Carrying money on vacation is a balancing act between safety and utility. Making money difficult to access deters thieves, but when it comes time to pay for something, you still want to be able to get to it without stripping off clothes or playing hide-and-seek with a bag’s hidden pockets. With that in mind, here are 10 tips that will help you carry money safely and elegantly while traveling.
Even if you disregard all other advice about carrying money, take this tip to heart: Whenever possible, divvy up your travel cash and even credit cards into multiple safe spots. If you’ve got all your money in one place, it only takes one time for a thief to totally wipe you out.
You can even apply this idea when you’re out and about by keeping some money attached to your person and some in a bag you carry. That way, if your bag gets lost or snatched, you’ll still have enough to get to a police station or back to your hotel.
Favor on-Body Storage
Under-clothing storage accessories have come a long way since neck pouches and money beltscame onto the scene. Though those classics are still in favor, newer options include bra stashes, as well as long johns, underwear, and undershirts with built-in pockets for safe storage. On-body storage accessories are particularly useful if you’re sleeping somewhere that doesn’t have a secure place for cash and other valuables.
Note that on-body storage isn’t a good wallet alternative, since fishing around under your clothes for money advertises where you’re hiding the goods. And lest you think a fanny pack is a substitute for a money belt, realize that it can actually make you more vulnerable to thievery since it marks you as a tourist.
Keep Small Bills Handy
Changing or withdrawing large amounts of money minimizes the fees you’ll pay to get local currency, but it also means you’ll be traveling with far more cash—and larger bills—than you’d have on you at home. We’ve already talked about the virtues of dividing your money, but it’s also wise to make smaller denominations of currency easily accessible. That way, you won’t pull out the local equivalent of a $100-dollar bill while attempting to buy a 30-cent souvenir. You also won’t have to reach down into your jeans to get more money from an under-clothing money pouch.
Make money preparation part of your morning routine: As you’re packing your bag, make sure you’ve got a variety of small bills and coins at the ready for purchases such as food, souvenirs, and attraction entry fees. Squirrel away larger bills in your under-clothing money pouch, or tuck them into a secure part of your wallet or bag.
Carry an Anti-Theft Bag
If garbage-bag commercials have taught us anything, it’s that some bags are tougher than others. The same goes for travel purses, backpacks, and bags—some, designed specifically for travel, have features such as cut-proof, steel-cable-reinforced shoulder straps; slash-proof fabric; and locking zippers.
Since elements like these slow down thieves, they can do a decent job deterring opportunistic pickpockets. Anti-theft bags are available online from Pacsafe, Travelon, and other retailers. Consider your purchase an investment that might save you some money.
Trim Your Wallet
Are you going to need your library card when you’re 6,000 miles from your local branch? Probably not. Before you leave, take the time to go through your wallet and take out everything except the necessities (a universal credit card and a backup, an identification card, an insurance card, etc.). Not only will it help you travel lighter, but if your wallet does get lost or stolen, you’ll have less to replace.
Use a Dummy Wallet
If you’re traveling in a place known for pickpocketings or muggings, consider getting a cheap walletthat looks just real enough to keep in your pocket or bag. Pad the wallet with some small bills and make it look more real by slipping in one or two of those sample credit cards you get with offers in the mail.
A dummy wallet can stop pickpockets before they get to your real wallet. And in the scary and unlikely case of an actual mugging, it also gives you something to throw and run, buying you time to escape with your safety and your actual wallet.
Buy a Travel Wallet
In addition to a dummy version, you might also consider a wallet that you reserve specifically for travel. There’s one simple reason for this: If you’re the type of person whose day-to-day wallet is packed with cards—gym memberships, pre-paid coffee cards, frequent-buyer punch cards, and the like—the pockets are likely to be stretched out when you minimize the contents for travel. By having a travel-only wallet, your cards will have snug pockets that they can’t slip out of accidentally.
As an added bonus, you won’t have to unpack and repack your day-to-day wallet; you can simply transfer what you need for your trip to your travel version.
Adapt to the Local Money Culture
Being prepared to pay your way on vacation means different things depending on where you are. In a cash economy, you’ll need to make sure to have a variety of bills and coins on hand at all times, but your credit cards will likely just collect dust.
