What Is a Jumbo Loan? Finance Your Property in a Competitive Market

After years of building a stellar credit history, you may have decided you’re finally ready to invest in that vacation home, but you don’t have quite enough in the bank for that eye-catching property just yet. Maybe you want to begin your investment journey early so you don’t have to spend years bulking up your life’s savings.

If an aspiring luxury homeowner can’t sufficiently invest in a property with a standard mortgage loan, there’s an alternative form of financing: a jumbo mortgage. This mortgage allows those with a strong financial history who may not necessarily be a billionaire to get in on the luxury property market. But what is a jumbo mortgage (commonly known as a jumbo loan), and how exactly does it work?

Jumbo Loan Definition

A jumbo loan is a mortgage loan whose value is greater than the maximum amount of a traditional conforming loan. This threshold is determined by government-sponsored enterprises (GSE), such as Fannie Mae (FHMA) and Freddie Mac (FHLMC). Jumbo loans are for high-valued properties, like mansions, luxury housing, and homes in high-income areas. Since jumbo loan limits fall above GSE standards, they aren’t guaranteed or secured by the government. As a result, jumbo loans are riskier for borrowers than conforming mortgage loans.

Jumbo loans are meant for those who may earn a high salary but aren’t necessarily “wealthy” yet. Lenders typically appreciate this specific group because they tend to have solid wealth management histories and make better use of financial services, ensuring less of a risk for the private investor.

Due to the uncertain nature of a jumbo loan, borrowers need to present an extensive, secure credit history, as well as undergo a more meticulous vetting process if they’re considering taking out a jumbo loan. Also, while jumbo loans can come in handy for those without millions in savings, potential borrowers must still present adequate income documentation and an up-front payment from their cash assets.

Like conforming loans, jumbo loans are available at fixed or adjustable rates. Interest rates on jumbo loans are traditionally much higher than those on conforming mortgage loans. This has slowly started shifting over the last few years, with some jumbo loan rates even leveling out with or falling below conforming loan rates. For example, Bank of America’s 2021 estimates for a 5/1 adjustable-rate jumbo loan were equivalent to the same rate for a 5/1 adjustable conforming loan.

The Federal Housing Finance Agency (FHFA) has set the new baseline limit for a conforming loan to $548,250 for 2021, which is an increase of nearly $40,000 since 2020. This new conforming loan limit provides the new minimum jumbo loan limits for 2021 for the majority of the United States. As the FHFA adjusts its estimates for median home values in the U.S., these limits adjust proportionally and apply to most counties in the U.S.

Certain U.S. counties and territories maintain jumbo loan limits that are even higher than the FHFA baseline, due to median home values that are higher than the baseline conforming loan limits. In states like Alaska and Hawaii, territories like Guam and the U.S. Virgin Islands, and counties in select states, the minimum jumbo loan limit is $822,375, which is 150 percent of the rest of the country’s loan limit.

Jumbo Loan Rates for 2021

Ultimately, your jumbo loan limits and rates will depend on home values and how competitive the housing market is in the area where you’re looking to invest.

Jumbo Loan vs. Conforming Loan: Pros and Cons

The biggest question you might be asking yourself is “do the risks of a jumbo loan outweigh the benefits?” While jumbo loans can be a useful home financing resource, sometimes it makes more sense to aim for a property that a conforming loan would cover instead. Here are some pros and cons of jumbo loans that might make your decision easier.
Pros:

  • Solid investment strategy: Jumbo loans allow the investor to get a solid jump-start in the luxury real estate market, which can serve as a beneficial long-term asset.
  • Escape GSE restrictions: Jumbo loan limits are set to exceed those decided by Freddie Mac and Fannie Mae, so borrowers have more flexibility regarding constraints they would deal with under a conforming loan.
  • Variety in rates (fixed, adjustable, etc.): Though jumbo loan rates differ from conforming loan rates in many ways, they still offer similar options for what kinds of rates you want. Both offer 30-year fixed, 15-year fixed, 5/1 adjustable, and numerous other options for rates.

Cons:

  • Usually higher interest rates: Though jumbo loans are known for their higher interest rates, the discrepancies between those and conforming loan rates are starting to lessen each year.
  • More meticulous approval process: To secure a jumbo loan, you must have a near air-tight financial history, including a good credit score and debt-to-income ratio.
  • Higher initial deposit: Even though jumbo loans exist for those who are not able to finance a luxury property from savings alone, they still require a higher cash advance than a conforming loan.

Jumbo Loan vs. Conforming Loan- Pros and Cons

How To Qualify for a Jumbo Loan

As we mentioned before, jumbo loans require quite a bit more from you in the application process than a conforming loan would.

First and foremost, most jumbo lenders require a FICO credit score of somewhere around 700 or higher, depending on the lender. This ensures your lender that your financial track record is stable and trustworthy and that you don’t have any history of late or missed payments.

In addition to the amount of cash you have sitting in the bank, jumbo lenders will also look for ample documentation of your income source(s). This could include tax returns, pay stubs, bank statements, and any documentation of secondary income. By requiring extensive documentation, lenders can determine your ability to make a sufficient down payment on your mortgage, as well as the likelihood that you will be able to make your payments on time. Usually lenders require enough cash assets to make around a 20 percent down payment.

Finally, and perhaps most importantly, lenders will also require that you have maintained a low level of debt compared to your gross monthly income. A low debt-to-income ratio, combined with a high credit score and sufficient assets, will have you on your way to securing that jumbo loan in no time.

Furthermore, you will also likely need to get an appraisal to verify the value of the desired property, in order to ensure that the property is valued highly enough that you will actually qualify for a jumbo loan.

Key Takeaways:

  • Jumbo loans provide a solid alternative to those with a steady financial history who want to invest in luxury properties but don’t have enough in the bank yet.
  • A jumbo loan qualifies as any amount exceeding the FHFA’s baseline conforming loan limit: $548,250 in 2021.
  • Jumbo loan rates are typically higher than those of conforming loans, although the gap between the two has begun to close within the last decade.
  • To secure a jumbo loan, one must meet stringent financial criteria, including a high credit score, a low DTI, and the ability to make a sizable down payment.

For any financially responsible individual, it’s important to always maintain that responsibility in any investment. Each decision made should be carefully thought out, and you should keep in mind any future implications.

While jumbo loans can be a valuable stepping stone to success in competitive real estate, always make sure your income and budget are in a secure position before deciding to invest. You always want to stay realistic, and if you aren’t interested in spending a few more years saving or financing through a conforming loan, then a jumbo loan may be for you!

