Rich Women Rock is a blog and online resource designed expressly for women. Here, we will talk about how to put the past behind you and begin making healthy, smart, and maintainable choices to secure your financial future.
How Could Marriage Potentially Affect My Finances?
Marriage affects your finances in many ways, including your ability to build wealth, plan for retirement, plan your estate, and capitalize on tax and insurance-related benefits. There are, however, two important caveats. First, same-sex marriages are recognized for federal income and estate tax reporting purposes. However, each state determines its own rules for state taxes, inheritance rights, and probate, so the legal standing of same-sex couples in financial planning issues may still vary from state to state. Second, a prenuptial agreement, a legal document, can permit a couple to keep their finances separate, protect each other from debts, and take other actions that could limit the rights of either partner.
If both you and your spouse are employed, two salaries can be a considerable benefit in building long-term wealth. For example, if both of you have access to employer-sponsored retirement plans and each contributes $18,000 a year, as a couple you are contributing $36,000, far in excess of the maximum annual contribution for an individual ($18,000 for 2016). Similarly, a working couple may be able to pay a mortgage more easily than a single person can, which may make it possible for a couple to apply a portion of their combined paychecks for family savings or investments.
Some (but not all) pensions provide benefits to widows or widowers following a pensioner’s death. When participating in an employer-sponsored retirement plan, married workers are required to name their spouse as beneficiary unless the spouse waives this right in writing. Qualifying widows or widowers may collect Social Security benefits up to a maximum of 50% of the benefit earned by a deceased spouse.
Married couples may transfer real estate and personal property to a surviving spouse with no federal gift or estate tax consequences until the survivor dies. But surviving spouses do not automatically inherit all assets. Couples who desire to structure their estates in such a way that each spouse is the sole beneficiary of the other need to create wills or other estate planning documents to ensure that their wishes are realized. In the absence of a will, state laws governing disposition of an estate take effect. Also, certain types of trusts, such as QTIP trusts and marital deduction trusts, are restricted to married couples.
When filing federal income taxes, filing jointly may result in lower tax payments when compared with filing separately.
In certain circumstances, creditors may be able to attach marital or community property to satisfy the debts of one spouse. Couples wishing to guard against this practice may do so with a prenuptial agreement.
Marriage may enhance a partner’s ability to collect financial support, such as alimony, should the relationship dissolve. Although single people do adopt, many adoption agencies show preference for households that include a marital relationship.
The opportunity to go through life with a loving partner may be the greatest benefit of a successful marriage. That said, there are financial and legal benefits that you may want to explore with your beloved before tying the knot.
Money is often a tough subject to discuss with others.
And, it got me thinking…secrets surrounding money are not reserved for couples only. They are all too common for many of us. Some of us feel pressure to “keep up” financially with our peers and so we are not honest with them about what we can and can’t afford. Some of us feel that talking about money is “rude”. Sometimes secrets are as simple as the shame that we feel over a past shopping splurge…that deep-down cringe that you feel when you recall that suede jacket that you charged to your card and then promptly ruined in the rain.
I wanted to talk a little bit about how we can eradicate feelings of shame or shortcoming that can surround our relationships with money. Because, and of this I am sure, feelings of regret or embarrassment cloud your ability to move forward financially. As long as you are dwelling in what makes you feel bad about money, you are unable to get yourself to a place where you feel good about money.
So, if you’re harboring secrets when it comes to money, I have a shame-busting, secret-stopping, regimen for you to consider employing as you work to heal your relationship with money.
April 18 is around the corner and it’s the make-it-or-break-it time. If you’re looking at your 2017 tax liability with a heavy heart, it may not be too late to make some last minute changes that can affect your circumstance. Take advantage of all that Uncle Sam has to offer you still for the 2017 tax year. Remember! Pay yourself first!
With the following ideas, I am going to suggest that you consider starting to contribute some serious dollars to your retirement investments. Don’t panic. In fact, try shifting your thinking a little bit. By contributing the maximum amount, it’s almost like getting paid twice. The first time you get paid is when you take the tax deduction. The second time you get paid is when it’s time to cash out and live off your savings!* How great is that!?
Ok. So…the brass tacks.
FIRST: Max Out Your IRA If you qualify, you can contribute $5,500 to your IRA for 2017 and also contribute another $5,500 to your IRA in 2018. Women aged 50 and older are eligible to contribute an additional $1000 for a total of $6,500 each year. Want to spread this contribution out over the year? It’s a mere $458 per month if you are 49 or younger or $542 per month for those 50 and older. This is doable! Please note that deductibility of IRA contributions may be limited if you or your spouse are covered my an employer plan, along with certain income level considerations.
