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Apache is functioning normally

May 2, 2023 by Brett Tams

For years, I was working anywhere from 60 to 100 hours per week.

I hardly got any sleep, barely saw my friends and family, and had very little time to do things for myself. It was exhausting, and I knew that I couldn’t do that long term. When I would think about what I wanted for the rest of my life, I realized I needed to make a change.

See, when I first started this blog, I was working a full-time job, getting my master’s degree, and blogging in my spare time. Even though I didn’t start my blog to make money (I started it to keep track of how I was doing with my finances), I used any amount of my spare time to work on it.

Reaching new readers, making a good additional income stream, and meeting blogging friends was all very motivating.

It felt good to work, but I knew I was working way too much. There’s no way I could continue like that forever.

After I quit my job to blog full-time, I was still working a ton, definitely more than 50 hours a week.

Eventually, I realized that I needed to focus on how I do things so that I could save time. I wanted to enjoy my life, travel more, spend time with friends and family, and more.

I had to rethink how I work and use my time so that I can get the most out of my days and weeks. At first, it was difficult to change how I did things, but now when I look back, I realize how different my life is now.

I now earn a great income, while working less than ever. My business is mostly on autopilot, and I just work around 10 hours a week.

As a new mom, this has been a lifesaver!

I can’t imagine if I had my daughter in the early days of starting this blog. It’s been about a decade since I started this blog, Making Sense of Cents, and I had no idea what I was doing. I spent a lot of time trying to figure things out, and even though it took a ton of time and energy, I wouldn’t be where I am today without all of those long weeks.

Now, I have my business running quite smoothly, and I’ve been able to make over $5 million online. There are some tasks that I definitely still do myself, such as writing blog posts and answering emails from readers. Other tasks, though, are automated and simply make my life easier.

I get to spend as much time as possible with my daughter, travel when I want, visit friends and family, and more.

I have learned so much in the decade since I started Making Sense of Cents. I’ve reached financial independence and live my ideal lifestyle. I work around 10 hours each week and spend the rest of my time with my family, traveling, and enjoying life.

Because I know people are shocked to learn how little I work, I wrote today’s post to help you realize how you may be able to save time so you can live the life you want.

Here’s how I save time and work 10 hours a week

I have a to do list

I have an on-going to-do list, and this is one of my top time management tips.

Any and everything that I need to do goes on my list, from small tasks to major ones. Without my to-do list, I would feel lost, unorganized, and probably even confused about what to do!

I’m actually not a very organized person, and my to-do list guarantees that I never forget what I need to do.

Yes, I rely heavily on my to-do list, but putting a to-do list together doesn’t have to be hard. I keep my to-do list on my phone, and it’s just a simple list of things I need to do. Other people find that planners work well for them.

Your to-do list will keep you on track so you don’t forget what needs to be done on a daily, weekly, or monthly basis.

I live by my calendar

If there is something coming up that I know I will not remember, I create a simple reminder on my calendar. This makes managing my life easier because I don’t have to worry about forgetting things.

I create reminders for things such as:

When it’s time to pay estimated quarterly tax payments
Interviews that I am taking part in
When I need to send invoices to companies
Checking affiliate links on a regular basis to make sure they work
Business tasks that need to be completed by a certain date

And more.

This prevents me from wasting my time trying to remember things I may have forgotten. Instead, I know exactly what I need to do each day and month.

I even have items on my calendar for things that are more than a year away. This ensures I never forget or wonder what I have to do.

I set working hours for myself

One of the best things about blogging is that I can work from home. There is a lot of flexibility when you work remotely, but it can be difficult to “turn off” for the day. That’s why I recommend having clear working hours. This will help you manage your time, complete your work, and “leave” work for the day.

You will want to schedule your day so you have:

A start time
Lunch break
End time
Anything else that you would normally do to break apart your work day

Even if you can have the most flexible schedule in the world, it’s usually wise to still keep somewhat of a work schedule. This way you can mentally get into the “work zone” each day and have fewer distractions.

While my typical work day varies a lot, having a loose schedule helped me as a new mom.

I work ahead

This one is probably my favorite. Working ahead has changed my life and allows me to focus better.

When I first started Making Sense of Cents, I was writing content and publishing it either the same day or the next day.

It was a very stressful way to run a blog because it felt very forced and rushed.

Eventually, I remembered reading about a blogger who said that they liked to be around six months or more ahead in blog posts. I thought it was nuts at the time, but it has truly changed my life.