Sources: Investopedia | Bank of America | Federal Housing Finance Agency

The post What Is a Jumbo Loan? Finance Your Property in a Competitive Market appeared first on MintLife Blog.

Source: mint.intuit.com

Go Green: 5 Tips for Saving Electricity

After a few weeks of talking about ways to go green, I thought an episode on how to save electricity would be a great way to finish out this green series. Hopefully you’ve enjoyed learning ways to save water, to cut down on the amount of trash you create in your kitchen as well as some environmentally-friendly laundry tips.

If you’ve ever Googled “How to save electricity,” you’ve found out the hard way that there are hundreds of tips out there. Some of these tips are easy to implement, but some of the ways to save electricity that are suggested online are tips like, “Use candles instead of turning on lights.” While this will certainly save electricity, it’s not incredibly practical. That’s why I decided to put together a list of some of my favorite, easy-to-do tips to help you save electricity.

Tip #1: Save electricity by turning off lights

If your parents were like mine, you probably still have a voice rattling around your head saying, “Turn off the lights!” whenever you exit a room. Our parents had it right, because there’s absolutely no reason to keep a light on in a room you are not in. If you can commit to simply turning off the lights in every room when you leave it, you can save electricity immediately.

Whether you are going to return to the room in 10 minutes or 10 seconds, there’s no reason to have the light on while you’re not in the room.

Tip #2: Save electricity by turning off (and disconnecting!) electronics

Just like there’s no use in keeping lights on while you’re not in a room, there’s no use in keeping electronics on while you’re not using them. When you leave for the day, make sure all your electronics are off. This includes your TV, sound system, computer, and any other electronic gadgets you may have around your home.

Did you know that electronics that are plugged in, and not even turned on, can account for 5-10% of electricity used in a home?

Taking it one step further, did you know that electronics that are plugged in, and not even turned on, can account for 5-10% of electricity used in a home? Computers, printers, coffee makers, and even phone cords that are plugged in can be energy vampires, sucking electricity (and your hard-earned money) when they aren’t in use. So you may want to invest in a power cord that you can plug most electronic devices into. That way, you can simply unplug off just one switch when you leave for the day (instead of walking around unplugging things throughout your home). Yes, it might take 2 more seconds of your time to turn the power cord on than simply turn the electronic device on, but it can make a big impact in your electricity bill.

Tip #3: Save electricity by taking care of your air conditioner

If you live in an area of the world where you use your air conditioner a lot, this can play a major part in your energy consumption. If you want to save electricity, there are a few things that you can do to make sure your air conditioner is running as efficiently as possible.

First, have your air conditioning unit serviced annually. Most companies charge a nominal fee to have this service completed. It involves cleaning out the coils and checking for any small repairs that are making your unit work overtime. Next, make sure you change your air filters monthly. These filters catch a lot of dust and dirt, which starts to clog them. The more clogged the filters, the harder your air conditioning unit has to work to get the air to pass through the filter. If your filters are any color other than white, making a slight whistling sound, or worse yet, are bent because they are being sucked into the vent, change them immediately. This change alone will save a ton of wasted electricity from being used to cool your home.

Tip #4: Save electricity by making easy swaps

A couple of quick swaps in your house can help you save electricity. The first you may want to consider is using ceiling or box fans instead of running your air conditioner as much. Oftentimes, just circulating the air in a room will help the room feel cooler. Instead of running the massive cooling unit outside your home, a fan uses about the same amount of electricity as a light bulb. For every degree you can raise your air conditioner, you save about 5% of the energy being used. I live in the desert of Arizona and my fellow dessert-dwellers are very familiar with this technique. It costs an arm and a leg to cool a house in Arizona to 70 degrees, so most people set their thermostats between 77 and 81 degrees and run the fans to do the rest. It keeps us comfortable, both with the feeling inside our house as well as when we see our electric bills!

Another easy change is to switch incandescent light bulbs to fluorescent, otherwise known as CFL, light bulbs. CFL bulbs use just 25% of the energy of regular light bulbs, so when you combine that with always shutting them off, you can dramatically save on your electricity consumption. Just remember that CFL bulbs contain a small amount of mercury, so they need to be disposed of properly. Check with your local government agency to see how they require these bulbs to be disposed of.

Tip #5: Save electricity by keeping nature outside

The final tip on how to save electricity is to make sure you don’t have any drafts coming into your home. If you hold a feather around the edges of your windows and doors, the feather should be perfectly still. If it wavers, that means outside air is getting into your home. The more outside air that gets into your house, the more your air conditioner or heater has to run. Seal up your windows and doors with weather stripping, which is available at your local hardware store and is relatively easy to apply.

Also, during the summertime, keep the sunshine out of your house using room darkening blinds and curtains. By keeping the sun out, especially from south and west facing windows, you will keep your house from heating up, which will do a big part in helping to save electricity.

These are just a few tips to save electricity to get you started. 

Source: quickanddirtytips.com

How to Buy a Second Home that Pays for Itself

Recent data from the U.S. Census Bureau shows that home sales were up more than 17% in June 2020 from the month before, and up more than 13% compared to the year prior. Those who have the means to buy a second home are wise to take on mortgage debt (or reorganize their current debt) in today’s low interest environment.

With low 30-year mortgage rates, owning a rental property that “pays for itself” through monthly rental income is especially lucrative with a significantly lower mortgage payment. If you’re curious about buying a second home and renting it out, keep reading to find out about the major issues you should be aware of, the hidden costs of becoming a landlord, and more. 

Important Factors When Buying a Short-Term Rental

The issues involved in buying a rental home varies dramatically depending on where you plan to purchase. After all, buying a ski lodge in an area with seasonal tourism and attractions might require different considerations than buying a home in a major metropolitan area where tourists visit all year long.

But there are some factors every potential landlord should consider regardless of location. Here are a few of the most important considerations:

  • Location. Consumers rent vacation homes almost anywhere, but you’ll want to make sure you’re looking at homes in an area where short-term rentals are popular and viable. You can do some basic research on AirDNA.co, a short-term rental data and analytics service, or check competing rentals in the area you’re considering.
  • Property Management Fees. If you plan to use a property management company to manage your short-term rental instead of managing it yourself, you should find out how much other owners pay for management. Also, compare listing fees for your second home with a platform like Airbnb or VRBO.
  • Taxes. Property taxes can be higher on second homes since you don’t qualify for a homestead exemption. This means higher fixed costs each month, which could make it more difficult to cover your mortgage with rental income.
  • Competition. Check whether a rental area you’re considering is full of competing rentals that are never full. You can find this information on VRBO or Airbnb by looking at various rentals and checking their booking calendars.
  • Potential Rental Fees. Check rental sites to see how much you might be able to charge for your second home on a nightly, weekly, or monthly basis. 