THEN: Max Out Your SEP If you are self- employed, consider funding a SEP (Simplified Employee Pension). This is a form of an IRA for the self-employed and contributions are tax deductible. Here’s the best part! You can still contribute for 2017 if you haven’t filed your taxes yet. The maximum contribution is 25% of your compensation or as much as $54,000 – whichever is less.
AND: Max Out Your 401K Ladies, you can contribute up to $18,500 to your 401(k) plan in 2018. To do it right, you will need to save $1,542 per month or $770 out of every paycheck if you are paid twice monthly. A woman in the 25 percent tax bracket who tucks the full amount into a 401(k) plan can save as much as $4,500 on her federal income taxes in 2018.
If you’re a woman who is 50 or older, you can contribute an additional $6,000 to a 401(k) plan in 2018, for a total contribution of $24,500 – that’s $6,000 savings on your federal income taxes, based on the 25% tax rate!
If you’re thinking that this is a lot to chew on, make no mistake. It is. But remember that tax time is always tough – by funding your retirement funds now and throughout the year to come, then you’re still spending the money but the money is being put aside for you. It’s pain with purpose and that may be just the thing that you need to make tax time palatable.
*Withdrawals from qualified plans are subject to income taxes, and if made prior to age 59 1/2, a 10% penalty tax may apply
This information is not intended to be a substitute for specific individualized tax advice. Tax laws and provisions are subject to change. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Examples shown are hypothetical for illustrative purposes, and are not representative of any individual tax situation. Your results will vary.
This article profiles Linda and Peter, a hypothetical couple worried about their ability to save for both education and retirement costs.
Linda and Peter are worried about their financial future. “We want our one-year-old son, Raymond, to go to college, but we’re concerned that in 17 years, the cost might be more than we can afford,” says Peter. “We also need to save for our retirement,” adds Linda. “Can we reach both of these goals?”
Linda and Peter aren’t alone. Millions of Americans are finding it a struggle to balance the high cost of higher education while saving for their own retirement. If you’re one of them or would like to help someone faced with this situation, put your worries aside. Fortunately, there are steps you can take to help overcome this double-sided planning hurdle.
For example, because Linda and Peter won’t need their money for 17 years, they decided to begin investing now and often. Starting a regular investment program long before needing the money can potentially work in their favor. That’s because of compounding — which is what happens when previous earnings from an investment remain invested and, in turn, earn more money.
They also decided to make the most of their contributions by investing in vehicles that would generate important tax benefits. They chose to funnel $100 each month into a 529 College Savings Plan, which would allow their contributions to benefit from tax-deferred growth and tax-free withdrawals. Meanwhile, they also set aside $200 a month into an IRA. When they receive raises, Linda and Peter will increase their contributions to both accounts.
Getting a Late Start
Sandy and Paul have a different issue. “We don’t want to be a financial burden on our kids when we’re older, so we’ve always opted to max out our 401(k)s and IRAs, which limited the amount left to contribute to a college fund,” says Sandy. “Now our twins are 16, and we’ve only managed to save $8,000 for their college expenses.”
“Fortunately, my parents have helped out by investing $22,000 in UGMA custodial accounts,” says Paul. “We should be eligible for loans and maybe the girls will receive scholarships. It won’t be a cake walk, but at least we should be able to get them through college without sacrificing our retirement.”
Planning Is Key
If you’re feeling overwhelmed while investing for long-term financial goals, why not create a workable financial plan and begin to invest regularly? Over time, even small sums of money invested could potentially add up. And by all means, don’t forgo investing for your own Golden Years. After all, there are no retirement scholarships. Investing in an IRA has many benefits. For example, assets held in an IRA will not affect your eligibility for financial aid, and if need be, usually you can make penalty-free withdrawals for qualified higher education expenses.1 With a traditional IRA, you may benefit from a tax deduction now while your earnings grow tax-deferred. With a Roth IRA, you make contributions with after-tax dollars, but qualified withdrawals will be tax-free.
Don’t Do It Alone
These are just some ideas for stashing away money for both college and retirement, but don’t make important financial decisions in a vacuum. Remember the role that your financial consultant can play in helping you solidify your financial future. He or she has the experience and the resources to help you evaluate your situation and may be able to help you maintain your financial equilibrium.
1Nonqualified withdrawals may be subject to a 20% withholding and a 10% federal penalty tax in addition to ordinary income tax.