Now, I try to be at least a few months ahead in content. Currently, I am around 5-6 months ahead, which feels so great.

Between getting ahead on content and reducing the number of posts I publish each week, I now have a realistic schedule that lets me work ahead on other projects and reduces my overall stress.

There are many benefits to writing content in advance, such as:

I don’t feel like I’m running out of article ideas.
I don’t rush the day or week before to try and figure out something good to write about.
Having a huge amount of content written and done.
I only write when I’m in the mood to write.

When I’m in the writing mood, I write much faster and enjoy the writing process. This helps me to work fewer hours because I’m not forcing myself to write, which takes way more time.

I can spit articles out quite quickly when I am in the mood to write.

I also like to batch write content, which means I may write a lot of content in one week, and then I can go several weeks or sometimes a month or two without writing a single blog post.

This way, I can focus on other areas of my blogging business and have a better work-life balance.

I outsource tasks

Certain things I do myself, such as writing blog posts, brainstorming new marketing and revenue ideas, and responding to emails from readers.

But there are many tasks that don’t have to be done by me.

And for those, I outsource!

Outsourcing tasks for your business can help you focus on more important tasks, find professionals who can do certain tasks better than you (such as accounting or legal work), as well as save time.

I know it can be hard to feel okay spending money on outside help, but outsourcing often makes you more productive so you can earn more money.

For my business, I outsource many different things such as I have an editor, virtual assistant, Pinterest virtual assistant, graphic designer, technical management, and more.

I cut out distractions

It can be so easy to get distracted when you’re working, especially if you are working from home.

But this can cause you to waste a lot of time and not get nearly as much work done as you would have liked.

While social media and TV may be great at times, you have to be careful so they’re not impacting your work in negative ways.

This may even mean downloading cell phone apps that minimize your screen time so that you are forced to cut out distractions. I even know of some people who put their phone in another room so that they are less likely to be on it while they are working.

For me, I have deleted numerous apps from my cell phone so that I am less likely to be distracted by it. I do not have Facebook, Pinterest, or Twitter on my phone, for example.

I use tools to automate my business

There are so many great tools out there to help you run your business.

To save time running Making Sense of Cents, I use a wide range of tools, plugins, and platforms, and they are all great! I try to automate as much as I can because with today’s technology, it is a no brainer.

Yes, some technology may take some time to learn and set up in the beginning. But once you have it set up, you can automate many different areas of your business.

Here are a few tools and websites I use:

Convertkit – This helps me automate my newsletter and funnels.
Teachable – My online courses are hosted on this website, and Teachable handles payments, affiliates, and more.
Adthrive – Yes, you can manage all of your different display ads by yourself, but honestly, no one does that these days. Using a company like Adthrive or Mediavine can save you an infinite amount of time.

There are many other tools you can use to your advantage too, such as automatic backups for your blog, creating filters for spam comments (so that you don’t have to go in all the time and delete spam comments on your blog), and more.

I use affiliate marketing on my blog

Finding a more passive income stream for your business can reduce the amount of time you spend actually working!

The passive income stream I’ve built is affiliate marketing.

I earn most of my monthly income with affiliate marketing, and it’s also my favorite way to monetize a blog.

Affiliate marketing allows me to save a lot of time, while still helping my readers find the best products and services to improve their lives.

It can be a somewhat passive income source because you can create a blog post and possibly earn money from that same blog post for years. In fact, I have many blog posts that I continue to earn income from even though they are five years old. See, even though a blog post may be old, I am still constantly driving traffic to it (and updating the content occasionally as well!), and readers are still purchasing through the affiliate links in that article.

What is affiliate marketing? Affiliate marketing is a blog monetization method where you share a link to a product or service with your readers and earn income when followers make a purchase through your special link.

You might earn a percentage of the sale or a flat rate for each person who signs up or makes a purchase through your affiliate link.

Here are some quick tips so that you can make affiliate income on your blog:

Be honest with your reviews. If there is something you don’t like about a product, either don’t be an affiliate for the company or do mention the negatives in your review. Whenever I write a review or talk about a product, I try to research negative reviews to see what others users think.
Ask for a raise. If you are doing well with a particular affiliate program, ask for a commission increase.
Build a relationship with your affiliate manager. Your affiliate manager can give your readers valuable coupons, increase your commissions, offer bonuses, and more.
Be strategic with your links. There is no need to include an affiliate link 100 times in your content. You can simply include links at the beginning, middle, and end of your posts, and readers will notice them. Perhaps bold your links or find another way for it to stand out as well, like a call-to-action box.

