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Retirement Plans

Retirement Plans

401K-is a feature of a qualified profit-sharing plan that allows employees and or employers to contribute a portion of their wages to individual accounts. Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals). Distributions, including earnings, could be included in taxable income at retirement (except for qualified distributions of designated Roth accounts).

403B– tax-sheltered annuity (TSA) plan is a retirement plan, similar to a 401(k) plan, offered by public schools and certain 501(c) (3) tax-exempt organizations. An individual may only obtain a 403(b) annuity under an employer’s TSA plan.

457-Plans of deferred compensation are available for certain state and local governments and non-governmental entities tax exempt under IRC 501. They can be either eligible plans under IRC 457(b) or ineligible plans under IRC 457(f). Plans eligible under 457(b) allow employees of sponsoring organizations to defer income taxation on retirement savings into future years. Ineligible plans may trigger different tax treatment under IRC 457(f).

409A-applies to compensation that workers earn in one year, but that is paid in a future year. This is referred to as non-qualified deferred compensation. This is different from deferred compensation in the form of elective deferrals to qualified plans (such as a 401(k) plan) or to a 403(b) or 457(b) plan.

Traditional IRA-tax deductible individual retirement account that has strict eligibility requirements based on income, filing status, and availability of other retirement plans (mandated by the Internal Revenue Service). Transactions in the account, including interest, dividends, and capital gains, are not subject to tax while still in the account, but upon withdrawal from the account, withdrawals are subject to federal income tax (see below for details).

Roth IRA-is an IRA that, except as explained below, is subject to the rules that apply to a traditional IRA.

-You cannot deduct contributions to a Roth IRA.

-Qualified distributions are tax-free.

-You can make contributions to your Roth IRA after you reach age 70 ½.

-You can leave amounts in your Roth IRA as long as you live.

SEP IRA-A SEP plan allows employers to contribute to traditional IRAs (SEP-IRAs) set up for employees. A business of any size, even self-employed, can establish a SEP.

Simple IRA Plan– (Savings Incentive Match Plan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.

Just wanted to give my readers a brief description and to list the many options we all have to contribute to a retirement plan. At any stage currently in your life you can make contributions to one of these plans depending on how you are employed even self-employed people have options. Also you can effectively reduce your taxes by contributing to one of these plans which is a win-win situation for anybody. Leave a comment to notify us if you agree or disagree with contributing to these plans. In addition to this if you would actually contribute to more than 1 plan to help you boost your retirement accounts? See IRS.gov for further details on these specific plans.

The picture above is your view after 25 years of contributing to one of these plans.

As always do not forget to Watch your Money!

Apple Dividend

Hello Everybody,

This is a quick post to notify the readers of the news that recently Apple established a stock dividend for it’s shareholders. Many people might now want to jump in and invest in the company, but is it a good idea or not? Nobody can predict the future on how well the stock will perform and if the company will continue to grow on a global scale. In any case I will break down for you what you can expect to get as income if you decide to invest in Apple stock aside from any price gains. I will do the calculations for a 5K, 10K, 20K, and 50K amount of investable assets with a current price of $600 dollars a share. The dividend they are currently paying is 2.65 per share owned.

Investments:

5K-Nets you 8 shares x 2.65 = 22 dollars per Qtr= $88 Income annually.

10K-Nets you 17 Shares x 2.65= 45 Dollars per Qtr= $180 Income annually

20K -Nets you 33 Shares x 2.65=$88 per Qtr= $353 Income annually

50K – Nets you 83 Shares x 2.65= $ 220 per Qtr= 883 Income annually.

Now that you see the numbers would it make sense to invest in this company with its over inflated price per share and such a low dividend in relation to it’s stock price? Here are a few things to consider, 1. The price of the stock in a year has gone from 310 to 610 price per share. 2. The company is very popular and is growing everyday. 3. The earnings estimate of apple is in the double digits for the foreseeable future. 4. The dividend is only a paltry 1.75%.