However, in much of Europe and parts of Asia, where automation is common and chip-and-PIN credit-card technology is standard, having a compatible credit card will come in very handy, especially if you find yourself at an unattended gas station late at night or a train station after-hours. Also keep in mind that in some countries, U.S. dollars are an official or unofficial secondary currency, so it’s wise to keep a few greenbacks at the ready.
Use Money Alternatives
In high-traffic settings such as metro stations and close quarters like bus lines, it’s nice to be able to forgo cash or credit-card transactions totally and rely instead on a multi-use ticket or other cash alternative. If you’re in a city where the public-transportation system offers multi-use cards (for instance, London’s Oyster card or San Francisco’s Clipper card) or where you can buy a bunch of tickets at once (like a “carnet” on the Paris metro, which gets you 10 single-ride tickets for one discounted price), then take advantage. You’ll reduce your chances of losing your wallet simply by retrieving and stowing it fewer times.
Stow Valuables Securely
Sometimes the best way to carry money is to not carry it at all. Hotels’ in-room safes are generally pretty secure, and if you’ve got an item (or a wad of cash) you’re particularly nervous about, check to see if the hotel has a safe-deposit box behind the desk. If you do use a hotel lockbox of any sort though, remember to retrieve your items when you leave. In the rush to pack up and depart, out of sight can easily mean out of mind—until you’re on your way to the airport. If you’re a forgetful type, leave a colorful note on top of your suitcase.Read More
Frugal moms know that a family doesn’t have to spend a lot to live well.
Even with violin practice to pay for, new clothes to budget in and widely attended birthday parties to throw, moms can keep finances in order with resourcefulness and strategy. We’ve collected tips from frugal moms on saving money without skimping on the things that matter. Whether you’re new to the frugal mom game or a lifelong saver, check out these tips to learn new ways to save your family money.
1. Create a budget.
If you’re a savvy mom, you might already be on top of this. Good for you! Feel free to skip on to the next tip.
For the rest of us: it may sound cliché and unglamorous, but creating a budget is probably the most important step in taking full rein of your finances. To begin, make a list of your family’s financial goals. For instance, aim to save up for a family vacation, to save for college or to save up for holiday gifts.
Next, make a plan of action by identifying your income and expenses for the month. Subtract the amount you owe for essential payments like mortgage payments, utility bills, car payments and the like. Next, make a decision on how you will divvy up the remainder of the money – for example, you may want to allot a certain amount of money for entertainment, extracurricular activities, restaurants, etc.
2. Map out menu plans for the week
For busy moms, planning a menu at the beginning of the week can help save time and money. Start by mapping out your meals for the rest of the week, and then make a grocery list of the items you will need. Buy in bulk whenever you can, and stick to your grocery list to avoid impulse purchases. Do all your cooking at the top of the week, and then freeze your meals to be eaten throughout the next seven days.
3. Keep an eye out for sales
Check grocery store circulars and websites to figure out what’s on sale and plan your meals accordingly. Join the loyalty club at grocery stores you frequent to take advantage of exclusive deals and earn rewards. You can even download grocery shopping apps like Weekly Ads & Sales or Grocery IQ, which alert you of current coupons for major grocery stores.
4. Hunt down online coupons and promo codes
You can find coupons for everything from cookware to clothing to toys on the internet. Check out coupon and deal sites that feature special offers, deals, and promo codes in hundreds of categories for thousands of your favorite stores.
5. Don’t fear generics
In many situations, generic products equal their name-brand counterparts in quality. To save money, go generic with dry goods like baking powder, sugar and spices, as well as dairy products and produce. Other products to buy generic include cleaning products, over-the-counter meds, beauty products and diapers.
6. Seek out free fun
Why shell out for entertainment when there’s an abundance of free fun to be had in your town? Look for free activities and family events listed in your newspaper, or check your local library for info on playtime and story hour.
7. Dine out smart
There’s nothing like sharing a home-cooked meal. You can save money, eat healthier and spend time together as a family. But there’s also nothing wrong with splurging on a restaurant every now and then. When you do dine out, take advantage of the “kids-eat-free days” offered by numerous major chains. Kids-eat-free days fall on Tuesdays at many nationwide restaurants, including Applebee’s, Chevys, T.G.I. Fridays, and Denny’s.