You can learn more about affiliate marketing strategies in my free Affiliate Marketing For Bloggers Ebook.

Want to find time to get stuff done?

There’s a good chance that after reading this post you realize that you want to use your time more efficiently so you have time to do more with your life, whether that’s more travel, more outings with friends, more time to start a family, and so on.

While working less is great, perhaps you’re having a hard time finding hours in your day to fit work in.

If that’s the case, then I can help you in this area too.

For several years, I worked full-time and found different ways to make extra money, such as starting and building my blog Making Sense of Cents. Before that, I was working full-time while also attending college full-time. Working 100 hour weeks was a regular thing for me for many, many years.

If you are someone who wants to start side hustling but you can’t figure out how to find time to make extra money, I recommend reading 16 Ideas That Will Teach You How To Find Time To Make Extra Money.

Some of the ways include:

Strategically use your lunch time
Use vacation days at your day job
Use short gaps in your day correctly
Be more organized
Create an efficient schedule

In conclusion

As I said at the beginning of this post, I can’t believe how much time I used to spend working every week. It was necessary to reach my goals, but finding ways to use my time better has allowed me to cut my working time down to around 10 hours a week.

The most surprising part about only working 10 hours a week is that I’ve made over $5 million online. Not all of that money was made while I was only working 10 hours a week, but I make a great income working a fraction of the time most people do.

While it might sound unbelievable, here’s how I’ve been able to save time working:

Keep a to-do list
Add things to my calendar so I never forget anything
Set work hours
Work ahead
Outsource tasks
Cut out distractions
Use technology to automate my business
Make somewhat passive income through affiliate marketing

What do you do to save time in your day-to-day life or business?

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Source: makingsenseofcents.com

Apache is functioning normally

May 2, 2023 by Brett Tams

Mrs. MM destroys a portion of our new house in a recent work session.

A few weeks ago, the MMM family lost about $12,000.

While this might sound like quite a bummer, the event wasn’t upsetting in the least. In fact, the days between that fateful event and today have been some of the most joyful and free days of our lives so far.

As you know, Mrs. Money Mustache keeps an old real estate license handy in her toolbelt. While she maintains the appropriate retired woman’s approach to the field, turning down business except in the case of helping the occasional friend who is buying or selling a house in our immediate neighborhood, she still finds herself helping out with a deal or two every year.

For the last few months, she has been touring houses with some friends who are currently renting a place nearby. They were shopping on the nicer side of our local neighborhood, which implies a 3-4 bedroom house in good condition at a price of around $400,000.

They shopped and shopped. Some places were perfect, but sold too quickly at a price just out of reach. Others were shabby and overpriced. There were various squawking battles from the colorful real estate agents and sellers involved in the process. Going through the all-too-familiar complications inspired my own article on how to buy a house.

At the end of it all, our friends decided to simply buy the nearly-new house they had been renting right in the same neighborhood for the past year. Their landlord had bought it just before the housing crash, and was happy to unload it now that our prices have recovered.

But the landlord proposed it as a private deal: cash would flow from buyer to seller, with no real estate agents on either side. With Realtors normally tacking a 6% commission onto every deal, this simpler arrangement would create a huge win/win situation for our friends and the homeowner.

The only problem was that Mrs. MM would no longer be eligible to receive her 2.8% paycheck, which is how a buyer’s agent normally earns a living. With a purchase price around $400k, this implies a loss of almost $12,000 in income. This fact was not lost on our friends.

“How should we handle this?”, they asked. “We don’t want you to get shafted after doing all this work – should we raise the selling price so you can get your commission? Should we renegotiate the deal harder so the landlord will pay you out of her cut?”

“Bah… don’t worry about it!”, said my wife. “We’re just happy that you found a place you like, and that you are getting such a great deal on it. Enjoy your new freedom from the grind of shopping and moving, and congratulations!”

That night she told me of her decision, and we both toasted some heartily filled wine glasses and had a laugh over the whole situation. We were glad our friends had finally found a house. We both knew that they would benefit from the lower purchase price much more than we would benefit from an extra twelve grand of before-tax income. There would surely be other deals and other windfalls in the future. And more importantly, we value the friendship and were very thankful that the sticky issue of money did not have to get in the middle of it. Friendships, businesses, and even families have been broken apart over much smaller sums.

I share this story because it is a particularly sweet illustration of the Position of Strength. It is an example of why financial independence, freedom from an addiction to ever-increasing luxury, and when you really think about it, all forms of strength are such incredibly useful things to build into your own life.

