Tag: 401ks

Tax Time!

smbaccari

Here we go… It’s that time of the year again, tax season.  The pressure of rounding up all the information we need to make sure we are taking all the deductions allowed. I personally rely on a professional to fill the forms in. Well, in all honesty that person is also pretty much family, so the fee is very reasonable.  The standard deductions for 2023 (so filing in 2024) filling single is $13,850 and $27,700 filling jointly or $20,800 for head of household. If you are over the age of 65, you may be eligible for more but should consult a professional.

When filing you either take that standard deduction, say the $27,700 or you itemize. Whichever number is higher usually works best. If you have a large mortgage payment with a high interest rate and other allowed deductions, you could exceed the $27,700 amount. NerdWallet has some great tips in this article on possible deductions for  2023. 22 Popular Tax Deductions and Tax Breaks for 2023-2024 – NerdWallet.

And who knew you could file your simple tax return with NerdWalled for just $50! Check it out if this could be a fit for you! The above link will take you there.

IF you find yourself having to PAY taxes this year, and you do not have a basic IRA account, maybe it makes sense to open one? If you only have a 401k and still owe taxes, it’s too late to add more money there, BUT you should have until April 15th to add money to a traditional IRA for the 2023 tax year. (Max $6500 if under the age of 50) This article from US News will give you the guildlines. IRA Contribution Limits for 2023 (usnews.com)

Keep in mind IF you do this because let’s say you owe $2000 this year, and you put $2000 in an IRA, it balances out? Not necessarily.  Plug in the numbers and see what tax bracket you need to be in for it to be a benefit for this filing. It may or may not be a “thing” for you this year but should be a push for you to UP your 401k contribution ASAP, as to not get stuck on that side next year.

Taxes and the lack of time to grow your money seem to be the biggest hinders to growing wealth. They say we should have at least two buckets for long-term growth accounts.

  1. Traditional retirement accounts, like an employer 401K, 457, 403b…. These a tax deferred account, so it lowers your taxable income. If you make $50,000 a year and put $10,000 a year in your 401K (does NOT included the employer match) then you are taxed as IF you only made $40,000 a year. That’s a basic outline. The money grows with compound interest for many years, and you pay a tax on that money years down the road on what ever amount you take out each year.
  2. ROTH IRA or ROTH 401K (If you are lucky to have one) With a ROTH IRA, you have already paid taxes on this money, and it can grow with compound interest, and you NEVER pay taxes on any of that money!!! There are income level caps to be able to contribute to a ROTH IRA. If you do a ROTH 401K, you pay the tax first and then it goes into the account to grow with compound interest and the same rules apply. But do check the rules and understand them.

Check out the link from Investopedia, which does a great job to beak it all down in simple terms. Roth 401(k) vs. Roth IRA: What’s the Difference? (investopedia.com)

Taxes are no fun, and it seems like some of the rules on what’s a deduction and what is not is always changing. Fun fact. Many years ago, Ok like 30 years ago.😊 you could write off the interest on a personal credit card and a car loan! Not anymore, and yet there is a higher percent of people with credit cards and the average credit card debt in the US is thousands of dollars.  It’s a good idea to just have a place that you keep all your receipts in one spot. Things like medical bills that were not covered by insurance, home repairs, property tax bills, excise taxes bills, homeowners’ insurance bills…. You name it.

In most cases, at least in my state you can not deduct things like home repairs on a single-family home. But what if you decide to sell your home? Might be a different story that year.  I personally, keep a decorative shoe box for the “paper” stuff and TRY to remember to print an e-receipts I have. This way everything is in one spot and takes less time to organize what my “tax guy” needs or does not need.

They say we don’t really want to be getting big refunds, that we shoot for close to Zero so more of our money stays in our pocket through out the year. I get that, BUT I also do NOT want to see I owe Uncle Sam money! Again, this gets back to our behaviors and mind sets. If you are someone that wants to live on the edge and has money set aside incase you owe taxes, go for it! I am more comfortable with getting close enough and getting a refund! 😊 Its like Christmas in the Spring and I earmark that money for something specific or put it in savings for a bigger project like a home repair. Do whatever works best for your personality and needs but try to look back next year and say you learned something positive about how you file your taxes or that you did something positive with your return, if you are getting one.

Happy tax season!!!

Week One Money Challenge!

smbaccari

This blog” Two Chicks Talking Money” is for other woman like us, just regular people with regular jobs. Getting financially “literate” is intimidating and may seem overwhelming.  That’s why we have each other! It’s not going to take much to get the ball rolling and start learning. We are not going to become day traders and must understand every technical term about the stock market. We are also not going to talk about investing in any ONE stock. We are going to INVEST in the market though!