5 Steps to Rent Your Second Home

Before purchasing a second home, take time to run different scenarios using realistic numbers based on the rental market you’re targeting. From there, the following steps can guide you through preparing your property for the short-term rental market.

1. Research the Market

First, you’ll want to have a general understanding of the rental market you’re entering. How much does the average short-term rental go for each night or each week? What is the average vacancy rate for rentals on an annual basis? 

Research your local rental market, the average price of rentals in your area, various features offered by competing rentals, and more.

Action Item: Dig into these figures by using AirDNA.co. Just enter a zip code or town, and you’ll find out the average nightly rate, occupancy rate, revenue, and more. Although some of the site’s features require a monthly subscription, you can find out basic information about your rental market for free.

2. Know Your Numbers

You need to know an array of real numbers before renting your second home, including the following:

  • Average nightly rate
  • Average occupancy rate
  • Fixed costs, such as your mortgage payment, taxes, and insurance for the rental
  • Property management fees and costs for cleaning between tenants
  • Additional fixed costs for things like trash pickup, internet access, and cable television
  • Costs for marketing your space on a platform like VRBO or Airbnb, which could be a flat fee or 3% of your rental fee depending on the platform

You’ll use these numbers to figure out the average monthly operating cost for your second home, and the potential income you might be able to bring in. Without running these numbers first, you wind up in a situation where your short-term rental doesn’t pay for itself, and where you’re having to supplement operating expenses every month. 

Action Item: Gather every cost involved in operating your specific short-term rental, and then tally everything up with monthly and annual figures that you can plan for.

3. Buy the Right Insurance

If you plan on using your second home as a short-term rental, you’ll need to buy vacation rental insurance. This type of homeowners insurance is different from the type you’d buy for your primary residence. It’s even unique from landlord insurance coverage since you need to have insurance in place for your second home and its contents.

Some vacation rental policies let you pay per use, and they provide the benefits of homeowners insurance (like property coverage, liability, and more) plus special protection when your property is rented to a third party. 

Action Item: Shop around for a homeowners insurance plan that’s geared specifically to vacation rentals. See our top picks for the best homeowners insurance companies out there.

4. Create a Property Management Plan

If you live near your second home, you might want to manage it yourself. There’s nothing wrong with this option, but you should plan on receiving calls and dealing with problems at all hours of the day. 

Many short-term rental owners pay a property management company to communicate with their tenants, manage each rental period, and handle any issues that pop up. Property managers can also set up cleanings between each rental and help with marketing your property. 

Action Item: Create a property management plan and account for any costs. Most property managers charge 25% to 30% of the rental cost on an ongoing basis, so you can’t ignore this component of owning a short-term rental. 

5. Market Your Space

Make sure you appropriately market your space, which typically means paying for professional photos and creating an accurate, inviting listing on your chosen platforms. Your property manager might help you create a marketing plan for your vacation rental, but you can DIY this component of your side business if you’re tech- and media-savvy. 

Action Item: Hire a photographer to take professional photos of your rental, and craft your rental description and listing. 

Risks of Purchasing a Short-Term Rental

Becoming a landlord isn’t for the faint of heart. There’s plenty that can go wrong, but here are the main risks to plan for:

  • Government roadblocks. In destinations from New York City to Barcelona, government officials have been cracking down on short-term rentals and trying to limit their ability to operate. New rules could make running your business more costly, difficult, or even impossible. 
  • Your home could be damaged beyond repair. If you read the Airbnb message boards and other landlord forums, you’ll find an endless supply of nightmare rental stories of houses getting trashed and rentals enduring thousands of dollars in damage. 
  • Housing market crash. If the housing market crashes again like it did in 2008, you might find you owe more than your second home is worth at a time when it’s increasingly difficult to find renters. 
  • Reliance on tourism. As we’ve seen during the pandemic, circumstances beyond our control can bring travel and tourism to a screeching halt. Since short-term rentals typically rely on tourism to stay afloat, decreases in travel can affect the viability of your business, quickly.
  • High ongoing costs and fees. Higher property taxes, property management fees, cleaning fees and maintenance costs can make operating a short-term rental costly in the long-term. If you don’t account for all costs and fees involved, you might wind up losing money on your vacation home instead of having the property “pay for itself”.

The Bottom Line

A short-term rental can be a viable business opportunity, depending on where you want to buy and the specifics of the local rental market. But there are a lot of factors to consider before taking the leap. 

Before investing hundreds of thousands of dollars, think over all of the potential costs and risks involved. You’ll want to ensure that you’ve done comprehensive research and have run the numbers for every possible scenario to make an informed decision.

The post How to Buy a Second Home that Pays for Itself appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

What is a Health Savings Account (HSA)?

A Health Savings Account (HSA) is a convenient way to store funds specifically for medical expenses. If you qualify for an HSA, you will get to enjoy a few tax advantages as well. While this might sound like an ideal setup, not everyone is eligible for a health savings account. To qualify for a health savings account, you must be enrolled in a high-deductible health insurance plan (HDHP). The details of these plans are revised every year by the Internal Service Revenue (IRS), which sets the bar for:

  • The minimum deductible a plan must have to be considered a HDHP.
  • The maximum amount that a customer who purchases a plan is able to spend out-of-pocket.

The benefits of a health savings account

Here are some of the key advantages of having a health savings account:

  • It covers a large variety of medical expenses: There are many different kinds of medical expenses that are eligible, such as medical, dental and mental health services.
  • Pretty much anyone can make contributions: Contributions to your health savings account don’t have to be made by you or your spouse. Employers, relatives, friends or anyone who would like to contribute to your account can do so. There are limits, however. For example, in 2019, the limit for individuals was $3,500 and $7,000 for families.
  • Pre-tax contributions: Since contributions are generally made at your employer pre-taxes, they are not considered to be part of your gross income and are not federally taxed. This is usually the same case when it comes to state level taxes as well.
  • After-tax contributions are tax-deductible: Any contributions made after taxes are deductible from your gross income on your tax return. Doing so minimizes the amount you would owe on taxes for that year.
  • Tax-free withdrawals: You can withdrawal money from your account for approved health care costs without having to worry about federal taxes. Most states do not tax, either.
  • Annual rollover: Any unused HSA funds that are left over by the end of the year get rolled over to the following year.
  • Portability: Even if you change health insurance plans, employers, or retire, the money in your health savings account will continue to be available for qualifying health care expenses.
  • Having a health savings account is convenient: Most of the time, you will receive a debit card that is connected to your health savings account. This way, you can use your debit card to start paying for eligible expenses and prescription drugs on the spot.