Looking back at my list of all the articles, I am starting to realize that this isn’t a personal finance blog or even a lifestyle design blog. It’s a neverending sermon on the joy of strength. Strength, also known affectionately as Badassity, is at the root of most of the joy in a human life. And weakness, which also manifests itself as Complainypants and Wussypants diseases, is what makes you unhappy. The solution to leading a great life is therefore so simple, it is almost insane that our entire society is geared to run directly against it.

So let us browse through a few of life’s most powerful sources of strength to soak up its amazing connection just about everything:

Money is the most acknowledged source of strength in modern society, for it gives you the power to get other people to serve you, and to do so with a smile.
An Abundance of Money is even more powerful, because you no longer find yourself feeling the need to act like a weenie in the pursuit of more of it. With this Abundance power, you can properly align your earning and your spending with your values, rather than just seeking out the cheapest option or trying to squeeze more money out of your customers, employees, or fellow citizens.
The Desire for Ever-Increasing Material Luxury is therefore a serious weakness. In the playground of life, there is a giant teeter totter. Mr. Abundance sits at one end of it, with his casually ripped physique, faded skateboarding shirt and scruffy facial hair. Mr. Luxury sits directly opposite him, clean-shaven in a 3-piece suit with those shiny pointy-toed business shoes and a rounded little beer belly tucked in behind a tight belt. You can never satisfy Luxury – there is always another level of fanciness to attain, and thus he can never have quite enough money.
Giving is a form of strength. When you say, “I have more than I need, and thus my desire to take should fade away as my desire to help out grows”.
Taking is therefore a form of weakness. On the playground, Luxury maintains just a little more desire to take, which competes with his desire to give. Meanwhile, Mr. Abundance is always working on needing less. The “taking” weakness continues to shrink, allowing him to invest more in his “giving” strength.
Health is a form of strength. With health comes a clearer mind, more energy, a greater range of options and comfort zones, and a longer time alive to enjoy the offerings and mysteries of this planet. Life can dish you a blow, and you can get up and get back to work.
Physical Strength is the part of health that is mostly ignored in the United States, yet it is the most useful and efficient component. Sure, aerobics and bicycling can keep the worst effects of early decay at bay, but lifting heavy old-fashioned barbells and dumbells is a much faster and more thorough way to keep all of your systems in working order and create a foundation for the rest of your life’s strength.
Skills are a form of strength. Each thing you learn to do improves your quality of life in astonishing ways, because it makes you stronger. If you are good at your job, you have the ability to earn lots money. But if this is your only skill, you need to outsource your food preparation, transportation, relationships, entertainment, and the repair and maintenance of everything you own including your own body. If your money supply fails or your hired specialists don’t do their jobs perfectly, your life falters. By insourcing all the basics required for happiness, you build a self-reinforcing resilient mesh of power that makes you happier, wealthier, and more interesting as well.

By now you are probably pretty excited about the Position of Strength, and you are ready to step into it. But there one point that underpins everything above, and it is the one our marketing engine works so hard to hide from you.

Voluntary Discomfort is the secret cornerstone of strength. We build our whole lives around increasing comfort and avoiding discomfort, and yet by doing so we are drinking a can of Weakness Tonic with every morning’s breakfast.

Discomfort is generally regarded as a bad thing. If you’re a mother of five in a developing country and you run out of food, or your children are injured or killed by disease or war, saying it absolutely sucks would be a great understatement. This is involuntary discomfort at its worst, and the resulting unhappiness makes perfect sense.

But when you, as a privileged rich-world resident walk into hardship and discomfort willingly, the feeling is completely different.

My favorite part of every weekday is cycling with my son to school. The morning temperature at this time of year is right around the freezing mark, and I make a point of wearing just a bit less warm clothing than I need for complete comfort.

“Don’t you need a bigger coat?”, my wife asks. “It’s freezing out there!”

But the feeling of cold wind on my skin is exactly what I need to feel alive in the morning. Pushing the frontier of comfort is a simple way of building strength, preparation for the coming winter, and by extension, happiness.