In conclusion if it were me I would definitely invest in the company if I had some extra playing money, as it is only slated to grow more, the only downside I see is the high stock price inflated by the media and all the institutional investors and the lowly dividend yield. Apple has a very large amount of money just sitting around why not give it’s investors at least a 2.5% dividend yield. Could this company reach a thousand dollars in stock price one day maybe but if I were to buy it I would sell it at 800 and take my profits elsewhere.

Even in Music Series II

Pic by GQ Mag

Hello,

As you know I listen to the lyrics of what some of these artists are saying in their music. Recently Drake released a song where he talks about ballin like crazy without any concern. I think he is just trying to relate to his audience which is proof that in his eyes most people would prefer to spend their hard earned money on that new sneaker, bag, or any product that makes them feel happy for a brief moment. I think he really meant to say in a subliminal message to his fans, to go buy his CD and not sugar coat it by saying that he spends like crazy. These artists say things in their songs to try to influence others to do exactly as they supposedly do.

He talks about being worth 25 million dollars at the ripe young age of 25. Now if you spend 5 million but bring in 10 million, then that is not a lot as its all relative to what he earns. The 25 million dollars he has invested in the bank makes him 1.25 million every year in interest alone on average, and thats not including his new income he gets from concerts, features in other songs, business ventures, CD/online sales, and reinvested stock gains. So you tell me if somebody that is young and bringing in that much money they can definitely afford to spend a lot as his lyrics state.

What he said- I never really been one for the preservation of money, nah I much rather spend it while I’m breathing.

HaHaHa- I have to laugh at this because I know for a fact if he was not making this much on an annual basis he would not be spending like he flaunts in his song. Also if he were to lose popularity and his income stream he would be signing a new note contrary to his lyrics.
I will go out on a limb and say that he is clearly lying on his song as he does want his money to last. Why keep working? Why keep touring and making/writing songs? Why are you investing in new ventures like a clothing line and cologne/candles? Drake Article
I’ll tell you why because: 1. Drake wants to keep fueling his spending. 2. Drake does want to grow his Net Worth.

Don’t get me wrong I am not hating on him and I do feel he is a talented artist, but do not release reckless lyrics trying to make your fans like sheep by influencing them to spend like you say you do. In reality we will never see Drake in the stores or with all those expensive receipts of all the things he is consuming so how do we really know if its true? I have come to a conclusion that it is all for show.

Financial influence is everywhere and sometimes it is delivered in a negative context! Better yourself and strive for a new mentality of preserving what you have and growing it everyday.

My motto – Watch your Money!

Net Worth = Freedom

Net Worth = Freedom. No really it does. Keep reading.

Where are you with your Net Worth calculations? Do you know what the average figure is for somebody your age? Well don’t delay in finding out your information so that you can gauge where you are in the spectrum of above or below average for you age range. How else would you be able to know if you are on track with your retirement goals? The reason I titled this post as net worth = freedom is because that net worth figure we all are shooting for in life will eventually be your income after you retire from a traditional job. Obviously a well-funded nest egg will provide a sizeable annual income and the freedom to do what you want. Will social security be around to assist us in our golden years? Maybe, but let’s pretend that it will not be around thus fueling a greater fire within us to save those pennies. A thousand years later if Social Security is still around you will then have extra gravy and steak every night for dinner.

Assets – Liabilities = Net Worth

Assets: Liabilities:

Checking/Savings Accounts Credit Card Debt

IRA/ 401k Accounts Mortgage/Student/Car Loans

Stocks/Investments Family Loans

Homes/Cars/Jewelry/ Anything that is sellable

My Quote-What we do now with what we have now will definitely impact us later with what we have later.

Don’t be like certain people who could care less to find out their current net worth figure, because they do not want to be let down for falling short on the figure they are supposed to have. If you notice at the bottom of this blog you will see calculators and if you click on the Net worth link you will be enlightened and reborn. No I’m kidding about being reborn, but if you value your future life like I do, you will take notice that you need to ante up your treasure chest. I will give you a quick run-down of the average Net worth figures for 25-54 year age ranges. Now this by no means eliminates you from running your own numbers, stop being lazy. This is just example to give us a visual effect and comparison of the different age groups.