Truth time. Asking for a raise is hard. (Just watch this scene in the movie: Defending Your Life when Albert Brooks asks for one…and prepare to chuckle with empathy.) Furthermore, in today’s current work climate, where there is always a deadline looming, it is so easy to put your employer’s needs ahead of your own needs to ask for a raise. After all, you’ll ask for that raise next week, when things slow down a little bit.
But that would be a real miss.
In fact, failing to negotiate raises early in your career can affect your income for decades to come. Let’s say you negotiate a salary of $50,000 instead of $55,000 when you’re 25 years old. Then tack on a 10% raise every year for the next 40 years. You will compound more than $500,000 in raises in the long run if you start with a mere $5,000 more in the first year of your career.
So. Raises really matter.
Now that you see how much money is actually on the table in the long run, you may find yourself ready to tackle this professional task. And you’re wondering…where do I start? Here are my tips for asking for a raise.
My goal for every woman is the opportunity to live a life full of choices. That means something different for everyone. For one woman it may mean leaving corporate America and moving to the desert to paint. For another it might mean being able to take a major trip abroad every year. For a third, it may be being able to set up a college fund for each of her grandchildren. No matter what your choices are – they all depend you accomplishing one thing. Financial. Independence.
In order to do that, you need to put all of your doubt away right now and realize that you ARE GOOD WITH MONEY. Saying you’re bad with money is an excuse to not have to engage with it. Whether or not you are a good cook, doesn’t mean that you don’t eat three times a day. Right!? There are so many ways for you to conquer this. But first, you must commit to making your financial independence a part of your life, and then find the pace and the partners who can help you get there.
Here are some ideas to help you over the hump and start believing in yourself in the financial arena.
Losing a parent or a dearly loved one is among the most overwhelming and emotional experiences of a lifetime. Adding a large inheritance to what is already a difficult moment to navigate, can become paralyzing. Many women make an expected inheritance a big part of their own retirement/savings strategy. Others don’t expect anything, so an inheritance becomes a windfall that requires an unplanned-for amount of attention.
Either way, an inheritance presents an opportunity that should not be squandered. Upon receiving an inheritance, it is easy to choose to change your immediate lifestyle…take a vacation…buy a Birkin. You know, dear reader, that it’s my philosophy that you can have it all…just not all at once. With that, I encourage you to be thoughtful with your newfound wealth.
Here are a list of steps that I believe will help you make the most of your new fortune – be it big or small.
For those who have charitable desires, tax considerations may help make them become smarter philanthropists who give more by giving wisely.
As the end of the year draws closer, thoughts of year-end tax planning start to dominate those who plan ahead to take maximum advantage of what the IRS code has to offer.
While financial decisions should not be made solely for tax purposes, being aware of what is available can enhance an individual’s overall financial effectiveness.
For those who have charitable desires, tax considerations may help make them become smarter philanthropists who give more by giving wisely. An early start is always recommended as some moves can benefit you, your family, and the institutions and causes you care about.
But if you wait until the end of the year, time may work against accomplishing your goals.
Here is a list of some ideas to consider before the year’s end.
The countdown for closing out 2017 has begun! This is a time where many of you may be looking for some new shiny wheels. Especially, as any TV watcher can tell you, there are ads for leasing and purchasing a car with bargain prices and closeouts on 2017 models. I often get the question….Is it better to buy or lease a car? The answer is….It depends. Here are some tips as you weigh your options.
Generally, you have lower monthly payments since leasing requires a low or no down payment.
You can drive a nicer car for less money and are generally under warranty for the lease term.
You are able to transition to a new car every 2-3 years.
You don’t own the car. You are basically renting it although you generally have the option to purchase at the end of the lease.
Your mileage is typically limited. If you tend to put on a lot of mileage, leasing can cost you a lot of extra money.
Be mindful of excessive wear and tear charges.
Leasing over a long period of time may cost more money than owning.
You can modify the car as you please.
You may save more money over the long term.
You can drive as much as you want.
You can sell the car and/or use it for a trade-in on the next car you buy.
If you buy an electric or hybrid car, you may qualify for tax credits. Tax credits vary significantly so make sure you do your homework.
You generally have to make a larger down payment if you are financing the car.
Monthly car payments may be higher than lease payments.
You have more of your cash tied up in a depreciating asset.
Once the car is out of warranty, you are responsible for repairs.
In the end, your decision will come down to your lifestyle and driving needs as well as your monthly budget for car payments.
Read Full Article
Read for later
Articles marked as Favorite are saved for later viewing.
Scroll to Top
Separate tags by commas
To access this feature, please upgrade your account.