The drawbacks to having a health savings account

While there are many advantages to having a health savings account, there are a few things to consider. For one, in order to qualify for an HSA, you must hold a high-deductible health insurance plan. The tax benefits might entice you to purposely sign up for insurance coverage under one of these health plans but think before doing this. Here are some of the disadvantages to having a health savings account:

  • The High-Deductible Health Plan: These types of health plans can end up being a lot more expensive in the long run, even with an HSA. If you have other options for health insurance that offer lower deductible, definitely consider those and don’t only choose a High-Deductible plan so that you can open an HSA.
  • You need to stay on top of your spending: If you have an HSA, you need to be willing to hold yourself responsible for recordkeeping. Keep track of all of your receipts so that you can prove you spent your HSA funds on eligible expenses.
  • Taxes and penalties: Using money from your HSA on other expenses that do not qualify as eligible health care expenses could result in you owing taxes. If you do this before the age of 65, you will have to pay taxes with a 20% penalty tacked on. If you are 65 or older, you will be responsible for paying taxes, but the penalty gets waived.
  • Fees: Sometimes, health savings accounts will charge additional fees, either per month or per transaction. Check with your HSA institution for more information on extra fees.

How an HSA works

In many cases, if your employer offers high-deductible health plans, they probably offer health savings accounts as well. Talk to your employer to find out what they offer. If your employer doesn’t offer HSAs, then you can sign up for a separate one through a different institution.

You get to decide how much you would like to contribute to your HSA annually, but keep in mind that you cannot exceed the HSA contribution limit. Once you are set up with an account, you will either receive a debit card or a series of checks that are linked to your HSA. Right away, you will be able to use the funds in your account for:

  • Deductibles
  • Copays
  • Coinsurance
  • Other eligible health care expenses that your insurance does not cover.

Generally, you cannot use HSA funds to pay your insurance premiums.  HSAs are not the same as flexible spending accounts, because HSAs rollover. Once you turn 65, you are no longer eligible to make contributions to your account, but you can still use the available funds for eligible out-of-pocket expenses. If you use the funds for non-eligible expenses, you will owe taxes on these amounts.

Investment Opportunities

Another benefit of HSA that you may or may not have heard of is that you can invest the money in mutual funds and stocks. If this is something that you are interested in, seek advice from a financial advisor for more information.

What is a Health Savings Account (HSA)? is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

7 Ways to Diversify Your Investments Without Spending a Fortune

This story originally appeared on The Penny Hoarder. You know it’s a bad idea to pour your life’s savings into a single investment. It’s personal finance 101: Invest regularly, and diversify your portfolio. But a lot of times, there isn’t much guidance beyond that. So as an investor, you’re left wondering: How do you know if your portfolio is diversified? How many investments do you need in a…

Source: moneytalksnews.com

The ABCs of Financial Empowerment

A quick Google search of ‘financial literacy’ will yield thousands of results, listing an infinite amount of do’s and don’ts that should (and shouldn’t) be followed to guide you along on your financial journey.

However, when you think of financial empowerment – what comes to mind? As defined by Merriam-Webster, empowerment is “the act or action of empowering someone or something: the granting of the power, right, or authority to perform various acts or duties.” No matter what your current sentiments are related to your finances, we will explore three key areas to not only embrace; but to help you prepare for a strong financial future.

Awareness

Now more than ever, we all have a laser-sharp focus on our money and where it’s being spent. The pandemic has generated a hypersensitivity to how we treat our finances while also determining what essential expenses look like and where they fit into our budget.

Before life as we knew it to be shifted, many of us don’t have to look too far back to remember a time where we didn’t check our accounts as often, our savings plan would fluctuate month-over-month or our emergency fund was used to bail us out of some impulsive spending.

To make sure those days are forever of the past, make it a habit to take inventory and audit all of your accounts. Take at least 15 – 30 minutes to review over any transactions and deposits across all active accounts. Not only does this help improve your self-accountability, but you are also able to make any disputes if anything appears incorrect and resolve quickly.

Another small but impactful tip is to acknowledge your financial health. What top three areas will be your main point of focus? If this is something you don’t know offhand, review your transactions from the last three months and categorize them. How much of your money went to impulsive buys or things that could have been purchased at a later date? Are you seeing an influx in overhead expenses or credit card payments? Are there any spending patterns you can explicitly see? Allow this exercise to serve as an eye-opening experience.

In order to determine where you want to be, you must first truthfully acknowledge where you are. This sets the blueprint and overall expectations with your personal finance journey. Knowing where you are may not feel pleasant but avoidance will lead to bigger consequences.

Betterment

Even though we don’t like to admit it, there’s always room for improvement and our finances are no exception. The first thing that guarantees mastery is actually following the budget that’s created. This serves as a guardrail – it’s used to keep us on track so we can greet our financial destination with open and inviting arms.

Once that’s in motion, explore ways to enhance your financial experience. Begin by automating recurring expenses, such as cellphone service or utility bills. That’s why it’s so important to be as honest and accurate as possible when setting a budget. Nothing should come to you as a surprise outside of any emergencies. When you trust yourself and the financial work you’ve put in, your finances have no choice but to follow suit.

If you haven’t already (or need to get back on track), work to beef up your emergency fund and savings account. Emergency expenses have a tendency to appear out of nowhere, so you want to dedicate a set dollar amount or a percentage every pay period. Setting up an automatic transfer to these accounts establish a routine while putting your mind at ease in the process.

Is there a hobby or skill you’d like to put to use and monetize? No matter how grandiose or small, this can definitely expedite achieving your financial goals. The money earned from a passion project can go toward savings, paying off debt or simply getting back to a place of comfort financially. Vacation funds or prepping for large purchases such as a car or home can also fall within this category. If you want to seek the assistance of a professional, search for financial advisors or coaches that could help you with reaching your goals. Preparation is key and your future depends on it!

Confidence

The foundation has been laid and you’ve been committed to crushing your financial goals. The budget and savings goals are in motion; so what’s next? It’s time to celebrate! Walk into your financial future with your best foot forward. When times seem bleak, remind yourself of your goals early and often.