Let’s do ONE Challenge each week, to up our financial position. Little steps in the right direction…

This week, Lets find an extra $50.00-$100.00 you can put into your retirement account AUTOMATICALLY, so that this happens EVERY month AUTOMATICLY.

IF you do not have a tax deferred retirement account at work, investigate opening a ROTH IRA or a traditional IRA. Get online or walk into a Fidelity office. They will take it from there.

We can do this! That’s this week’s challenge!

If you have never read the book The Millionaire Next Door, by Thomas J Stanley & William D Danko. You must pick it up and read this! It is motivating and makes you believe Yes; I too can do this!

Now don’t get me wrong this is NOT a get rich fast book or some fast-track way to get to the finish line. These days we only have ourselves to ensure we have money to survive when we are older and no longer able or willing to work. How quickly we get to that finish line, well that does depend on how much you save. The younger you start, even with a small amount, the faster it grows. So, when we think of the word INVESTING, we do this!! This can be in a company retirement plan, like a 401K. 403b…. Or even just a brokerage account. BUT we MUST set money aside for it to grow. Let’s also not get worked up on when the “Market” goes down, it will, we know this! It will also go up! Ya more for us!!! So what do we do when the market goes down??? I say BUY MORE! If the market is DOWN (And we are not pulling money out because we are already retired) Up your monthly contribution! Even if it’s only $50.00 more a month. Hey, it’s a SALE on STOCKS! Right!? What Chick does not like a sale!!! That’s what it is accentually. It’s all good! Clean your “Closet” aka, stop paying for things you do not need every month… Subscriptions for streaming, a latte EVERY day… Girl, that’s $100.00 a month if the Latte is Monday- Friday! Let’s not even get into the calories and the sugar! I LOVE Lattes, but not 5 days a week. Let’s fill the “closet” with more Index funds! 😊 Good Luck this week!

Retirement!

smbaccari

Let’s talk about retirement. A new survey from Axios-Lpsos, says one in five people think they will never retire!   Gen. Xers said they have nothing saved for retirement at all and that’s from the National Institute of Retirement Securities. It’s said this is due to reduced pension plans and decreased access to 401K retirement plans as the major contributors for people working longer.

 I find it hard to believe that people really want to work into their 70s! Sure. you want to have things to do and stay active but do people really want to do the same job they’ve been doing for the last 35-40 years?

 I must think at one point those full-time big person jobs that are stressful and time-consuming, are no longer fun! It’s not a 40-hour week anymore, it’s a 60-hour week for the same money!

 So. what’s really going on? I think people want to stay busy in retirement, but I think they want to do something they feel is rewarding and gets them out. We all need a reason to get up and shower each day and keep our minds sharp. We want to be a part of the world but maybe not the full-time gig we have been doing for the 3-4 decades prior.

 I think more people work full time and stay working full time because they need to, not because they want to and is that good for us overall?

What if we start earlier with small changes in how we spend & save?  Little changes and starting earlier in life. We must educate the younger generations that it is important to start saving for retirement as soon as you start working just a little bit even if it’s only $100 a month, it’s a huge difference on the other end. You might love your job and you might think oh this is great I’m going to do this forever!

 Let me tell you things change overtime, companies change, they get acquired, they go out of business, management changes, you get a new boss and that could change everything! Then suddenly you went from having the greatest job in the world to being completely miserable.

  What’s the lesson here? Start taking care of yourself, the younger the better, but START! A little bit at a time and understand what compound interest does for you!  What’s the worst thing that happens? You get 40 years down the road and you’re still going to work, but you have a $2,000,000 in the bank! Ya, that’s a problem I want!!! Let’s get educated on the “money math”!

Check out this great on-line compound interest calculator from Bankrate! If this does not inspire you, you’re in the wrong place! 😊

Compound Interest Calculator – Savings Account Interest Calculator (bankrate.com)

Example: If you start with $1,000 in a retirement account that earns on AVERAGE 8% return, and you only put $100 per month in for 30 years… You get… wait for it! $146,002.51!!! You would have invested $37,000 and made $109,002.51 in INTEREST!!!

What if as you aged, you added more than a $100 a month or let it run for 33 years, or got a 10% average return??? The market will go up and down but set up a retirement account through work (401k) or a simple IRA, get online with Fidelity or Vanguard, or another major brokage company and start saving! That’s the first step!!!!! These companies have amazing software to guild you along the way as well as real people to call and talk to. Just START!!!

We cannot control everything during those “working” years, and we cannot control the market, but we must put the odds in our favor, so we have options down the road. We want to decide when we retire. We don’t want our “bills & expenses” to decide when we retire!!!