8. Look for yard sales
Yard sales can be a treasure trove of name-brand clothing, toys and more. It’s often a good strategy to visit sales at the end of the day, when garage sale hosts become increasingly eager to clear out merchandise. Try combing purchases to score a better deal.
9. Promote an eco-friendly lifestyle
Leading an environmentally friendly lifestyle doesn’t just protect the earth – it saves you money. Use cloth napkins and reusable water bottles rather than disposable alternatives. Swap out traditional light bulbs for compact florescent lights, which use around 30 percent less energy and can last te10 times longer. Turn down your water heater to 120 degrees to save up to 10 percent on your heating bill. Save on water by installing a low-flow shower head and encouraging your family to take shorter showers – five minutes is all you really need. Your family should also get in the habit of turning off lights whenever anyone leaves a room, which will save energy and cut down your energy bill.Read More
So you’re about to become a parent. Congratulations! Parenthood may be one of the most rewarding experiences you’ll ever have. As you prepare for life with your baby, here are a few things you should think about.
Reassess your budget
You’ll have to buy a lot of things before (or soon after) your baby arrives. Buying a new crib, stroller, car seat, and other items you’ll need could cost you well over $1,000. But if you do your homework, you can save money without sacrificing quality and safety. Discount stores or online retailers may offer some items at lower prices than you’ll find elsewhere. If you don’t mind used items, poke around for bargains at yard sales and flea markets. Finally, you’ll probably get hand-me-downs and shower gifts from family and friends, so some items will be free.
Buying all of the gear you need is pretty much a one-shot deal, but you’ll also have many ongoing expenses that will affect your monthly budget. These may include baby formula and food, diapers, clothing, child care (day care and/or baby-sitters), medical costs not covered by insurance (such as co-payments for doctor’s visits), and increased housing costs (if you move to accommodate your larger family, for example). Redo your budget to figure out how much your total monthly expenses will increase. If you’ve never created a budget before, now’s the time to start. If it looks like the added expenses will strain your budget, you’ll want to think about ways to cut back on your expenses.
Review your insurance needs
You may incur high medical expenses during the pregnancy and delivery, so check the maternity coverage that your health insurance offers. And, of course, you’ll have another person to insure after the birth. Good medical coverage for your baby is critical, because trips to the pediatrician, prescriptions, and other health-care costs can really add up over time. Fortunately, adding your baby to your employer-sponsored health plan or your own private plan is usually not a problem. Just ask your employer or insurer what you need to do (and when, usually within 30 days of birth or adoption) to make sure your baby will be covered from the moment of birth. An employer-sponsored plan (if available) is often the best way to insure your baby, because these plans typically provide good coverage at a lower cost. But expect additional premiums and out-of-pocket costs (such as co-payments) after adding your baby to any health plan.
It’s also time to think about life insurance. Though it’s unlikely that you’ll die prematurely, you should be prepared anyway. Life insurance can protect your family’s financial security if something unexpected happens to you. The death benefit can be used to pay off debts (e.g., a mortgage, car loan, credit cards), support your child, and meet other expenses. Some of the funds could also be set aside for your child’s future education. If you don’t have any life insurance, now may be a good time to get some. The cost of an individual policy typically depends on your age, your health, whether you smoke, and other factors. Even if you already have life insurance (through your employer, for example), you should consider buying more now that you have a baby to care for. An insurance agent or financial professional can help you figure out how much coverage you need.
Update your estate plan
With a new baby to think about, you should update your will (or prepare a will, if you haven’t already) with the help of an attorney. You’ll need to address what will happen if an unexpected tragedy strikes. Who would be the best person to raise your child if both parents die? If the person you choose accepts this responsibility, you’ll need to designate him or her in your will as your minor child’s legal guardian. You should also name a contingent guardian, in case the primary guardian dies. Guardianship typically involves managing money and other assets that you leave your minor child. You may also want to ask your attorney about setting up a trust for your child and naming trustees separate from the suggested guardians.
While working with your attorney, you should also consider completing advance medical directives. These documents allow you to designate someone to act on your behalf for medical and financial decisions if you should become incapacitated.
