savings plans Archives - Faithful with a Few

[The following is a guest post by Jeff Rose about finding the right retirement plan for you – see his complete bio below]

Do you have aspirations of an early retirement? If so, it is important to investigate all of your options and even more important to start saving for retirement now.

The Typical Retirement Plan Options:

Employer-Sponsored 401(k) Plan

A 401(k) is a savings plan created by employers. Eligible employees can make contributions directly from their paycheck without being taxed. Subsequent earnings are tax-deferred. Early withdrawals are subject to penalties. If a 401(k) Plan is offered to you through your place of employment, take advantage of it.

[Take a look at the current 401k contribution limits]

Many companies offer a matching program. This means that whatever you contribute is matched by your employer, usually up to 5 or 6% of your income. In order to receive these additional funds, you need to participate at a certain level in your 401(k) plan, but as long as you can do that, why wouldn’t you? Free money is hard to come by.

Individual Retirement Account (IRA)

Another popular plan with definite tax advantages is the Individual Retirement Account. With a traditional IRA, you save tax-deferred money that gets invested in a variety of ways. If you already have a 401(k) through an employer, you can save even more for retirement with an IRA. Savings in an IRA is typically invested in the following ways.

Stocks and Mutual Funds – By far the most popular choices, these are arguably the best way to increase your savings. Some people are adverse to risk and, therefore, afraid of this option, but stocks and mutual funds generally beat inflation and allow your money to compound via dividends and increases in share prices.
Bonds – Putting your money into bonds is a good choice for the more cautious of investors. You will still end up with more than with money markets and CDs. Dividends can be spent or reinvested..
CDs and Money Markets – These options are your safest option, but give the lowest amount of interest.

[Here are the current IRA contribution limits]

Roth Individual Retirement Account

A Roth IRA is another type of retirement plan where your earnings grow tax-free, similar to that of a self invested personal pension in the UK. The difference is, you have to pay taxes up front and, in order to let your money accrue tax-free, hold the account for a five year minimum. There are fewer investment restrictions and withdrawals are tax-free, though certain rules may apply.

Changes occurring within your Roth IRA (interest, dividends, capital gains) are not taxable. Contributions are not tax deductible, but once deposited into your account, your money will grow free of taxes.

403(b) Plan

This type of retirement plan is solely for the employees of certain public schools and other organizations that are tax-exempt. Some ministers fall into this category. You, the employee, can not set up a 403(b) account for yourself. Only your employer can set one up for you. Contributions are made by your employer through salary reduction agreements. Some plans allow you to make after-tax contributions.

These are funds put into your plan from some other source of income. No income tax is paid on these contributions until you start withdrawing from your plan, normally not until you are retired. (Contributions made to a Roth program are initially taxed but then remain tax-free until you start withdrawing and, if certain requirements are met, sometimes even then.)

If you are ready to start saving for retirement, take a minute to educate yourself. You’ll be glad you did.

photo by jscreationzs

Jeff Rose is an Illinois Certified Financial Planner. He blogs at Good Financial Cents and Soldier of Finance. He loves Crossfit workouts, writes about Roth IRA rules and craves In-N-Out burger. You can follow his updates on Twitter.

5 Tips For Saving Money On Vacation

By following these simple tips, you will be on your way to saving money on vacation expenses! Even if you are traveling on business, these tips can help you to save money.

Set A Budget

Before you leave the comfort of home, sit down and figure out a budget for your trip. Factor in what you’re willing to pay for food, lodging and transportation. Set an amount for incidentals, including souvenirs, and stick to it. If you happen to come in under budget, make sure to put that money back into savings.

Decide Your Method Of Payment

Some people research to find the best credit card offer and plan to pay for their entire vacation with plastic. This can be an effective strategy, but only if you have the money set aside already and can pay off the balance before the end of the billing cycle, otherwise you will be paying high interest rates. Choose a card with a reward program, and you can come out ahead. There is always the option of utilizing 0% balance transfer credit cards if you are unable to pay off the balance right away.

Use The Credit Card When Traveling Out Of The Country

Using a credit card when traveling outside the country affords you a little more protection than using traveler’s checks or cash. Some offer travel insurance, a much better exchange rate and other buyer’s protection options. Check your credit card agreement for more details on travel information.

Khaleef’s note

credit card benefits

Saving Money On Vacation By Shopping And Eating Locally

The native residents of an area will know the best and least expensive places to shop and eat. Ask your hotel desk clerks, housekeepers and gas station attendants where they like to go and what they like to do. Chances are they can give you the inside track and you can save a lot of money this way.

Do Not Pre-pay In Advance

It may look as if you are saving significant money when you book and pay for a hotel room in advance, but the truth is you won’t save more than a couple of dollars after all the fees are charged and pre-paid reservations are not refundable. If anything happens, you are out that money no matter the circumstances. Stay away from the third party vendors and book the reservation through the hotel’s website or directly with the hotel.

The best tip is to plan ahead as much as possible. You can’t plan for every contingency, but being prepared is the best way to save money when away from home.