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When reviewing investment options, many people focus strictly on returns. But it’s critical to also consider tax efficiency as you build a portfolio.

There are two types of investment accounts: tax-advantaged and taxable. Tax-advantaged accounts are any investment or savings option that’s either tax-exempt, tax-deferred or offers some other kind of tax benefit. When you take advantage of tax-advantaged investing, you can reduce the impact when Uncle Sam comes calling on April 15th.

401(k) Plans

One of the most common and well-known tax-advantaged accounts is the 401(k). Many employers offer a 401(k) as part of their workplace benefits. There are two main types:

·         A traditional 401(k) grows tax-deferred. You contribute money from your paycheck before taxes are taken out, lowering your taxable income today. You save money on taxes now, but you pay taxes on your withdrawals later. If you think you’ll be in a lower bracket during retirement, this can be one way to realize tax savings over time.

·         A Roth 401(k) grows tax-free. You make your contributions with after-tax dollars. So, even though you pay taxes today, you don’t have to pay taxes when you withdraw during retirement. If you think your taxes will be higher in the future, this can be a good move, reducing your tax liability during retirement.

HSA (Health Savings Account) – The “Triple Tax Advantage”

If you have a high-deductible health plan and meet other requirements, you might be able to contribute to an HSA. With this type of account, you get what’s often called a triple tax advantage:

1.    Contributions are made with pre-tax dollars, resulting in tax savings today.

2.    Money in the HSA grows tax-deferred, allowing it to accumulate without the drawback of paying taxes as you accrue earnings from investments.

3.    Withdrawals aren’t taxed if they’re used for qualified medical expenses.

Some retirees use an HSA in conjunction with other tax-advantaged investing accounts. For example, an HSA can pay for health costs during retirement, while money from the 401(k) is used toward everyday expenses.

529 Savings Plans

After you’ve shored up your own finances, you might want to use a tax-advantaged account to save for your kids’ education. Many states offer 529 savings plans that can help you do just that, whether you’re putting money away for college or even K-12 tuition. Both prepaid tuition and savings plans are available but investment options and fees may differ by state. Contributions are made with after-tax dollars, but money in the account grows tax-free if withdrawals are used for eligible education expenses.

Understand Your Options

Taxes can have a big impact on your financial picture and can sometimes be complicated to fully understand. Nonetheless, it’s important to consider tax-advantaged investing when establishing your personal financial plan. If you have questions, speak with your qualified financial professional about which tax-advantaged investment options might be best for you.

Sources

https://www.irs.gov/retirement-plans/roth-comparison-chart

https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts

https://www.kiplinger.com/personal-finance/insurance/health-insurance/health-savings-accounts/601688/5-hsa-benefits-you-might?gclid=CjwKCAiAhreNBhAYEiwAFGGKPH_II3vjJvJukrrA9gX5AsfkxyKn3D-i3McYgSkKIbTrgxMpcVnGURoCeNoQAvD_BwE

https://www.forbes.com/advisor/student-loans/benefits-of-a-529-plan/

Most people know that having good credit is important. Your credit impacts your ability to qualify for a mortgage or car loan, as well as the interest rate you’ll receive from lenders. The consequences of poor credit, however, can be less obvious — and a lot more insidious — than just having one less card in your wallet. Credit regulations vary by state, but here are some ways credit damage might cost you that you might not even realize.

Losing out on an apartment or car lease. When you apply for a rental, your landlord might run a credit check. If you have poor credit, you may not be able to get that apartment. Or, if you’re approved, you could be on the hook for a higher security deposit or an additional month’s advance on rent. The same is true of leasing a car. You might need a co-signer on the lease if you have bad credit.

Missed job opportunities. Some employers may pull a special version of your credit report as part of a background check for a job. If there are red flags on your report, you might not get the offer.

Unfavorable credit card rates. When you get a credit card, your credit score greatly influences your interest rate. If you carry a hefty balance, a higher credit score could cost you hundreds of dollars a year in additional interest payments.

Pricier car insurance. Depending on the state, you might end up paying a higher premium based on your credit score. Only seven states currently restrict the use of credit scores when determining insurance rates, so you could end up saving money on your premiums if you boost your credit score.

More expensive utility deposits. You may have to fork over a larger deposit when you set up utilities and other home services. Poor credit could mean coming up with more money up front — money you might not be able to spare.

Worse loan terms. Like credit cards, you can also end up with less-competitive rates on auto and home loans. Companies may also charge higher fees because of poor credit. Before you apply for a loan, it’s a smart move to improve your credit.