Net Worth by Age as per CNN Money:

25 under: -1,250

26-34 Year Old: -8,525

35-44 Year Old: -51,525

45-54 Year Old: -98,350

To be completely honest I do not agree with these numbers as they are a bit skewed. Somebody who is 41 years old should have a lot more than 51K net worth and somebody who is 32 should have a lot more than 8 thousand as well. Another way to work out your net worth figure is to divide your annual salary by .04 and then divide that by ten and that figure should give you an amount you should aim for which is really aggressive. In this example age has no factor as it is all based on income. So it helps those people who are not content with the figures provided by CNN Money as I am.

Income Based Net Worth Examples:

Income-25,000/ .04= 625,000 / 10= $ 62,500

Income–30,000/ .04= 750,000/ 10= $75,000

Income–40,000/ .04= 1 million/ 10= $100,000

Income-50,000/ .04= 1.25 million/10= $125,000

As these figures are very difficult to attain it is still a possibility with dedication and living a life where you do not have to impress others around you by flaunting items that set you back in life. If you are in between the income figure and age based figure for your specific situation then you are on the right path. But if your Net Worth is less than the age based example then it is pertinent to begin thinking of your future. The closer you are to the income based Net Worth the easier it will be for you to live off of your investments later.

Comment on this post and give us your opinion on what your feelings are about the Net Worth examples and its importance to your future. Do you know what your Net Worth is (Keep yours private) or is it a magical number you have never cared to calculate?

Watch your Money!

Brands that I Love

OK I did a post about brands that I hate and what better way to reciprocate that than to post about the brands that I love. I know that this post will get a lot of people to comment back. Something about brand loyalty that gets people to talk and talk and talk. For this reason alone I will start a series of posts based on brand loyalty and update my brands with every new post. I even found an article on this robust topic listed in Daily Finance website. I was shocked and surprised to see what was the #1 brand on the list in the Daily finance article. Before clicking the website I mentioned above take a guess at who will be the victor on that list. My list below is a mixed list of random companies that were in my mind at the time and I will look to add to this list in the future.

Continue reading Brands that I Love

Best Financial Decision Ever Part II

As the years keep passing I like to think back and really get a feel for what I have done right with my money. I think this is only possible if you have a great memory or if the decision you made had such a positive outcome thus staying relevant in your mind. Part II of this series of posts I want to revisit another smart decision and hopefully I can repeat it again or maybe help others do the same thing. After I reveal this important decision, then maybe you all can share a special decision you made. We all receive enlightenment from different sources whether it be people, books, a blog, or a financial TV program.

The underlying fact is that all those sources I mentioned before, were sparked by somebody who decided to share with the world a unique personal finance decision they made. What would happen if everybody kept things to themselves for whatever reason, that selfish frame of mind would not benefit the world. Sharing is caring now let’s begin this great cycle of discussing personal finance stories.

Financial Decision Part II:
As a kid I saved up any money I received from birthdays/Christmas’s and I envisioned a goal that I had in mind. Which was to buy myself a video game for my Nintendo system. I still remember that day on a Saturday when I told my mom to take me to the hobby/toy store on Broadway in 180st in NY city. If I can recall the day I must have frustrated my mom cause as soon as I walked in I was steered away by the numerous options of toys and games. I have always been a bit indecisive when it comes to making a final choice with my money. It’s the darn value vs. cost dilemma I struggle with still till this day. I can not recall the exact video game I purchased as this was many years ago, but this one action helped me see a new side of myself that I knew would be ingranied within me forever. As the years passed I visited that hobby store time and time again to continue purchasing that new toy that intrigued me without ever going into debt. Thinking back now if I had better guidance with financial matters, I could have saved at least 20% of my income, but then I would have never been the owner of as much cool GI Joe’s, Transformers, or Thundercat toys that I desired.

If you can take away one thing from this, it is to save up first as I did and then buy what you need/want. Credit cards didn’t exist back then and loans were not as prevalent as they are now. This one decision in a weird way made me the person that I am when it comes to money and I feel that the companies that run our society want us to do the exact opposite. Spend first then pay later plus interest. Only you can stop that downward non-productive cycle.