Start saving for your little one’s education
The price of a college education is high and keeps getting higher. By the time your baby is college-bound, the annual cost of a good private college could be almost triple what it is today, including tuition, room and board, books, and so on. How will you afford this? Your child may receive financial aid (e.g., grants, scholarships, and loans), but you need to plan in case aid is unavailable or insufficient. Set up a college fund to save for your child’s education. You can arrange for funds to be invested in the account(s) that you choose. You can also suggest that family members who want to give gifts could contribute directly to this account. Start as soon as possible (it’s never too early), and save as much as your budget permits. Many different savings vehicles are available for this purpose, some of which have tax advantages. Talk to a financial professional about which ones are best for you.
Don’t forget about your taxes
There’s no way around it: Having children costs money. However, you may be entitled to some tax breaks that can help defray the cost of raising your child. You may qualify for one or more child-related tax credits: the child tax credit, the child and dependent care credit (if you have qualifying child-care expenses), and the earned income credit (if your annual income is below a certain level). For more information about tax issues, talk to a tax professional.Read More
Go out into your yard and dig a big hole. Every month, throw $50 into it, but don’t take any money out until you’re ready to buy a house, send your child to college, or retire. It sounds a little crazy, doesn’t it? But that’s what investing without setting clear-cut goals is like. If you’re lucky, you may end up with enough money to meet your needs, but you have no way to know for sure.
How do you set goals?
The first step in investing is defining your dreams for the future. If you are married or in a long-term relationship, spend some time together discussing your joint and individual goals. It’s best to be as specific as possible. For instance, you may know you want to retire, but when? If you want to send your child to college, does that mean an Ivy League school or the community college down the street?
You’ll end up with a list of goals. Some of these goals will be long term (you have more than 15 years to plan), some will be short term (5 years or less to plan), and some will be intermediate (between 5 and 15 years to plan). You can then decide how much money you’ll need to accumulate and which investments can best help you meet your goals. Remember that there can be no guarantee that any investment strategy will be successful and that all investing involves risk, including the possible loss of principal.
Looking forward to retirement
After a hard day at the office, do you ask, “Is it time to retire yet?” Retirement may seem a long way off, but it’s never too early to start planning — especially if you want your retirement to be a secure one. The sooner you start, the more ability you have to let time do some of the work of making your money grow.
Let’s say that your goal is to retire at age 65 with $500,000 in your retirement fund. At age 25 you decide to begin contributing $250 per month to your company’s 401(k) plan. If your investment earns 6 percent per year, compounded monthly, you would have more than $500,000 in your 401(k) account when you retire. (This is a hypothetical example, of course, and does not represent the results of any specific investment.)
But what would happen if you left things to chance instead? Let’s say you wait until you’re 35 to begin investing. Assuming you contributed the same amount to your 401(k) and the rate of return on your investment dollars was the same, you would end up with only about half the amount in the first example. Though it’s never too late to start working toward your goals, as you can see, early decisions can have enormous consequences later on.
Some other points to keep in mind as you’re planning your retirement saving and investing strategy:
- Plan for a long life. Average life expectancies in this country have been increasing for years and many people live even longer than those averages.
- Think about how much time you have until retirement, then invest accordingly. For instance, if retirement is a long way off and you can handle some risk, you might choose to put a larger percentage of your money in stock (equity) investments that, though more volatile, offer a higher potential for long-term return than do more conservative investments. Conversely, if you’re nearing retirement, a greater portion of your nest egg might be devoted to investments focused on income and preservation of your capital.
- Consider how inflation will affect your retirement savings. When determining how much you’ll need to save for retirement, don’t forget that the higher the cost of living, the lower your real rate of return on your investment dollars.
Facing the truth about college savings
Whether you’re saving for a child’s education or planning to return to school yourself, paying tuition costs definitely requires forethought — and the sooner the better. With college costs typically rising faster than the rate of inflation, getting an early start and understanding how to use tax advantages and investment strategy to make the most of your savings can make an enormous difference in reducing or eliminating any post-graduation debt burden. The more time you have before you need the money, the more you’re able to take advantage of compounding to build a substantial college fund. With a longer investment time frame and a tolerance for some risk, you might also be willing to put some of your money into investments that offer the potential for growth.
