Your Retirement Account

There are two types of retired people in the world. There are those who planned and saved and have the ability to enjoy retired life by traveling and living comfortably and then those who didn’t.

I don’t know about you but I want to be the former not the latter. So, what needs to be done to get there? You’ve seen the commercials and have heard the terms now it’s time to select your account. Like getting out of debt building a secure retirement takes vision and discipline.

Once you determine where you want to be financially and what you are willing to sacrifice to get there the next step is deciding which type account you want.

IRA - An IRA is a tax-advantaged retirement account into which an investor may contribute a portion of his/her earned income. The "I" stands for individual, which is important in that these programs are arrangements individual investors make for themselves - not through an employer- sponsored flexible spending account or a payroll-deduct retirement plan.

A Traditional IRA is available to those under age 70 ½ who have earned income. Traditional IRA earnings grow tax-deferred until withdrawal. Withdrawals are required beginning at age 70 ½ and are taxed. Contributions made to this IRA may be deductible, depending on certain factors.

A Roth IRA is a nondeductible IRA. Depending on certain income limits, taxpayers are able to save for retirement in such a way that allows the savings to grow tax- free. Taxes are paid on contributions, but qualified withdrawals are not taxed at all.

A 403(b) retirement plan, also known as a Tax-Sheltered Account (TSA), is designed exclusively for employees of non-profit institutions such as public schools, colleges, nonprofit hospitals, and other tax-exempt 501(c) organizations.

Employees make contributions into a 403b plan by making pre-tax payroll deductions. Depending on your 403b plan, you authorize pre-tax payroll deductions to be invested in a tax-sheltered annuity (TSA) contract or in a custodial account made up of mutual funds offered by your employer. Dividends and investment earnings grow tax deferred until they are withdrawn after age 59 1/2 at which time the withdrawals will be taxed as income. Withdrawals prior to age 59 1/2 usually incur an additional 10% penalty. However, most 403b plans allow investors to take out a loan.

There you have it. Don’t wait to long either before you start saving. Remember, the longer you save the more you will be able to enjoy your retirement.

Financial Resources for Small Business Owners

Owning your own business can be daunting and sometimes down right expensive. With the need for a good credit score along with the need for start up capital outside help is often required.

That’s where companies like Premier General Finance come into play. No one likes going into debt and obviously making money is the point behind starting a business but when help is needed it’s important to find someone you can trust.

Merchant advances are sometimes needed to improving your credit score could be vital to the survival of your business. If your business is suffering debt you need help. I’m not saying that Premier General Finance is your answer because you will want to shop around and find the best solution for you but it is a start.

How Long Will It Take to Retire Your Debt?

Two things I have preached over and again on this site are budgeting and patience. How long you have to budget for your debt retirement and how long you have to be patient depends on the amount of your debt.

Most people have no idea how long it will take them to wipe out their debt at their current rate and they would be shocked if they did find out. I came across an interesting tool that will allow you to not only see how long it will take you to pay off your debt at your current payments but it also tells you how much you can save in interest by increasing your payments.

Unfortunately the majority of my debt is credit card debt so this was a very interesting tool for me. Here’s a quick example of what I am talking about. I currently have a $1,944.37 balance on one of my credit cards with a minimum payment of $63.00 at 28.24% interest. By just making the minimum payment it would take me 14 years and 4 months to pay it off and I would have paid a total of $3,583.83 in interest alone.

Now, check this out. If I up it to my current payment of $100.00 per month then it would take me 2 years and 2 months to pay it off and my total interest paid is $603.12. However, if I’m able to budget an additional $50.00 a month to allow me to make a $150.00 payment I’ll be free from this card in 1 year and 4 months only paying $337.93 in interest.

Remember you have to have a plan if you are trying to get out of debt and this is the perfect tool to help you devise that plan. Start by paying off your smallest balance first and then work to the next smallest amount until you find yourself debt-free. It’s not going to happen over night which is why patience is a must. A debt-free life is out there waiting for you but you have to be disciplined enough to attain it.

The Evil of Credit Card Interest

I shared in an earlier post my plan for getting my self out of debt by borrowing against my 403(b) a little at a time to pay off one credit card at a time and paying myself back at a lower interest rate than the credit cards.

I’ve been questioned a few times about my plan and why I would want to borrow more money to pay off my debt. Here’s the deal. If a person owed $3,500 on a credit card at the age of 30 it would take them 40 years to pay it off by just making the minimum payment each month at 18% interest.

Credit Card interest compounds so quickly that the almost all of your minimum payment goes to the interest. If you made a $300.00 purchase on your Sears credit card and paid only the minimum balance your total purchase price is going to be at least $1,200.00.

So there you have my motivation! Credit card debt is bad but the interest you build from that debt is even worse. Getting yourself out from underneath the burden of that debt can and will be liberating but you have to have a plan because you won’t get there making the minimum payment.

A Great Vacation at a Great Price without Going into Debt

It may only be January 3rd and still in the heart of winter but vacation season is only six months away. Americans will amass millions of dollars in debt this summer on vacations when they don’t need to. Yes, it is possible to enjoy a great vacation at a great price and not go into debt over it.

Like so many other things involved in getting out and staying out of debt you have to plan, save and budget for your vacations. Know where your limits are and what you can actually afford. In other words don’t try to go to Disney World on a state fair budget. If you can’t afford Disney World this year then take a smaller vacation and save for Disney next year. Trust me there is no greater feeling than treating your family to a fantastic vacation and knowing that you are not going into debt over it.

After deciding what you can afford choose your vacation destination. There are several places online where you can get great deals such as travelocity but you may not be aware of checking state tourism departments. Once I was able to book my family for a Florida vacation that included two nights in Coco Beach, a day cruise to and from the Bahamas and three nights in the Bahamas for my family of five for only $2500.00. I was able to book everything except the airfare and rental car through the Florida Tourism Department.

After you have determined your destination the only thing to do next is save, save, save! Put within your regular budget a vacation savings line item and begin now to put money away for your vacation. After doing your planning you should know about how much you need to save so make it a goal to have your vacation paid for before you even leave for it.

Keep in mind that it’s about eliminating debt not building it. Happy planning!

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