Reinforcement such as daily reminders on your phone, having goals posted somewhere in your home you can see daily or reciting positive financial affirmations will serve as a second wind when you want to throw in the towel. Be sure to celebrate wins along the way such as debt payoff, reduction or hitting a new savings goal. Never been able to invest before and now you have the additional income to get in the game? Celebrate that!

The best way to generate excitement is to rally your family and get them involved. Create family challenges to get your children excited about saving funds and reallocating money. Come up with creative ways you all can commemorate knocking out a goal by ordering from your favorite restaurant or saving for a family staycation.

In order to walk in confidence, you have to build up the courage to begin no matter where you are or how many times you’ve had to start over. Each step counts – each successful budget, savings goal and consistent reduction of overall expenses. Be sure to keep in mind, financial freedom looks different for everyone and has the ability to pivot over time. While some may want to vacation throughout the year, save for their children’s college fund or wipe debt out completely, all are significant and take sacrifice. What is the key to achieving such a pinnacle level of confidence? Time.

 

Be kind to yourself and understand mistakes should never be equated to failures. Your commitment to this financial journey will always be rewarded.

The post The ABCs of Financial Empowerment appeared first on MintLife Blog.

Source: mint.intuit.com

Amazon Pledging More Than $2 Billion for Affordable Housing in Three Hub Cities

wsj-amazon-affordable-housing-main-jan6MITCH PITTMAN/AMAZON

Amazon.com Inc. said it would commit more than $2 billion to create and preserve affordable housing in three of its employment hubs, the latest tech giant to make a large investment in easing the U.S. housing shortage.

Amazon said it intends to invest in affordable housing over the next five years in three regions where it is a major employer: Seattle, Arlington, Va., and Nashville, Tenn.

The online giant has more than 75,000 workers in the Seattle area, its main headquarters. Amazon has more than 1,000 employees each in Arlington, across the Potomac from Washington, D.C., where it is establishing a second headquarters, and in Nashville, where the company is building an operations center. It plans to have at least 5,000 employees in each region within five years.

The bulk of its investment will be through low-cost loans to preserve or build affordable housing, Amazon said. The company also will offer grants to public agencies and minority-led housing organizations.

“We don’t have control over how the [housing] markets respond to a large employer coming into the market or expanding in the market, but we can play a role in how Amazon’s growth is impacting our local communities,” said Catherine Buell, head of community development for one of Amazon’s philanthropic arms. “Particularly as we’re expanding our corporate presence, we’re working to get ahead of the issue as much as we can.”

wsj-amazon-affordable-housing-inline1-jan6
Catherine Buell, head of community development for one of Amazon’s philanthropic arms, and Kimberly Driggins, executive director of the Washington Housing Conservancy, near Amazon’s second headquarters just outside D.C.

JOEL FLORA/AMAZON

A slew of large tech companies in 2019 committed to investing in affordable housing, particularly in the San Francisco Bay Area. Job growth has outpaced new housing supply in many large cities, especially on the West Coast.

Alphabet Inc.’s Google has committed $1 billion toward Bay Area housing, and Apple Inc. pledged $2.5 billion for housing throughout California. Redmond, Wash.-based Microsoft Corp. has committed $750 million toward affordable housing in the Seattle area.

Facebook Inc. also pledged $1 billion toward affordable housing in and around Silicon Valley, one of the most expensive areas in the country. The social media giant said last month it would spend $150 million on homes for the lowest-income residents of five Bay Area counties. This funding would support the development of at least 2,000 units.

For some of the world’s largest tech companies, which regularly generate tens of billions of dollars or more in revenue annually, these phased-in housing commitments aren’t expected to have a big impact on their bottom lines. Amazon doesn’t expect to make money from these housing investments and there is no special tax treatment for them, according to a person familiar with the program.

The housing efforts also come as Facebook, Alphabet and other big tech companies are facing scrutiny in Washington and from state attorneys general over their business practices.

Many housing advocates have welcomed these contributions, saying large employers like tech companies have played a role in driving up home prices by attracting well-paid workers who can pay more for housing than longtime residents.

But advocates also say these investments aren’t expected to solve the housing shortages for lower and even middle-income earners in these expensive metro areas. Solving the country’s affordable-housing crisis would require policy changes and government spending, not just private-sector investments, said Chris Herbert, managing director of the Harvard Joint Center for Housing Studies.

“It’s going to take a much larger investment of resources to address the problem at a scale that’s needed,” he said.

The Covid-19 pandemic has disproportionately affected renters, and housing advocates have warned that millions of renters could face eviction this year.

wsj-amazon-affordable-home-inline2-jan6
Amazon helped Washington Housing Conservancy acquire a multifamily property in Arlington, Va.

JOEL FLORA/AMAZON

Amazon said it plans to create or preserve more than 20,000 units affordable to households making between 30% and 80% of each area’s median income. It expects about half of those units to come from preservation or from converting market-rate rentals into affordable housing, Ms. Buell said.

The company has so far spent about $380 million in loans and grants to help the Washington Housing Conservancy acquire a multifamily property in Arlington near Amazon’s planned second corporate headquarters. Real-estate investment trust JBG Smith Properties also invested in the project.

“This is the housing stock that is most at risk of being lost to private development,” said Kimberly Driggins, executive director of the Washington Housing Conservancy. “This building would typically have gone to a private developer to…continue to escalate rents.”

Amazon also committed about $185 million in loans and grants to help the King County Housing Authority preserve about 1,000 apartment units in the Seattle area.

Before the latest commitment, Amazon’s biggest housing-focused investment was $100 million to build and operate a homeless shelter on its Seattle campus for Mary’s Place, a local homeless-services organization. The shelter opened in March.

The post Amazon Pledging More Than $2 Billion for Affordable Housing in Three Hub Cities appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

10 Financial Steps to Take Before Having Kids

According to the U.S. Department of Agriculture (USDA), raising a child to the age of 18 sets families back an average of $233,610, and that’s for each child. This figure doesn’t even include the cost of college, which is growing faster than inflation. 

CollegeBoard data found that for the 2019-2020 school year, the average in-state, four-year school costs $21,950 per year including tuition, fees, and room and board. 

Kids can add meaning to your life, and most parents would say they’re well worth the cost. But having your financial ducks in a row — before having kids — can help you spend more time with your new family instead of worrying about paying the bills.