Consider these tips as well:
- Estimate how much it will cost to send your child to college and plan accordingly. Estimates of the average future cost of tuition at two-year and four-year public and private colleges and universities are widely available.
- Research financial aid packages that can help offset part of the cost of college. Although there’s no guarantee your child will receive financial aid, at least you’ll know what kind of help is available should you need it.
- Look into state-sponsored tuition plans that put your money into investments tailored to your financial needs and time frame. For instance, most of your dollars may be allocated to growth investments initially; later, as your child approaches college, more conservative investments can help conserve principal.
- Think about how you might resolve conflicts between goals. For instance, if you need to save for your child’s education and your own retirement at the same time, how will you do it?
Investing for something big
At some point, you’ll probably want to buy a home, a car, maybe even that yacht that you’ve always wanted. Although they’re hardly impulse items, large purchases often have a shorter time frame than other financial goals; one to five years is common.
Because you don’t have much time to invest, you’ll have to budget your investment dollars wisely. Rather than choosing growth investments, you may want to put your money into less volatile, highly liquid investments that have some potential for growth, but that offer you quick and easy access to your money should you need it.
When saving for retirement, you’re probably aware of the benefits of using tax-preferred accounts such as 401(k)s and IRAs. But you may not be aware of another type of tax-preferred account that may prove very useful, not only during your working years but also in retirement: the health savings account (HSA).
HSA in a nutshell
An HSA is a tax-advantaged account that’s paired with a high-deductible health plan (HDHP). You can’t establish or contribute to an HSA unless you are enrolled in an HDHP. An HDHP provides “catastrophic” health coverage that pays benefits only after you’ve satisfied a high annual deductible. However, you can use funds from your HSA to pay for health expenses not covered by the HDHP.
Contributions to an HSA are generally either tax deductible if you contribute them directly, or excluded from income if made by your employer. HSAs typically offer several savings and investment options. Your employer will likely indicate which funds or investment options are available if you get your HSA through work. All investments are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost.
Withdrawals from the HSA for qualified medical expenses are free of federal income tax. However, money you take out of your HSA for nonqualified expenses is subject to ordinary income taxes plus a 20% penalty, unless an exception applies.
Benefits of an HSA
An HSA can be a powerful savings tool. First, it may be the only type of account that allows for federal income tax-deductible or pre-tax contributions coupled with tax-free withdrawals. Depending upon the state, HSA contributions and earnings could be subject to state taxes. In addition, because there’s no “use it or lose it” provision, funds roll over from year to year. And the account is yours, so you can keep it even if you change employers or lose your job.
HSA as a retirement tool
During your working years, if your health expenses are relatively low, you may be able to build up a significant balance in your HSA over time. You can even let your money grow until retirement, when your health expenses are likely to be greater.
In retirement, medical costs may prove to be one of your biggest expenses. Although you can’t contribute to an HSA once you enroll in Medicare (it’s not considered an HDHP), an HSA can help you pay for qualified medical expenses, allowing you to preserve your retirement accounts for other expenses (e.g., housing, food, entertainment, etc.). And an HSA may provide other benefits as well.
- An HSA can be used to pay for unreimbursed medical costs on a tax-free basis, including Medicare premiums (although not Medigap premiums) and long-term care insurance premiums, up to certain limits.
- You can repay yourself from your HSA for qualified medical expenses you incurred in prior years, as long as the expense was incurred after you established your HSA, you weren’t reimbursed from another source, and you didn’t claim the medical expense as an itemized deduction.
- And once you reach age 65, withdrawals for nonqualified expenses won’t be subject to the 20% penalty. However, the withdrawal will be taxed as ordinary income, similar to a distribution from a 401(k) or traditional IRA.
- At your death, if your surviving spouse is the designated beneficiary of your HSA, it will be treated as your spouse’s HSA.
HSAs aren’t for everyone. If you have relatively high health expenses, especially within the first year or two of opening your account, you could deplete your HSA or even face a shortfall. In any case, be sure to review the features of your health insurance policy carefully. The cost and availability of an individual health insurance policy can depend on factors such as age, health, and the type and amount of insurance.Read More
Roundup of tax-related investment strategies and news your clients may be thinking about. This article was originally on FinancialPlanning.com
Tax tips for last-minute filing
As the tax-filing deadline draws near, clients who need more time to prepare their taxes should consider an extension until Oct. 15 to avoid putting themselves through a stressful situation, according to this article on Kiplinger. The IRS will hold on to their tax refund until they can file their returns. However, those who owe the IRS should ensure that they pay their taxes by April 15 even if they have already secured an extension to avoid penalties plus interest on the dues.