First Things First

Even if you’re not in the market for a house or credit card, it’s important to protect your credit — and improve it if need be. The first step is to check your credit from the three major credit reporting agencies by visiting AnnualCreditReport.com to get a free credit report. If you have additional questions about your credit, contact your WellCents financial professional for advice.

Sources

https://www.experian.com/blogs/ask-experian/which-states-prohibit-or-restrict-the-use-of-credit-based-insurance-scores/

https://www.experian.com/blogs/ask-experian/how-to-get-apartment-with-bad-credit/#s1

https://www.experian.com/blogs/ask-experian/credit-education/life-events/employment/

If you’re a pet owner, you know just how much fun they can be. But adopting a pet is a big decision that comes with many responsibilities — and expenses. Here are some considerations when planning for the next four-legged addition to your family.

Adoption & Licensing

Most pets require spaying/neutering and vaccinations, and some may also need to be microchipped and trained. If you obtain your furry friend from a breeder, not only does the purchase price go up, but you may also have to pay all these expenses on top — which can bring total costs above $6,000. In contrast, adopting a dog or cat from a shelter or rescue organization can be below $500, which generally includes initial vet work. You’re also giving an at-risk animal a happy home. Certain shelters will reduce the price further for older pets that can be good companions for seniors. In addition, some local governments require an annual license that‘s generally below $25 if you spay or neuter.

Food & Supplies

Fish, rodents and birds are often more economical to feed — from around $15 to $50 annually. Cats, ferrets and small dogs may cost approximately $200 to $325 per year, while larger dogs can run up to $400. These prices don’t include special treats or prescription food for older animals. Then come the supplies. Smaller animals can make up for their lower purchase cost with the need to maintain an aquarium, cage or other habitat. Cats and dogs have collars, leashes, crates, carriers and toys that you may replace several times during their lives. Cats have the infamous litter box to repeatedly fill, but dogs can have their own high-ticket demands: After all, they may be the reason you decide to fence in your yard!

Grooming & Veterinary Visits

Cats are generally self-cleaning and may even resent your efforts to groom them (thank you very much), although long hair varieties tend to require more maintenance. Dogs can be a different story. Some even love getting bathed and will try to get you to do it with them. But even if you handle bathing on your own, you’ll still need to buy shampoo, brushes and combs — and some breeds benefit from an occasional haircut. You’ll also need to schedule annual checkups with the vet and may have to purchase heartworm medication or a hairball preventative. You may also want to go to the vet between checkups for certain delicate procedures you don’t feel comfortable with, like trimming nails or — yuck — expressing glands.

Emergency Care & Insurance

Pets can suffer illnesses and injuries, and many owners go to extremes to heal them. And these ailments can occur during the weekend or when the vet is on vacation. Emergency clinics can help, but some can charge thousands in fees. Pet insurance, sometimes as low as a few hundred dollars each year, can help alleviate financial pain in these circumstances — but this coverage can have many exclusions, so be sure to read the fine print of any insurance policy you purchase.

Pet Sitting

You can’t take your pet everywhere, but getting a sitter before your vacation or during the holidays usually isn’t cheap. Professional pet sitters can charge different rates depending on the time frame. This can be around $75 a night. Another option is a boarding facility, where your pet can have 24-hour care for about $50 per night. And many pet parents choose to install in-home wifi cameras to monitor their pets when they’re out (some even include remote treat dispensers).

The Joy They Bring … Priceless

Some costs can be difficult to anticipate, such as a pet deposit or monthly fee for renters. It’s important to include all costs as budget line items. And consider a dedicated expense account for furry, feathery or scaly companions. But if you‘re responsible with your pet spending, you’ll find that all creatures great and small can be worth every penny for the joy they bring you.

Sources

https://pactforanimals.org/how-much-cheaper-is-adopting-a-dog-vs-buying-one/

https://www.cesarsway.com/5-reasons-to-get-your-dog-licensed/

https://www.aspca.org/sites/default/files/pet_care_costs.pdf

https://homeguide.com/costs/pet-sitting-prices

https://homeguide.com/costs/dog-boarding-cost

 You begin every month with the best intentions. You make a budget and plan to stick to it. So how come you find yourself coming up short by the time the next payday rolls around?

1. Impulse purchases. Have you ever gone into a store to pick up one small item and left with a bag stuffed full of merchandise you didn’t intend to buy?

What you can do. Impulse purchases are more likely when you’re rushed, tired or under stress. Try to avoid online or in-person shopping under these circumstances, and always bring a list to the grocery store.

2. Missed savings opportunities. Don’t you hate finding out that the very thing you just bought was available from another retailer at a lower price?

