Every time I shop a certain department store they ask if I would like to open their store credit card and get a 10% discount on my purchase. I always say no for two reasons: I don’t need another credit card, and I like the perks I get with the one that I use. Now that it is holiday season, the store credit card offer has gotten bigger with some discounts as high as 20%. It is still not in your best interest to take this bait, and here is why.
The average annual percentage rate (APR) for retail cards now stands at 26.01%, up 37 basis points from a year ago, according to a separate report from CreditCards.com. That’s nearly nine percentage points higher than the overall average credit card APR of 17.21%.
Interest rates on retail cards have risen over the past year even as the prime rate, which most credit-card issuers use to set their APRs, has fallen 25 basis points over the past year.
As many people get a bit over generous during the holidays, these cards add to their debt, potentially reducing their credit scores.
Set a holiday budget and pay cash. You will be in a holiday happy mood throughout the next year.
One of the worst things a family can go through is probate. Probate is the judicial process by which a decedent’s estate is valued, beneficiaries are determined, an executor in charge of estate distribution is declared, and the estate is legally transferred to the determined beneficiaries. Probate is very public, and the results may not be what the deceased had intended. Even worse, is when there is a specific place to name a beneficiary, thus avoiding probate, and that place is skipped. On top of that error, having a retirement account managed through a large, national company, and their representative does not take time to alert an employee that they did not name a beneficiary. This is the case for a client whose parent did not name beneficiaries on their 401k.
The parent lived in another State, so my client now has to brush up on that State’s probate law, hire an attorney in that State, and see this process through. It is hard enough dealing with the loss of your parent and the loss is compounded by the now necessary probate process.
Your will or trust will not override what is named in the beneficiary designation on a life insurance policy, annuity, or retirement account (like an IRA or 401(k) plan). As you gather with your family for the holidays, bring this topic up. It may not be in the holiday spirit, but it can be a short conversations that saves time, money, and anguish later in life.
The holidays are always so exciting, and it is easy to get caught up in the excitement. We have parties galore with family, friends, and co-workers, and let’s not forget the presents! Here are my tips for making sure the joy extends all year, not the bills.
Every year we go through the holiday debt hangover but never learn a lesson. According to MagnifyMoney’s annual post-holiday debt poll, last year we racked up more than $1,000 worth of debt from the holidays. Determine in advance how much you want to spend and have that cash set aside. Do not go over your budget no matter how much you want to justify the extra expenses.
This year, 1 in 6 plan to open a credit card for holiday shopping. Here’s the kicker: 1 in 5 will be in debt until at least February, according to a poll from personal finance website WalletHub. You do not need another credit card, period. Cash is king
Holidays are fun, budgets are not. This year’s budget will ensure that you can afford next year’s holidays.
When did you first start saving? Some people are much more disciplined and save from their very first dollar earned, others, not so much. With my own child, it has been a “do as I say, not as I have done” scenario. When I first started working, my family dynamics were different than for my daughter. I have insisted that she start depositing into her 401(k) from her first paycheck, which she has done. But what is the true cost of waiting?
If you start saving at 25 and plan to retire at 70, you’ll need to save just 4% of your income; meanwhile, if you start saving at 45 and plan to retire at 62, that percentage is 44%. The visualization uses data collected by the Center for Retirement Research at Boston College, which assumed you had a real rate of return of 4%, earned an average wage and were saving enough to replace 70% of your preretirement income in retirement (which includes Social Security benefits), among other assumptions.
By the way, if you’re thinking that barely anyone waits until their 40s or later to save for retirement, you’d be mistaken: Data show that more than 1 in 5 people don’t start saving until their 40s or older.
So take advantage of the biggest saving asset you have – time.
Q: I have a Roth that the deposits have been in for well over 5 years and I am thinking of converting some regular IRA funds to a Roth this year due to lower earnings. Does it make sense to open a new Roth to receive the conversion dollars?
A: Yes, it does if you plan on using some of the assets in your current Roth within the next few years. If you do not plan on making any Roth withdrawals for over 5 years, then it is not necessary.
What is a sinking fund? It is a saving account that you establish for a specific purpose. We are a mere 7 weeks from the December holidays and if you have your eye on a computer or flat screen TV, now is the time to start saving. The average laptop computer costs around $700. If that is on someone’s wish list and you’re paid twice a month, you will need to save $50 per paycheck for the computer. If your dream is a flat screen TV, I have seen prices for large ones as low as $500, so we are talking about saving just $35 per paycheck for that purchase.
These items certainly make our lives easier and more enjoyable, but are not worth going into debt over. Determine the cost, make, and model of that “want” item on your list and start your sinking fund now.
Throughout this year, I have been telling you when to spend money so you do so wisely. Here are some of the October shopping bargains to take advantage of:
Buy your blue jeans now. Much like the month of October, denim is in a down time between back-to-school shopping and the holiday season. Retailers want to sell off back-to-school denim and make room for the winter trends that will appear on gift lists, so keep your eye out for October deals on jeans.
Looking for a new car? This may be the one time I say it’s ok to not buy used. October is prime time for striking a deal on a new car that happens to be stamped with last year’s date. Auto dealers are eager to make room on their lots for 2020 models.
Lastly, shop off season for bargains. This is most likely the last month when shoppers will see patio furniture, yard tools, and summer-themed decor in stores until next spring. Look for deals on air conditioners, too, and get ready for next summer now, for less.
Spend wisely, then you will be able to save more.
Most, but not all of my clients are retired. All of my clients share a couple of things though: they like access to a person vs. only a screen. All of us have integrated the world of tech into our everyday lives. We text, we email, we pay our bills online, book vacations, any number of daily activities without talking to a real person. I have found time and again, even with clients that started out using programs to help plan their retirement, they prefer a smile, an actual person looking at rebalancing their accounts, and being able to pick up the phone to ask anything they need of me. Being able to meet with your CFP© Professional for regular reviews, or just to ask for advice on buying car, is proving to be the point of comfort for most when planning for their retirement.
Recently, we have had three families of relatives move from New Jersey to Florida, with more planning to do so. While I think living in Florida is wonderful for a host of reasons, Kiplinger’s has rated the States from a tax standpoint for retirees. Here is what they found:
For those choosing to stay in New Jersey:
Our ranking: Mixed tax picture
State income tax: 1.4% (on up to $20,000 of taxable income) — 8.97% (on taxable income over $500,000).
Average state sales tax: 6.97%
Estate tax/inheritance tax: No/Yes
Go to New Jersey’s full state tax profile
The Garden State has been taking big steps to reduce its tax burden on retirees. It does not tax Social Security benefits or military pensions. And a law passed in 2016 means seniors may also qualify to exclude part of their retirement income from state income taxes. By 2020, a couple filing jointly, with an income of $100,000, could exclude all of that. To top that off, the estate tax is being phased out. What’s keeping New Jersey from being a retirement idyll? Stubbornly high property taxes—the highest in the country, in fact.
For the contingent that has decided to join us in Florida:
Our ranking: Most tax-friendly
State income tax: None
Average state and local sales taxes: 6.80%
Estate tax/inheritance tax: No/No
Go to Florida’s full state tax profile
One of Kiplinger’s top ten most tax-friendly states for retirees, the Sunshine State is very popular with retirees, not just because of its abundant sunshine but also because of the absence of a state income tax. Permanent residents are entitled to a homestead exemption of up to $50,000, regardless of age, and seniors may qualify for an additional exemption.
We welcome the transplants from New Jersey and all of the other unfriendly tax States.