Now after reading this what would you like to share? Comment now and feel better about yourself for releasing information that is/was important to your past life thus helping you shape your current financial mind-set and or perspective.

Adding up the best financial decisions year after year is another way to watch your money!

Image is Time + Money = Goals graph.

Budget Max Percentages

Your income consists of 100% of your spending as a whole, but do you actually know how much you should spend on certain monthly expenses as a percentage of your salary.

25%- Housing Costs (Max is 35% of income)
15%- Debt Reduction ( If not in debt use this to allocate to other items)
15%- Retirement/Savings Goals/Emergency Fund
10% -Transportation
15%- Food
10%- Utilities
10%- Personal
10%- Charity
5%- Recreational
5%- Clothes
5%- Misc

If you add up all the percentages they are over 100% of your Income and it’s your job to balance it out by increasing and decreasing certain categories. This is just an example of what each category should be percentage wise give or take. The lower the categories to bills the more you can allocate to the good things in life like savings/goals, personal, and recreational.

Obviously this is not set in stone, but this is what the experts recommend. If you were hell bent on getting rid of your debt then you can allocate funds from other places and increase your debt reduction amount. Even lenders who are working with new clients on a mortgage loan; notify their clients that the mortgage payment including interest and taxes can not exceed the maximum of 35%.

Some people will argue that a portion of your income up to about 10% should go to giving others or a charity of your choice. But if your income can not sustain this amount consistently on a monthly basis then your only left with the first option, which is to take care of your household first in order to survive. On the other hand if your housing cost as a portion of your income is only 15% then you can definitely afford to give to your favorite charity. See my new page under Budget tab as to help you set up a easy to use budget printout that you can have as a visual reminder.

I will actually be up front with you all that my budget is not in line with the recommended percentile amounts listed above. For the sake of this post I will release my percentages to you as I continually am attempting to improve my budget. I know what your thinking that I am not doing as I preach, but for arguments sake my budget is in line except for two maybe three categories in which I am over the max limit and unfortunately are a current necessity.

Housing %- 40% (Over)
Utilities %- 8%
Food %- 1% (The Misses takes care of this)
Transportation%- 4%
Clothing %- 2%
Personal%- 23% (Child Care) (Over)
Recreational%- 5%
Debts%- 13% (School Loan) (Over, as this is a category you never want)
Savings%- 4% (After Tax savings- I do a total of 12% of my income before tax)

Total = 100%

Comment back if you have ever ran these numbers as a percentage of your income. If you feel up to it post your actual percentages for your preferred categories on the same comment.

Now we all can be better aware of how our budget gets allocated.

Even In Music Series I

OK by now you know that I’m about finding your money that was once lost due to the thousand or so reasons / excuses that life can throw your way. But do not overlook the fact that money is right in front of us everyday with some form of monitoring or budgeting of our current income. Monetary influencers seep from every angle of our lives, even in music. Just listen from time to time instead of singing all by your lonesome, lol.

Jay – Z the most famous rap artist talks about money every chance he gets. Recently I heard some of his lyrics and he states in clear proper English aka an easily deciphered phrase- Anticipation for precipitation stack chips for a rainy day. What does this mean? It means to save money for emergencies that may arise from time to time. Wow what an eye opening, simply put phrase that struck a nerve within me. Yes he talks about spending on diamonds and fancy cars all the time, but I would bet a few of my pennies that he saves / invests a hell of a lot more money than he spends. I also witnessed his Forbes magazine cover with the most respected investor of our times Mr. Warren Buffet. In addition to his status as a business man, investor and respect in our times he has even been quoted as an investor of the Euro as a way to diversify his current cash portfolio.

In Conclusion we might not make the kind of money Jay-Z makes, but saving it should be relative to what we make for our incomes. It all boils down to saving some of it before it’s too late, and believe me you will never regret the fact that you saved some extra money for your future.

Even in music you can find ways to watch your money.

*Image is the cover of a recent Forbes magazine.