liens, Judgments and Bankruptcies
Tax time offers a golden opportunity to open and contribute to an IRA if you haven’t done so already for 2014, and make that contribution tax deductible, while saving and investing money. These are some of the benefits of doing your own taxes, you sometimes uncover information that you may not have otherwise found or the tax preparer deems you wouldn’t be interested in. So, there are two types of IRA and the most popular for middle income folks is the Roth IRA as it lets you make after tax contributions, and you can take penalty free withdrawals should the emergency arise. Of course there are some rules surrounding withdrawals, without going into them specifically I will note some benefits of The IRA and 401k accounts that sometimes get overlooked. For details on the differences between Roth IRA or Roth 401k versus IRA and 401k I suggest checking out http://www.investopedia.com/terms/r/rothira.asp
Another major and often overlooked benefit of retirement plans is that they are protected from creditors if you are in bankruptcy or against judgments and liens. So while a creditor may levy or place a lien on your bank account for a judgment against you, they are unable to get at your IRA, 401k or other type retirement plan account. This also covers Educational IRA’s where the account is setup for the benefit of a child, yours or not, to pay for college education costs, that account is protected too. There are limits you can put into IRA’s, Child Education IRA’s and 401k’s be them of the Roth type or not. However, in some cases those limits can be pretty high depending on who you are and how much you have to put away. Also, you can take withdrawals or loans from these accounts under certain circumstances, just in case there is an emergency! Imaging your bank account having a lien during an emergency, that would be crazy. Of course, as conventional wisdom would have it, you definitely should pay all of your bills all on time, avoid getting and answer any or all judgments entered by creditors or otherwise. However, in reality, many folks are finding themselves with judgments and liens and don’t really know how far they reach or can reach. Let’s face it, when you’re under attack and you’re resources have been locked, it is comforting to know that something is safe.
If you find that you only have an employer sponsored 401k, some administrators may or may not allow you to make contributions outside of your payroll deductions, while other companies such as Fidelity will allow you to link your brokerage account if you have one. If you have a 401k handled by Fidelity, it may be time to consider getting a brokerage account with them too. That’ll make it so you can have access to all sorts of cool options that should last you beyond your employer. That being said, it is beneficial to have a IRA or Roth IRA account that you manage yourself. You make the contributions, however much you would like, you select the fund to invest in and so on. Most brokerages will allow you set up an IRA ,Education IRA or Roth account. A few of the best known brokerages to consider are https://www.fidelity.com/, https://investor.vanguard.com/ira/vanguard?WT.srch=1 , www.usaa.com or www.tdameritrade.com to name a few.
Quick couple of notes,
• if you have children you should consider the Education IRA which is much like a 529 plan. Even if you only open it with $25. 00 to start and direct deposit $25.00 a month, many plans allow this to open an account. So you don’t need to have a bunch of money to get started. The same applies to regular Roth IRA’s for you.
• If you’re expecting a tax refund, you can contribute any amount up to the annual limit to the 2014 contribution. Again, if you don’t have an IRA, it’s a good time to start one even with a few dollars that you’re expecting. It’s not all or nothing, so throw a few bucks that way. Most people that qualify for large returns already have it earmarked, but can still at least toss in $25.00 or $50.00 to get started.
• Consider beneficiaries; don’t leave this overlooked as it is very important. Put someone down now, you can always update it if you need to. And while considering beneficiaries, think about your will or living will. We’ll talk more about wills later.
Doing these sort of things and being set in place regardless of the amount of money you have on hand, be it a little or a lot, allows you to be prepared when the time comes to make financial moves. In the meantime, you build with what you have regardless of how small as low as $25.00 monthly. You can even suspend that if it becomes too difficult until things ease up. Getting set up in most cases cost very little or nothing other than some time dedicated to making things happen.