After all, my son and I could just as easily drive the car that 0.77 mile distance to the school, thereby avoiding all discomfort completely. Heck, I could start driving for all my errands around town just like a Car Clown. I could avoid the burning sensation of trying to lift the barbells in my garage and be more comfortable too. Sitting in my office typing this blog article is much more comfortable than lying in the crawlspace under my new house welding up the new structural supports, and it pays much better too. Perhaps I should also outsource the hard physical activity to a specialist. A 2014 Mercedes would be more comfortable than my 2005 Scion, a $2000 bike would out-cozy my $300 one, and in the summer my house would be more comfortable at 75 degrees than the 86 level where I currently consider turning on the air conditioning. It would be more comfortable to have a housekeeper and a chef, a private driver and a gardener, and these days we could even afford to add these comforts to our lives without the discomfort of having to work.

And yet we continue to not purchase any of them, and to do quite a bit of unnecessary work. Why? Have we developed some sort of insanity?

The answer is exactly the opposite: If you go back and look through those points which define the Position of Strength, you see that every bit of the conventional and comfortable path undermines that position.

Our entire culture teaches us to seek out all possible comforts, and to be unhappy when we don’t have them. And thus, it dooms us to a life of permanent involuntary discomfort, and therefore permanent weakness.

Living a life of weakness is not fun

Living a lifestyle of strength is extremely fun.

The only insanity is the fact that almost nobody chooses this option.

Source: mrmoneymustache.com

Apache is functioning normally

May 2, 2023 by Brett Tams

Posted on: July 26, 2022

While there are some specific steps pertinent to those using their VA loan benefits, the overall process is similar for all homebuyers.

The good news? It’s not complicated.

The VA home program has allowed millions of veterans, active-duty service members and surviving spouses to purchase or refinance homes. If all of those fellow military members managed it, so can you.

Check your VA home buying eligibility. (May 1st, 2023)

VA Home Loan Program Offers Valuable Benefits

VA loans are backed by the U.S. Department of Veterans Affairs and offer considerable benefits for eligible borrowers. Some of the most valuable aspects of the VA home loan benefit include:

Low or zero down payment
Competitively low mortgage interest rates
No private mortgage insurance (PMI)

12 Steps To Buy a Home With a VA Loan

1. Work out what you can afford

The first step toward your home purchase is determining what you can afford to spend. This involves taking a close look at your household budget.

Once you know where your money is going each month, you’ll have a sense of your potential buying power and the monthly mortgage payment amount you can handle. Keep in mind that homeowners have extra expenses including property taxes, homeowner’s insurance and home repairs.

Creating a budget isn’t a requirement for loan qualification, but it makes you a more informed consumer.

2. Get pre-approved

Getting pre-approved gives you “serious buyer” status in the eyes of sellers and real estate agents. It means you’ve talked to a mortgage lender who has run your finances.

Getting pre-approved includes establishing your eligibility for a VA loan, checking your credit, confirming your income, and working out how big a mortgage you can afford.

Once completed, the lender sends you a letter confirming your loan amount. This means sellers and agents take you way more seriously. And, gives you an advantage when negotiating the price, especially when up against other potential buyers who aren’t approved.

Don’t get confused between pre-approval and pre-qualification. Pre-qualification is better than nothing, but it only means the lender asked you a few questions and relied on your answers (with zero verification) to estimate how much you can borrow. It’s less credible than pre-approval.

VA Loan Eligibility Requirements & Your Certificate of Eligibility (COE)

Your mortgage lender can help you request your Certificate of Eligibility (COE), a document that establishes your VA loan eligibility. Your COE includes information about your military service (confirming you meet the VA’s service requirements), along with the amount of your VA loan entitlement and your VA funding fee.

3. Shop for lenders

You may think all VA loans are the same. While these loans are government-backed, your loan will be issued by a private lender. Some lenders offer great deals and others less great — or flat-out bad.

You should shop around between lenders to find the very best deal for you. But, it’s not just us saying that.

Last year, the Consumer Financial Protection Bureau (CFPB) wrote:

Mortgage interest rates and loan terms can vary considerably across lenders. Despite this fact, many homebuyers do not comparison shop for their mortgages. In recent studies, more than 30 percent of borrowers reported not comparison shopping for their mortgage, and more than 75 percent of borrowers reported applying for a mortgage with only one lender. Previous Bureau research suggests that failing to comparison shop for a mortgage costs the average homebuyer approximately $300 per year and many thousands of dollars over the life of the loan.”

Lenders are required to send you a loan estimate detailing everything you need to know about the mortgage you’re being offered. The CFPB has an exceptionally helpful guide about how to read these — and how to compare them.

Read more: Questions To Ask Before Picking A Lender.

4. Find a reputable buyer’s real estate agent

Usually, as a buyer, retaining a real estate agent costs you nothing. This is because sellers generally pay the buyer’s real estate agent’s commissions. Not every buyer has an agent, but it’s a good idea. Your real estate agent can be one of your greatest assets throughout the transaction. (Just don’t use the same one the seller is using. Their first duty is to the seller.)