10 Financial Moves to Make Before Having Kids

If you want to have kids and reach your long-term financial goals, you’ll need to make some strategic moves early on. There are plenty of ways to set yourself up for success, but here are the most important ones. 

1. Start Using a Monthly Budget

When you’re young and child-free, it’s easy to spend more than you planned on fun activities and nonessentials. But having kids has a way of ruining your carefree spending habits, and that’s especially true if you’ve spent most of your adult life buying whatever catches your eye.

That’s why it’s smart to start using a monthly budget before having kids. It helps you prioritize each dollar you earn every month so you’re tracking your family’s short- and long-term goals.

You can create a simple budget with a pen and paper. Each month, list your income and recurring monthly expenses in separate columns, and then log your purchases throughout the month. This gives you a high-level perspective about money going in and out of your budget. You can also use a digital budgeting tool, like Mint, Qube Money, or You Need a Budget (YNAB) to get a handle on your finances. 

Regardless of which budgeting tool you choose, create categories for savings (e.g. an emergency fund, vacation fund, etc.) and investments. Treat these expense categories just like regular bills as a way to commit to your family’s money goals. Your budget should provide a rough guide that helps you cover household expenses and save for the future while leaving some money for fun.

2. Build an Emergency Fund

Most experts suggest keeping three- to six-months of expenses in an emergency fund. Having an emergency fund is even more crucial when you have kids. You never know when you’ll face a broken arm, requiring you to cover your entire health care deductible in one fell swoop. 

It’s also possible your child could be born with a critical medical condition that requires you to take time away from work. And don’t forget about the other emergencies you can face, from a roof that needs replacing to a job loss or income reduction. 

Your best bet is opening a high-yield savings account and saving up at least three months of expenses before becoming a parent. You’ll never regret having this money set aside, but you’ll easily regret not having savings in an emergency.

3. Boost Your Retirement Savings Percentage

Your retirement might be decades away, but making retirement savings a priority is a lot easier when you don’t have kids. And with the magic of compound interest that lets your money grow exponentially over time, you’ll want to get started ASAP. 

By boosting your retirement savings percentage before having kids, you’ll also learn how to live on a lower amount of take-home pay. Try boosting your retirement savings percentage a little each year until you have kids. 

Go from 6% to 7%, then from 8% to 9%, for example. Ideally, you’ll get to the point where you’re saving 15% of your income or more before becoming a parent. If you’re already enrolled in an employer-sponsored retirement plan, this change can be done with a simple form. Ask your employer or your HR department for more information.

If you’re self-employed, you can still open a retirement account like a SEP IRA or Solo 401(k) and begin saving on your own. You can also consider a traditional IRA or a Roth IRA, both of which let you contribute up to $6,000 per year, or $7,000 if you’re ages 50 or older. 

4. Start a Parental Leave Fund

Since the U.S. doesn’t mandate paid leave for new parents, check with your employer to find out how much paid time off you might receive. The average amount of paid leave in the U.S. is 4.1 weeks, according to a study by WorldatWork, which means you might face partial pay or no pay for some weeks of your parental leave period. It all depends on your employer’s policy and how flexible it is.

Your best bet is figuring out how much time you can take off with pay, and then creating a plan to save up the income you’ll need to cover the rest of your leave. Let’s say you have four weeks of paid time off, but plan on taking 10 weeks of parental leave, for example. Open a new savings account and save weekly or monthly until you have six weeks of pay saved up. 

If you have six months to wait for the baby to arrive and you need $6,000 saved for parental leave, you could strive to set aside $1,000 per month for those ten weeks off. If you’re able to plan earlier, up to 12 months before the baby arrives, then you can cut your monthly savings amount and set aside just $500 per month.

5. Open a Health Savings Account (HSA)

A health savings account (HSA) is a tax-advantaged way to save up for health care expenses, including the cost of a hospital stay. This type of account is available to Americans who have a designated high-deductible health insurance plan (HDHP), meaning a deductible of at least $1,400 for individuals and at least $2,800 for families. HDHPs must also have maximum out-of-pocket limits below $6,900 for individuals and $13,800 for families. 

In 2020, individuals can contribute up to $3,550 to an HSA while families can save up to $7,100. This money is tax-advantaged in that it grows tax-free until you’re ready to use it. Moreover, you’ll never pay taxes or a penalty on your HSA funds if you use your distributions for qualified health care expenses. At the age of 65, you can even deduct money from your HSA and use it however you want without a penalty. 

6. Start Saving for College

The price of college will only get worse over time. To get a handle on it early and plan for your future child’s college tuition, start saving for their education in a separate account.  Once your child is born, you can open a 529 college savings account and list your child as its beneficiary. 

Some states offer tax benefits for those who contribute to a 529 account. For example, Indiana offers a 20% tax credit on up to $5,000 in 529 contributions each year, which gets you up to $1,000 back from the state at tax time. Many plans also let you invest in underlying investments to help your money grow faster than a traditional savings account. 

7. Pay Off Unsecured Debt

If you have credit card debt, pay it off before having kids. You’re not helping yourself by spending years lugging high-interest debt around. Paying off debt can free-up cash and save you thousands of dollars in interest every year. 

If you’re struggling to pay off your unsecured debt, there are several strategies to consider. Here are a few approaches:

Debt Snowball

This debt repayment approach requires you to make a large payment on your smallest account balance and only the minimum amount that’s due on other debt. As the months tick by, you’ll focus on paying off your smallest debt first, only to “snowball” the payments from fully paid accounts toward the next smallest debt. Eventually, the debt snowball should leave you with only your largest debts, then one debt, and then none.

Debt Avalanche

The debt avalanche is the opposite of the debt snowball, asking you to pay off the debt with the highest interest rate first, while paying the minimum payment on other debt. Once that account is fully paid, you’ll “avalanche” those payments to the next highest-rate debt. Eventually, you’ll only be left with your lowest-interest account until you’ve paid off all of your debt. 

Balance Transfer Credit Card

Another popular strategy involves transferring high-interest balances to a balance transfer credit card that offers 0% APR for a limited time. You might have to pay a balance transfer fee (often 3% to 5%), but the interest savings can make this strategy worth it.

If you try this strategy, make sure you have a plan to pay off your debt before your introductory offer ends. If you have 15 months at 0% APR, for example, calculate how much you need to pay each month for 15 months to repay your entire balance during that time. Any debt remaining after your introductory APR period ends will start accruing interest at the regular, variable interest rate. 

8. Consider Refinancing Other Debt

Ditching credit card debt is a no-brainer, but debt like student loans or your home mortgage can also weigh on your future family’s budget.

