8 Tips for Maximizing Your 401(k)

HAPPY RETIREMENT!!

It’s never too early to start saving for your retirement. Many jobs provide their employees with the opportunity to put money away into a 401(k) before paying taxes. This allows individuals to save money for retirement and lower their taxable income. Understanding how to maximize your 401(k) and put it to work will ensure you to have plenty of money when you reach the retirement age. 

• Start Saving Now

If your employer offers a 401(k), grab it. Start saving as soon as you are eligible to adopt the procedure. Many people wait to sign up because they think they have plenty of time before retirement. The earlier you start the greater chances you get to build the account to a suitable level by retirement.

• Maximize Your Contributions

When most employees sign up for their 401(k), they indicate a certain percentage of each paycheck to go into the account. You may contribute up to $17,000 per year. If you can afford it is best to maximize these contributions. It is also important to look at your employer’s 401(k) matching program. Always contribute at least as much as your employer is willing to match to maximize the money or put into the savings account.

• Think Long Term

The market will fluctuate taking your 401(k) with it will be tough at times. This can often lead to panic and feelings that you are losing more money than you are contributing. Your 401(k) is a long-term investment. Therefore, these short-term fluctuations will have little bearing on the amount you will have at retirement. Don’t panic and lower contributions or change distributions when you have a bad year or two.

• Ask for Fee-Free Transfers

Switching jobs can cause issues while handling your 401(k). If the previous institution writes you a check to transfer the funds, you could owe taxes or other fees when you transfer. Instead, ask for the first institution to send the money directly to your new institution to avoid unnecessary fees and taxes. This will save you money and maximize the money in your account.

• Find Out When You’re Fully Vested

Some employers will put money into your 401(k) on the contingency that you will remain with the company for a specific number of years. If you leave before this time, then you will lose some or all of the money the employer contributed to your account. Make sure you fully understand how long it takes to turn vested and consider staying with the company for that amount of time so that you can take all your money with you if you leave.

• Diversify Your Funds

Some 401(k) plans automatically diversify accounts, while others allow you to select how you want the money dispersed. These plans often use a combination of stocks, bonds and other funds to diversify the risk. At a younger age, it is appropriate to take greater risks with more stocks, while older individuals should put more money into stable investments. Talking to a retirement professional can help you find the right level of risk for your situation.

SAVE ! SAVE !

• Don’t Cash It Out

It can be tempting to take out a 401(k) loan to pay for something you may not have afforded to pay down your bills. In some situations, this can be the best solution, but in most circumstances, it is best to deposit your money in your 401(k). Withdrawing money straight from your account before retirement can result in crippling fees and taxes, and you will miss the compounded interest that you might have earn out of the 401(k) plans. 

• Learn about Your 401(k)

The best thing you can do for your retirement savings is to learn as much as possible about how it works. Many employers hold seminars and other meetings that allow their employees to learn about the 401(k) plans that company offers. Attend one or several of these for more tips on how to maximize your 401(k) and save the money you need for retirement.

Saving for retirement is important so that you can enjoy life to its fullest. To ensure you make the most of your 401(k), follow these tips and talk to a retirement specialist. 

Stay independent even at your old age. Buck up! It’s fun to have grey hairs.

Author’s Bio:  Joshua John is the digital strategist for MBA@UNC, the online executive MBA from the University of North Carolina-Chapel Hill. Joshua is an avid blogger, with a background in Economics and Information Technology. You can find him on Twitter: @joshuavjohn.

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Posted in: 401(k),credit reports,credit score,retirement

Checklist to Sum up Your 100% Good Credit Score

Hey, thinking to apply for a loan to buy a new car, nope! Well, then you might be planning for a new house. Whatever you plan to buy or fetch look at your financial status.

First thing, that must strike your mind – “Do I have a good credit score?” If not then it is time to build a good credit score.

Scratching you head!! Well, I think you are not aware of the term good credit score. Then let me define it for you.

What is a good credit score?

A good credit score is a numeric expression that helps lenders to estimate risk of extending credit gives out loan amount to people. Most common credit score is FICO score, and for this one usually have a measurement based on five factors that is sure to effect credit score.

35% accounts from payment history

A recorded history of on time payments always comes handy to improve credit score. What does payment history generally contain? They include various types of information like credit card balance, retail accounts and installment loans outstanding balance, even adverse public records for liens, foreclosures and even bankruptcies.

Time gap between last negative event and frequency of missed payments is sure to affect the credit score. As for example, take a person who might have missed his credit card payment three years ago, will be seen less riskier than person who misses several payment every year.

Credit scoring and FICO score

Many agencies uses data that they have collected to formulate a credit score for you. This is a value that can be used later to determine your creditworthiness.

Some factors used to calculate your score are - 

• Amount you owe on non-mortgage accounts

• Credit card outstanding balance

• Payment history

• Number of credit lines that are open

• Age of credit file

• Number of recent report inquiries 

• Credit history

FICO SCORE

FICO score is the most widely used by lenders for checking the credit history. All three credit-reporting agencies have their own names for FICO score like, Equifax calls it BEACON, Experian calls it Experian/Fair Isaac Risk Model, and TransUnion calls it FICO Risk Score. Despite having different names, scoring method is consistent across all three.

How are FICO score determined?