What you can do. Think twice about squeezing in some quick online shopping during your lunch hour. Plan purchases well ahead of time and give yourself the opportunity to comparison shop for the best deal. Purchase from stores that have a price protection policy in case your item goes on sale later.

3. Buying on credit. It can be easier to overspend when you use plastic, especially when it doesn’t feel like “real money.” And you can quickly lose track of growing card balances that make even the items you buy on sale a lousy deal after factoring in hefty interest charges.

What you can do. Pay cash whenever you can — and bring only enough money for items you plan to buy. Be careful about reflexively using credit cards for a cashback or travel benefit. You may find it’s not worth it in the long run. You can also use your debit card, which is more likely to make you stay within your available balance. If you do use credit cards, pay off balances in full each month.

4. Unexpected expenses. Sometimes we spend too much because we don’t anticipate purchases that we probably could have — like a car repair for a vehicle with 150,000 miles.

What you can do. This is why it’s so important to establish an emergency fund to cover at minimum three-to-six months of regular expenses (more is better if you can) or an occasional big repair bill. And beef up your savings target if your car or house or computer is older.

5. Falling for a sales pitch. It’s the cliché of the pushy used car salesman that comes to mind, but coming across slick or aggressive salespeople is sadly a common experience. Sometimes, they can persuade us to act against our better judgment.

What you can do. Know your limits in advance. Set a cutoff for purchases and be willing to walk away. You can always fake an emergency phone call or restroom trip to buy yourself time before you pull the trigger on a purchase. Remember that you can always come back later to buy.

6. Impulsive holiday or vacation spending. It’s easy to get swept up in the moment during holidays or your annual summer trip to the theme park, especially when you want to make special memories for loved ones.

What you can do. Include holiday and vacation spending in your household budget. Put a little bit aside each month before the event. You can also open a separate special occasion fund.

Simply having a budget isn’t enough — you have to stick to it to get the benefits. Talk to a WellCents financial professional to help you crunch your numbers and figure out a sensible strategy to stay the course.

If you’re working from home during the pandemic, and the “new normal” becomes permanent, you should contemplate how this change could affect your retirement strategy.

First, it’s important to consider the difference between working from home (WFH) and working from anywhere (WFA). In a WFH arrangement, employers may still expect workers to come to the office from time to time. But in a WFA arrangement, employees have the flexibility to live and work from wherever they choose.

A WFA scenario offers maximum freedom and may allow a worker to relocate to another part of the country (or even outside of it altogether) to take advantage of a lower cost of living.

WFA is not nearly as common as WFH. In 2019, few companies based in the U.S. offered WFA arrangements, with about 95% of remote employees required to work from a set location. However, Household Pulse Survey data collected by the U.S. Census Bureau shows that more than 35% of U.S. households have engaged in more frequent telework than prior to the COVID-19 crisis.

Remote Work Can Be a Retirement Game-Changer

Working anywhere other than the office may reap significant cost savings for employees in a variety of areas, including:

·         Cheaper housing

·         Lower transportation costs

·         Fewer socializing and entertaining expenses

·         Reduced purchases and upkeep for work attire

·         Greater ability to handle child and adult caregiving duties

Many employees who’ve come to appreciate the benefits of WFH are considering the possibilities of extending that arrangement — and rethinking their retirement plan in a number of ways as a result.

Retire sooner. With a substantial drop in housing or caregiving costs, you may find that you can retire sooner than you’d hoped. Taking advantage of a lower cost of living can bend the retirement timeline significantly. You may not have to move very far for this to make a big difference, particularly if your job requires you to reside in a major city, where the cost of just about everything is often much more expensive.

Work Longer. On the other hand, WFH may give some the flexibility and desire to continue working past retirement age. For example, if an employee has health or mobility limitations, working from home may make it easier to stay in the workforce longer. Additionally, employees nearing retirement may have parents who require assistance, and having the kind of flexibility that WFH or WFA affords them may allow them to fulfill their family obligations while remaining on the job. Others may want to work longer to be able to afford an “upgrade” to their retirement lifestyle.

Re(work) the Numbers: The first step in evaluating the possibility is to reevaluate the household budget. With housing, transportation, childcare and so many other major components of the budget potentially affected, you have to crunch the numbers. Your financial advisor can help you make an A/B comparison of what your retirement plan looks like if you work remotely or on-site to see how it impacts your retirement trajectory.

The pandemic has created significant hardships and burdens for many families. The possibilities for continuing remote work may constitute a bright spot in the darkness.

Source

https://www.cnbc.com/2019/09/09/harvard-study-says-a-popular-work-benefit-may-delay-retirement-in-workers.html