Side hustle or hobby? Know the difference to avoid issues with the IRS
Clients who have a side hustle should ensure that the IRS considers it a business and not a hobby, according to this article on The Washington Post. That’s because while income from business and hobby is taxable, clients can claim a tax deduction only for business losses. “Make sure that the IRS will consider your endeavor a real business before you start claiming deductions for the costs of your art projects or toy car collection,” according to an expert.
Too high a tax bill for 2018? Here’s how to lower your 2019 taxes
Clients who owed the IRS a hefty tax bill for 2018 can minimize the tax bite this year by maxing out deductible contributions to their retirement plans, according to this article on Motley Fool. They should also consider setting up a health savings account and a flexible spending account, which are also funded with pretax dollars. Investors sitting on depreciated investments can sell these assets and use the losses to offset taxable capital gains and trim their tax bill.
There’s still time to make this move to lower your clients’ taxes
Clients who have yet to file their taxes can still make a last-minute move to minimize their tax bill, according to this article on Money. They have until April 15 to make 2018 pretax contributions to their traditional IRAs and reduce their taxable income for the year. “It’s one of the only things you can do up until the 2018 tax deadline that can lower the amount of taxes you owe,” a CPA says.
How to pay less in taxes with smart investment decisions
Clients can minimize their tax burden with tax-advantaged IRAs and employer’s matching contributions in their 401(k) plans, according to this article on Arizona Republic. They should also consider investing in municipal bonds, which offer tax-exempt yields. While clients will owe taxes on dividends from stocks held in taxable accounts, they can delay capital gains by deferring the sale of these investments and use losses to write off taxable income.
The federal income tax filing deadline for most individuals is Monday, April 15, 2019. Residents of Maine and Massachusetts have until Wednesday, April 17, to file their 2018 tax return because April 15 is Patriots’ Day and April 16 is Emancipation Day.
Need more time?
If you’re not able to file your federal income tax return by the due date, you can file for an extension using IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Filing this extension gives you an additional six months (until October 15, 2019) to file your federal income tax return. You can also file for an automatic six-month extension electronically (details on how to do so can be found in the Form 4868 instructions).
Special rules apply if you’re living outside the country, or serving in the military outside the country, on the regular due date of your federal income tax return.
Pay what you owe
One of the biggest mistakes you can make is not filing your return because you owe money. If the bottom line on your return shows that you owe tax, file and pay the amount due in full by the due date if at all possible. If you absolutely cannot pay what you owe, file the return and pay as much as you can afford. You’ll owe interest and possibly penalties on the unpaid tax, but you will limit the penalties assessed by filing your return on time, and you may be able to work with the IRS to pay the unpaid balance (options available may include the ability to enter into an installment agreement).
It’s important to understand that filing for an automatic extension to file your return does not provide any additional time to pay your tax. When you file for an extension, you have to estimate the amount of tax you will owe; you should pay this amount by the April 15 (April 17 if you live in Massachusetts or Maine) due date. If you don’t, you will owe interest, and you may owe penalties as well. If the IRS believes that your estimate of taxes was not reasonable, it may void your extension.
Having the right amount of tax withheld?
Taxpayers are required to pay most of their tax obligation during the year by having tax withheld from paychecks or pension payments, or by making estimated tax payments. A penalty may be due at tax time if too little is paid during the year, unless an exception applies. It seems that many taxpayers may not have properly adjusted their withholding or estimated tax payments for 2018 to reflect the many changes in the Tax Cuts and Jobs Act. The IRS has announced that it will waive the estimated tax penalty for tax year 2018 for taxpayers who paid at least 80% of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments, or a combination of the two.
The IRS continues to urge taxpayers to check withholding again this year to make sure they are having the right amount of tax withheld for 2019. You can give your employer a new Form W-4 to change your withholding.