30% accounts for how much you use your credit and how much you owe

FICO score taken into consideration to show how much you owe or how many accounts have balances and the amount of credit used. More a person is going to owe relative to their credit limit, credit scores will lower accordingly. You will be already going to see yourself in risk, if you are already max out your lines of credit.

15% is contributed to length of your credit history

In FICO score, age not taken into consideration.  Fact is that, longer the credit history more it will improve your credit score. Well this is a disadvantage on the part of young people, a young person is going to have a lower credit score than an old person, but all the factors will remain the same. 

However, a person with short credit history will be still getting a high credit score if he or she is able to exhibit dependable credit management.

Just 10% incorporates in new lines of credit

Recent or frequent applications of new credit have a negative impact on credit score. Every time when the lenders check your credit history, your score drops by a few points.

For credit rating agencies, they consider number of recently opened accounts and often compared to percentage of new accounts relative to total number of accounts. They intake the number of credit inquiries, but excludes consumer and promotional inquires.

In addition to that, they make inquiries on how long accounts have been kept open or number of credit inquiries made. FICO also suggests that staying focused while shopping for loans like automobiles and mortgages, you have to search under a period of 30 days, and that can help one to avoid credit score deductions.

Other factors account about 10%

Individual is having a variety of credit types even you may have it. If you have just one type of credit say for example a credit card, your score will be lower than an individual having variety of credits will.

Author Bio : Moumita Dasgupta, a financial blogger and the owner of bizandfiz, shares her knowledge and expertise of various financial topics. A clear view on market, business, Forex, funds, personal finances etc. are the subjects she perfectly underlines through her articles.

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Posted in: credit reports,credit score,loans

5 Places to Park your Money

Every financially strong personality or a business man with bags full of money loves to park at a place that keeps it safe as well as gives some return. Financial institutions are in search of such investors and might line up at their door. If you are in the mood of an investment, then you can fall for any of them that succeed to impress you.

However, offering money to a safe institution where it is at low risk and can earn maximum return is essential. Some of the factors which you must consider while making a choice include - the way you access your account (ATM, check writing, etc), interest rates paid back, etc. 

Below are 5 places where you can park your money with low risk and higher returns. 

A. Checking Accounts: Checking accounts are more of a transaction account than a savings account used in financial planning after retirement. However, there are institutions that provide with a combination of the checking accounts and money market account in terms of return.

Pros

1. You can access your money through ATM or any other process.
2. You can even visit at any of the bank branches for any transaction.
3. The Federal Deposit Insurance Corp. insures the deposits and the checking accounts. 

Cons

1. Some of the banks might not return you much as interest.
2. Many of the checking accounts require a minimum balance or charge fees.

B. Savings Accounts: Saving bank account was the most famous in olden days, especially among people interested in short-term investment. Nowadays, they park it at places that would bring higher returns. Saving bank account will not fill your pocket with enough interests.

Pros

1. FDIC insures the money in the savings bank account. 
2. The account minimums are low for most of the bank.

Cons

1. Interests paid by saving bank account are lower, compared to other accounts. 

C. High-yield Bank Accounts: Many checking and savings bank accounts are available that provide you with high returns on your savings. These accounts offer you flexibility and liquidity. Through flexibility, you are free to withdraw and deposit any amount, any time. 

While talking of liquidity, your money is not going to stay locked for a specific time-period, rather you can access it anytime. The interest rates are even considered at par with other restrictive investments like CDs. The returns from the account can be used during some economic crisis.

Pros

1. Provides better rates than many of the bank accounts.
2. The high-yield accounts too come under same FDIC insurance plan.

Cons

1. Do you know banks with no ATM, debit access or check writing facilities is a hassle for customers? 
2. As customers have to coordinate their cash flow by making transactions through online banking linked to checking or savings account. This brings delays of a few days before getting everything reconciled. 

D. Money Market Deposit Accounts: Many banks offer money market deposit accounts and usually require a minimum balance in the account and offer a limited number of transactions within a month. Further, there is a restriction of a specific number of those to be done in the form of check writing.

Pros

1. These accounts are very liquid and allow the transaction through ATM, checks or any other transfer process. 
2. Being offered by banks, these accounts are insured by the FDIC.

Cons

1. Due to the liquidity, you might get a lesser return than promised.
2. You need to pay the penalty if you make a greater number of transactions as available or the balance goes below the minimum amount allowed.

E. Money Market Funds: The funds are offered by the mutual fund families and brokerages. They invest in highly liquid, safe securities like commercial papers, certificates of deposit and government securities, etc.

Pros

1. This funds allow using ATM and writing checks.
2. The money market fund provides you with a higher amount of return in comparison to money market accounts. 
3. Issuers of the fund try their best to keep the price of each share at $1 so that the principal remains safe.

Cons

1. These are not bank accounts and are not insured by FDIC.
2. The NAV might not remain at $1

Just not five places we have many places to safely deposit the money. However, we need to live with the trend. In the rpesent economic scenario, these five places are the hotspots to safely invest your hard-earned money. So investors, take the hot seat and switch to the best investment strategy.

Guest Post - This article is by a financial blogger William Briat, even a freelancer and copyright editor belonging to NY. Check out his site at economicrisis.com

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Posted in: investment strategy,investment tips,investors