If you have student loan debt, look into refinancing your student loans with a private lender. A student loan refinance can help you lower the interest rate on your loans, find a manageable monthly payment, and simplify your repayment into one loan.

Private student loan rates are often considerably lower than rates you can get with federal loans — sometimes by half. The caveat with refinancing federal loans is that you’ll lose out on government protections, like deferment and forbearance, and loan forgiveness programs. Before refinancing your student loans, make sure you won’t need these benefits in the future. 

Also look into the prospect of refinancing your mortgage to secure a shorter repayment timeline, a lower monthly payment, or both. Today’s low interest rates have made mortgage refinancing a good deal for anyone who took out a mortgage several years ago. Compare today’s mortgage refinancing rates to see how much you can save. 

9. Buy Life Insurance

You should also buy life insurance before having kids. Don’t worry about picking up an expensive whole life policy. All you need is a term life insurance policy that covers at least 10 years of your salary, and hopefully more.

Term life insurance is extremely affordable and easy to buy. Many providers don’t even require a medical exam if you’re young and healthy. 

Once you start comparing life insurance quotes, you’ll be shocked at how affordable term coverage can be. With Bestow, for example, a thirty-year-old woman in good health can buy a 20-year term policy for $500,000 for as little as $20.41 per month. 

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10. Create a Will

A last will and testament lets you write down what should happen to your major assets upon your death. You can also state personal requests in writing, like whether you want to be kept on life support, and how you want your final arrangements handled.

A will can also formally define who you’d like to take over custody of your kids, if both parents die. If you don’t formally make this decision ahead of time, these deeply personal decisions might be left to the courts.

Fortunately, it’s not overly expensive to create a last will and testament. You can meet with a lawyer who can draw one up, or you can create your own using a platform like LegalZoom.

The Bottom Line

Having kids can be the most rewarding part of your life, but parenthood is far from cheap. You’ll need money for expenses you might’ve never considered before — and the cost of raising a family only goes up over time.

That’s why getting your money straightened out is essential before kids enter the picture. With a financial plan and savings built up, you can experience the joys of parenthood without financial stress.

The post 10 Financial Steps to Take Before Having Kids appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

529 Plans: A Complete Guide to Funding Future Education

Do you have kids? Are there children in your life? Were you once a child? If you plan on helping pay for a child’s future education, then you’ll benefit from this complete guide to 529 plans. We’ll cover every detail of 529 plans, from the what/when/why basics to the more complex tax implications and investing ideas.

This article was 100% inspired by my Patrons. Between Jack, Nathan, Remi, other kiddos in my life (and a few buns in the oven), there are a lot of young Best Interest readers out there. And one day, they’ll probably have some education expenses. That’s why their parents asked me to write about 529 plans this week.

What is a 529 Plan?

The 529 college savings plan is a tax-advantaged investment account meant specifically for education expenses. As of the passage of the Tax Cuts and Jobs Act (in 2017), 529 plans can be used for college costs, K-12 public school costs, or private and/or religious school tuition. If you will ever need to pay for your children’s education, then 529 plans are for you.

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529 plans are named in a similar fashion as the famous 401(k). That is, the name comes from the specific U.S. tax code where the plan was written into law. It’s in Section 529 of Internal Revenue Code 26. Wow—that’s boring!

But it turns out that 529 plans are strange amalgam of federal rules and state rules. Let’s start breaking that down.

Tax Advantages

Taxes are important! 529 college savings plans provide tax advantages in a manner similar to Roth accounts (i.e. different than traditional 401(k) accounts). In a 529 plan, you pay all your normal taxes today. Your contributions to the 529 plan, therefore, are made with after-tax dollars.

Any investment you make within your 529 plan is then allowed to grow tax-free. Future withdrawals—used for qualified education expenses—are also tax-free. Pay now, save later.

But wait! Those are just the federal income tax benefits. Many individual states offer state tax benefits to people participating in 529 plans. As of this writing, 34 states and Washington D.C. offer these benefits. Of the 16 states not participating, nine of those don’t have any state income tax. The seven remaining states—California, Delaware, Hawaii, Kentucky, Maine, New Jersey, and North Carolina—all have state income taxes, yet do not offer income tax benefits to their 529 plan participants. Boo!

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This makes 529 plans an oddity. There’s a Federal-level tax advantage that applies to everyone. And then there might be a state-level tax advantage depending on which state you use to setup your plan.

Two Types of 529 Plans

The most common 529 plan is the college savings program. The less common 529 is the prepaid tuition program.

The savings program can be thought of as a parallel to common retirement investing accounts. A person can put money into their 529 plan today. They can invest that money in a few different ways (details further in the article). At a later date, they can then use the full value of their account at any eligible institution—in state or out of state. The value of their 529 plan will be dependent on their investing choices and how those investments perform.

The prepaid program is a little different. This plan is only offered by certain states (currently only 10 are accepting new applicants) and even by some individual colleges/universities. The prepaid program permits citizens to buy tuition credits at today’s tuition rates. Those credits can then be used in the future at in-state universities. However, using these credits outside of the state they were bought in can result in not getting full value.

You don’t choose investments in the prepaid program. You just buy credit’s today that can be redeemed in the future.

The savings program is universal, flexible, and grows based on your investments.

The prepaid program is not offered everywhere, works best at in-state universities, and grows based on how quickly tuition is changing (i.e. the difference between today’s tuition rate and the future tuition rate when you use the credit.)

Example: a prepaid credit would have cost ~$13,000 for one year of tuition in 2000. That credit would have been worth ~$24,000 of value if used in 2018. (Source)

What are “Qualified Education Expenses?”

You can only spend your 529 plan dollars on “qualified education expenses.” Turns out, just about anything associated with education costs can be paid for using 529 plan funds. Qualified education expenses include:

  • Tuition
  • Fees
  • Books
  • Supplies
  • Room and board (as long as the beneficiary attends school at least half-time). Off-campus housing is even covered, as long as it’s less than on-campus housing.

Student loans and student loan interest were added to this list in 2019, but there’s a lifetime limit of $10,000 per person.

How Do You “Invest” Your 529 Plan Funds?

529 savings plans do more than save. Their real power is as a college investment plan. So, how can you “invest” this tax-advantaged money?

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There’s a two-part answer to how your 529 plan funds are invested. The first part is that only savings plans can be invested, not prepaid plans. The second part is that it depends on what state you’re in.

For example, let’s look at my state: New York. It offers both age-based options and individual portfolios.