Filing deadline for most individuals:
- Monday, April 15, 2019
- Wednesday, April 17, 2019, if you live in Massachusetts or Maine
- Tuesday, October 15, 2019, if you file for an automatic six-month extension by the original due date
Making a last-minute contribution to an IRA may help you reduce your 2018 tax bill. If you qualify, your traditional IRA contribution may be tax deductible. And if you had low to moderate income and meet eligibility requirements, you may also be able to claim the Savers Credit for 2018 based on your contributions to a traditional or Roth IRA. Claiming this nonrefundable tax credit may help you reduce your tax bill and give you an incentive to save for retirement. For more information, visit irs.gov.
You have until your tax return due date (not including extensions) to contribute up to $5,500 for 2018 ($6,500 if you were age 50 or older on December 31, 2018). For most taxpayers, the contribution deadline for 2018 is April 15, 2019 (April 17 for taxpayers who live in Maine or Massachusetts).
Even though tax filing season is well under way, there’s still time to make a regular IRA contribution for 2018. You have until your tax return due date (not including extensions) to contribute up to $5,500 for 2018 ($6,500 if you were age 50 or older on December 31, 2018). For most taxpayers, the contribution deadline for 2018 is April 15, 2019 (April 17 for taxpayers who live in Maine or Massachusetts).
You can contribute to a traditional IRA, a Roth IRA, or both, as long as your total contributions don’t exceed the annual limit (or, if less, 100% of your earned income). You may also be able to contribute to an IRA for your spouse for 2018, even if your spouse didn’t have any 2018 income.
You can contribute to a traditional IRA for 2018 if you had taxable compensation and you were not age 70½ by December 31, 2018. However, if you or your spouse was covered by an employer-sponsored retirement plan in 2018, then your ability to deduct your contributions may be limited or eliminated, depending on your filing status and modified adjusted gross income (MAGI). (See table below.) Even if you can’t make a deductible contribution to a traditional IRA, you can always make a nondeductible (after-tax) contribution, regardless of your income level. However, if you’re eligible to contribute to a Roth IRA, in most cases you’ll be better off making nondeductible contributions to a Roth, rather than making them to a traditional IRA.
|2018 income phaseout ranges for determining deductibility of traditional IRA contributions:|
|1. Covered by an employer-sponsored plan and filing as:||Your IRA deduction is reduced if your MAGI is:||Your IRA deduction is eliminated if your MAGI is:|
|Single/Head of household||$63,000 to $73,000||$73,000 or more|
|Married filing jointly||$101,000 to $121,000||$121,000 or more|
|Married filing separately||$0 to $10,000||$10,000 or more|
|2. Not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by a plan||$189,000 to $199,000||$199,000 or more|
You can contribute to a Roth IRA even after reaching 70½ if your MAGI is within certain limits. For 2018, if you file your federal tax return as single or head of household, you can make a full Roth contribution if your income is $120,000 or less. Your maximum contribution is phased out if your income is between $120,000 and $135,000, and you can’t contribute at all if your income is $135,000 or more. Similarly, if you’re married and file a joint federal tax return, you can make a full Roth contribution if your income is $189,000 or less. Your contribution is phased out if your income is between $189,000 and $199,000, and you can’t contribute at all if your income is $199,000 or more. And if you’re married filing separately, your contribution phases out with any income over $0, and you can’t contribute at all if your income is $10,000 or more.
|2018 income phaseout ranges for determining eligibility to contribute to a Roth IRA:|
|Your ability to contribute to a Roth IRA is reduced if your MAGI is:||Your ability to contribute to a Roth IRA is eliminated if your MAGI is:|
|Single/Head of household||$120,000 to $135,000||$135,000 or more|
|Married filing jointly||$189,000 to $199,000||$199,000 or more|
|Married filing separately||$0 to $10,000||$10,000 or more|
Even if you can’t make an annual contribution to a Roth IRA because of the income limits, there’s an easy workaround. If you haven’t yet reached age 70½, you can make a nondeductible contribution to a traditional IRA and then immediately convert that traditional IRA to a Roth IRA. Keep in mind, however, that you’ll need to aggregate all traditional IRAs and SEP/SIMPLE IRAs you own — other than IRAs you’ve inherited — when you calculate the taxable portion of your conversion. (This is sometimes called a “back-door” Roth IRA.)
