A Few Hard Truths About Certificates Of Deposit

More conservative investors will normally use certificates of deposit or CDs. This should not come as a surprise to seasoned investors and finance experts since CDs are well-known for being safer than other investment options. CDs are also not connected to the stock market, which means the risk is incredibly low.
However, critics of CDs argue that the investment causes investors to lose money because of inflation and taxation. The harsh truth is that over the past seven years, the average six-month CD rate has never exceeded 1 percent. Also for the past seven years, CDs have never yielded a positive “real” return.

As with all investments, doing a bit of research goes a long way. With a bit of calculation, investors can see just how much they stand to lose (in terms of purchasing power) when they invest in CDs, especially when they consider the effect of inflation and taxes.
A lot of banks never discuss these hard facts with investors, and sometimes, CD owners are taken by sur…

A Beginner’s Guide To Setting Up An Individual Retirement Account

Individual retirement accounts, or IRAs, are essentially savings plans. People set up IRAs to defer paying taxes on earnings as their savings continue to grow until they decide to withdraw the money. Remember that there are different types of IRAs, each with its own tax eligibility and tax implication as established by the IRS.

Having an IRA has many advantages. A traditional one, for example, will allow you to claim a tax deduction when you contribute to it. It helps reduce your taxable income, as you don’t pay income tax for the money you’ve put on there. Also, as your savings grow, they continue to be tax-deferred. In short, there’s no need to include any of your dividends, capital gains, and interests when computing your annual tax return.
The first step in setting up your IRA is to decide on which IRA type best suits your needs. You should study closely if a traditional IRA or, say, a Roth, is what you need. You then will have to choose the investments for your IRA. T…

Tax planning: Steps and strategies

Tax planning is widely known to be the manner of forecasting one’s tax liability and creating ways and methods to reduce it. This involves analyzing one’s financial situation from a tax perspective, with the goal of tax efficiency. Here are some steps for businesses to perform this crucial exercise in financial planning. 

Start early: The tendency for most people is to do taxes in March or April when the deadline for settling tax returns is already looming near. Start earlier to have more time to estimate one’s investment gains and losses, as well as income. 
Calculate tax liability: Know these liabilities and work toward them. This need not be a difficult thing to do if one has a relatively fixed income and salaried employees. Engage the services of a tax expert if you find yourself in the dark when it comes to computations. 
Profile risk level: Here, find a good level of investment risk that one’s current financial status and other personal circumstances permit. In coming up …

The right way to set up a self-directed IRA

When it comes to IRA assets, investors must make sure that they are investing their money profitably and legally. To prevent prohibited transactions, especially with self-directed IRAs, those who are saving up for their retirement years must be on the lookout for fraudulent offers. Those who are aiming for a self-directed IRA should act accordingly: 

1. Avoid investing in prohibited investments. An IRA cannot be invested in collectibles (art, antiques, gems, etc.), precious metals, and life insurance. When a broker approaches a potential investor to direct their IRA through these means, it is a fraudulent deal. 
2. Ask questions and check the broker's credentials. Setting up a self-directed IRA can be tricky for those who will be doing it for the first time. Before investing in assets, there should be a lot of questions. Factors such as valuation, liquidation, and distribution might determine if it's worthwhile to invest. FINRA also has a broker check that will reas…

Debunking the 'earn more vs. save more' argument

As a person begins to earn money, he or she could be thinking of either earning more or saving more. For years, the argument about whether one should earn more or save more to become financial independent has ruled the minds of those in the workforce. 

On the one hand, the "earn more" side suggests that the best manner to experience financial freedom is by having a larger income. If one is an entrepreneur, there is no upper limit to this idea. On the other hand, the "save more" team tells individuals that saving more and spending less is the most sufficient way to become financially independent. The statement that one would spend more if one earns more is based on behavior and mindset; its counter-statement says that it is easier to save as one earns more is focused on math and logic. As both are correct, this debate shall be put to rest as people must only focus on widening the gap between income and spending. 
To be financially free, a person must widen the…

A Primer On Asset Protection Planning

There would always be market uncertainties; no one can change that fact. Combine that with a litigious society and occasional amendments in tax laws, asset protection planning has become more important than ever.
Asset protection is defined as a set of techniques or strategies that seek to guard one’s properties from being taken by someone else through a lawsuit or civil money judgments. Generally, this is done by limiting creditors’ access to assets subject to claims, which are called nonexempt assets. They are insulated by repositioning them into exempt assets, which are out of the reach of creditors’ claims. When done properly, asset protection is done in a legal manner, avoiding perjury, fraud, concealment, or tax evasion.
The most effective asset protection planning takes a proactive approach; it is not implemented when a judgment creditor is already about to begin a claim on the properties.
In every U.S. state, there are laws that protect judgment creditors from de…

Now is the perfect time for millennials to save for retirement

Millennials are often regarded as financial freewheelers. People are always quick to assume that the twenty and thirty-somethings of this era do not take their financial health and retirement seriously. However, more and more millennials are becoming concerned and are taking charge of their future.

Now is the perfect time for millennials to save for their future. Options may be unavailable for them when they start saving late. A study led by The New York Times zoomed in on the financial lives of five millennials who were saving for their future. The research landed on these conclusions: 
-These millennial savers are taking advantage of Roth retirement funds. These include individual retirement and 401(k)’s that are different from traditional retirement schemes made after tax. 
-Millennial workers to contribute as much as what their employers are willing to match in a 401(k). 
Aside from taking care of their retirement funds, there are also millennials who have diversified inve…