The age-based option places your 529 plan on one of three tracks: aggressive, moderate, or conservative. As your child ages, the portfolio will automatically re-balance based on the track you’ve chosen.

The aggressive option will hold more stocks for longer into your child’s life—higher risk, higher rewards. The conservative option will skew towards bonds and short-term reserves. In all cases, the goal is to provide some level of growth in early years, and some level of stability in later years.

The individual portfolios are similar to the age-based option, but do not automatically re-balance. There are aggressive and conservative and middle-ground choices. Thankfully, you can move funds from one portfolio to another up to twice per year. This allowed rebalancing is how you can achieve the correct risk posture.

Advantages & Disadvantages of Using a 529 Plan

The advantages of using the 529 as a college investing plan are clear. First, there’s the tax-advantaged nature of it, likely saving you tens of thousands of dollars. Another benefit is the aforementioned ease of investing using a low-maintenance, age-based investing accounts. Most states offer them.

Other advantages include the high maximum contribution limit (ranging by state, from a low of $235K to a high of $529K), the reasonable financial aid treatment, and, of course, the flexibility.

If your child doesn’t end up using their 529 plan, you can transfer it to another relative. If you don’t like your state’s 529 offering, you can open an account in a different state. You can even use your 529 plan to pay for primary education at a private school or a religious school.

But the 529 plan isn’t perfect. There are disadvantages too.

For example, the prepaid 529 plan involves a considerable up-front cost—in the realm of $100,000 over four years. That’s a lot of money. Also, your proactive saving today ends up affecting your child’s financial aid package in the future. It feels a bit like a punishment for being responsible. That ain’t right!

Of course, a 529 plan is not a normal investing account. If you don’t use the money for educational purposes, you will face a penalty. And if you want to hand-pick your 529 investments? Well, you can’t do that. Similar to many 401(k) programs, your state’s 529 program probably only offers a few different fund choices.

529 Plan FAQ

Here are some of the most common questions about 529 education savings plans. And I even provide answers!

How do I open a 529 plan?

Virtually all states now have online portals that allow you to open 529 plans from the comfort of your home. A few online forms and email messages is all it takes.

Can I contribute to someone else’s 529?

You sure can! If you have a niece or nephew or grandchild or simply a friend, you can make a third-party contribution to their 529 plan. You don’t have to be their parent, their relative, or the person who opened the account.

Investing in someone else’s knowledge is a terrific gift.

Does a 529 plan affect financial aid?

Short answer: yes, but it’s better than how many other assets affect financial aid.

Longer answer: yes, having a 529 plan will likely reduce the amount of financial aid a student receives. The first $10,000 in a 529 plan is not part of the Expected Family Contribution (EFC) equation. It’s not “counted against you.” After that $10,000, remaining 529 plan funds are counted in the EFC equation, but cap at 5.46% of the parental assets (many other assets are capped higher, e.g. at 20%).

Similarly, 529 plan distributions are not included in the “base year income” calculations in the FAFSA application. This is another benefit in terms of financial aid.

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Finally, 529 plan funds owned by non-parents (e.g. grandparents) are not part of the FAFSA EFC equation. This is great! The downside occurs when the non-parent actually withdraws the funds on behalf of the student. At that time, 50% of those funds count as “student income,” thus lowering the student’s eligibility for aid.

Are there contribution limits?

Kinda sorta. It’s a little complicated.

There is no official annual contribution limit into a 529 plan. But, you should know that 529 contributions are considered “completed gifts” in federal tax law, and that those gifts are capped at $15,000 per year in 2020 and 2021.

After $15,000 of contributions in one year, the remainder must be reported to the IRS against the taxpayer’s (not the student’s) lifetime estate and gift tax exemption.

Additionally, each state has the option of limiting the total 529 plan balances for a particular beneficiary. My state (NY) caps this limit at $520,000. That’s easily high enough to pay for 4 years of college at current prices.

Another state-based limit involves how much income tax savings a contributor can claim per year. In New York, for example, only the first $5,000 (or $10,000 if a married couple) are eligible for income tax savings.

Can I use my state’s 529 plan in another state? Do I need to create 529 plans in multiple states?

Yes, you can use your state’s 529 plan in another state. And mostly likely no, you do not need to create 529 plans in multiple states.

First, I recommend scrolling up to the savings program vs. prepaid program description. Savings programs are universal and transferrable. My 529 savings plan could pay for tuition in any other state, and even some other countries.

But prepaid tuition accounts typically have limitations in how they transfer. Prepaid accounts typically apply in full to in-state, state-sponsored schools. They might not apply in full to out-of-state and/or private schools.

What if my kid is Lebron James and doesn’t go to college? Can I get my money back?

It’s a great question. And the answer is yes, there are multiple ways to recoup your money if the beneficiary doesn’t end up using it for education savings.

First, you can avoid all penalties by changing the beneficiary of the funds. You can switch to another qualifying family member. Instead of paying for Lebron’s college, you can switch those funds to his siblings, to a future grandchild, or even to yourself (if you wanted to go back to school).

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What if you just want you money back? The contributions that you initially made come back to you tax-free and penalty-free. After all, you already paid taxes on those. Any earnings you’ve made on those contributions are subject to normal income tax, and then a 10% federal penalty tax.

The 10% penalty is waived in certain situations, such as the beneficiary receiving a tax-free scholarship or attending a U.S. military academy.

And remember those state income tax breaks we discussed earlier? Those tax breaks might get recaptured (oh no!) if you end up taking non-qualified distributions from your 529 plan.

Long story short: try to the keep the funds in a 529 plan, especially is someone in your family might benefit from them someday. Otherwise, you’ll pay some taxes and penalties.

Graduation

It’s time to don my robe and give a speech. Keep on learning, you readers, for:

An investment in knowledge pays the best interest

-Ben Franklin

Oh snap! Yes, that is how the blog got its name. Giving others the gift of education is a wonderful thing, and 529 plans are one way the U.S. government allows you to do so.

If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

Source: bestinterest.blog

13 Easy Ways to Invest with Little Money

This page may include affiliate links. Please see the disclosure page for more information. A common misbelief is that one must be rich to invest. It’s easy to invest with little money in a variety of assets and save for your goals. More platforms let you “micro invest” and purchase small amounts of expensive assets.  Even if…

The post 13 Easy Ways to Invest with Little Money appeared first on Debt Discipline.


13 Easy Ways to Invest with Little Money was first posted on December 3, 2020 at 12:00 pm.
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