Finally, if you make a contribution — no matter how small — to a Roth IRA for 2018 by your tax return due date and it is your first Roth IRA contribution, your five-year holding period for identifying qualified distributions from all your Roth IRAs (other than inherited accounts) will start on January 1, 2018.Read More
An important part of managing your personal finances is keeping your financial records organized. Whether it’s a utility bill to show proof of residency or a Social Security card for wage reporting purposes, there may be times when you need to locate a financial record or document–and you’ll need to locate it relatively quickly.
By taking the time to clear out and organize your financial records, you’ll be able to find what you need exactly when you need it.
What should you keep?
If you tend to keep stuff because you “might need it someday,” your desk or home office is probably overflowing with nonessential documents. One of the first steps in determining what records to keep is to ask yourself, “Why do I need to keep this?”
Documents you should keep are likely to be those that are difficult to obtain, such as:
- Tax returns
- Legal contracts
- Insurance claims
- Proof of identity
On the other hand, if you have documents and records that are easily duplicated elsewhere, such as online banking and credit-card statements, you probably do not need to keep paper copies of the same information.
How long should you keep your records?
Generally, a good rule of thumb is to keep financial records and documents only as long as necessary. For example, you may want to keep ATM and credit-card receipts only temporarily, until you’ve reconciled them with your bank and/or credit-card statement. On the other hand, if a document is legal in nature and/or difficult to replace, you’ll want to keep it for a longer period or even indefinitely.
Some financial records may have more specific timetables. For example, the IRS generally recommends that taxpayers keep federal tax returns and supporting documents for a minimum of three years up to seven years after the date of filing. Certain circumstances may even warrant keeping your tax records indefinitely.
Listed below are some recommendations on how long to keep specific documents:
Records to keep for one year or less:
- Bank or credit union statements
- Credit-card statements
- Utility bills
- Auto and homeowners Insurance policies
Records to keep for more than a year:
- Tax returns and supporting documentation
- Mortgage contracts
- Property appraisals
- Annual retirement and investment statements
- Receipts for major purchases and home improvements
Records to keep indefinitely:
- Birth, death, and marriage certificates
- Adoption records
- Citizenship and military discharge papers
- Social Security card
Keep in mind that the above recommendations are general guidelines, and your personal circumstances may warrant keeping these documents for shorter or longer periods of time.
Out with the old, in with the new
An easy way to prevent paperwork from piling up is to remember the phrase “out with the old, in with the new.” For example, when you receive this year’s auto insurance policy, discard the one from last year. When you receive your annual investment statement, discard the monthly or quarterly statements you’ve been keeping. In addition, review your files at least once a year to keep your filing system on the right track.
Finally, when you are ready to get rid of certain records and documents, don’t just throw them in the garbage. To protect sensitive information, you should invest in a good quality shredder to destroy your documents, especially if they contain Social Security numbers, account numbers, or other personal information.
Where should you keep your records?
You could go the traditional route and use a simple set of labeled folders in a file drawer. More important documents should be kept in a fire-resistant file cabinet, safe, or safe-deposit box.
If space is tight and you need to reduce clutter, you might consider electronic storage for some of your financial records. You can save copies of online documents or scan documents and convert them to electronic form. You’ll want to keep backup copies on a portable storage device or hard drive and make sure that your computer files are secure.
You could also use a cloud storage service that encrypts your uploaded information and stores it remotely. If you use cloud storage, make sure to use a reliable company that has a good reputation and offers automatic backup and technical support.
Once you’ve found a place to keep your records, it may be helpful to organize and store them according to specific categories (e.g., banking, insurance, proof of identity), which will make it even easier to access what you might need.
Consider creating a personal document locator
Another option for organizing your financial records is to create a personal document locator, which is simply a detailed list of where you have stored your financial records. This list can be helpful whenever you are trying to locate a specific document and can also assist your loved ones in locating your financial records in the event of an emergency. Typically, a personal document locator will include the following information:
- Personal information
- Personal contacts (e.g., attorney, tax preparer, financial advisor)
- Online accounts with username and passwords
- List of specific locations of important documents (e.g., home, office, safe)