A good real estate agent helps you with the following:

Finding your dream home
Negotiating the best possible purchase deal
Completing the buying paperwork
Guiding you throughout each step of the transaction
Troubleshooting any issues

5. Find your home

This is the fun part: picking out your new home.

Depending on your local real estate market, it may take time to find the right property.

Think ahead about your future needs as well as your existing ones. Choose a home that meets your requirements for many years to come if possible and realistic.

Don’t be tempted by a quick-fix purchase with the expectation that you can move again in a few years. Buying and selling a home is expensive and the real estate market unpredictable — you don’t want to do it more often than you absolutely have to.

6. Make an offer

This is the moment when a good real estate agent proves most valuable. So listen to their advice.

It’s a real estate agent’s job to get you the best deal and they should have the knowledge and expertise to achieve that. So leave the negotiations up to them. Of course, your real estate agent should talk through tactics with you. Basically, how to pitch an offer that won’t alienate the owner but will have you paying the smallest amount possible.

Your real estate agent will also advise you on any “contingencies” that should be included in your offer. These are items that allow you to walk away at no cost if certain eventualities arise like an inspection contingency (if the home inspection uncovers unexpected issues) or a finance contingency (in case your mortgage loan has problems). There may be others as well.

7. Pay earnest money

You’ll typically be expected to pay earnest money when your offer is accepted. Your agent can negotiate the amount, but expect to pay between 1 to 5 percent of the purchase price.

As its name implies, earnest money indicates to the seller that you’re a serious (aka earnest) buyer. This isn’t lost money, though. You’ll get it back either as a deduction from your closing costs, or if your closing costs are covered by a third party, you’ll be refunded the amount.

8. Get a home inspection

Home inspections aren’t required to purchase a home, but they’re highly recommended — especially if you’re buying an older home. A home inspection gives you a top-down evaluation of the home and property, including the roof and home exterior, and shouldn’t be confused with a VA home appraisal.

Typically, you can back out of your offer and receive your earnest money back as long as there is an “inspection contingency” written into the purchase contract.

The VA home appraisal is required for a VA home loan and is arranged by your VA lender. It evaluates the property according to the VA’s minimum property requirements (MPRs) and is intended to protect you from purchasing a property that isn’t safe, sound, and sanitary; it also establishes a fair value of the property.

Read more: VA Appraisal & Home Inspection Checklist

9. Update your lender documentation

Every document used to approve your loan must be the most recent. Ultimately, your lender will ask for what it needs, but you can avoid delays by having it all ready in advance. Gather copies of your personal documents, including your latest pay stubs and bank statements.

You’ll also send a copy of the signed purchase contract to your lender. This allows your lender to order the VA appraisal and update your loan application with the address for your next home.

At this point, you may be asked to sign mortgage disclosure documents. These are sent to you by your lender and lay out the terms of your loan in detail — terms may have changed now that a specific home was found and purchase price agreed upon.

Read more: VA Mortgage Loan Document Checklist

10. Meet your lender’s underwriting conditions

Once it has all the required documentation, your lender submits your application to its underwriting department. This is the final step to officially approve your mortgage loan. It’s not uncommon for underwriters to request more information — called conditions — at this stage. Usually, additional documentation is all that is needed.

After the underwriter gives final loan approval, your lender sends your final loan documents to an escrow company.

11. Sign the final paperwork

You’ll likely go to the escrow agent’s office to sign all the final paperwork. Review all the documents carefully. Compare your most recent loan estimate with the closing disclosure. (Closing disclosures provide a final breakdown of all your loan’s details, including “projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs),” according to the CFPB.)

If there are discrepancies between your closing disclosure and your last loan estimate, your lender must justify them. While some costs can increase at closing, others legally can’t. Call your lender immediately if something doesn’t look right.

If you need to pay any closing costs, you’ll pay those at this time too. Bring a cashier’s check or other certified funds to the escrow office when you sign your documents; your escrow company provides the total amount needed.

12. Monitor the status of your loan

Unfortunately, your loan is not complete when you sign the documents. Your lender could take up to a week or more to finalize your loan and transfer the money. Once the lender funds the loan, the seller and all other parties are paid. (The final step: when the transaction is recorded in your jurisdiction’s official records.)

You might think now’s the time to relax. You can, soon. But, not quite yet.

Few home buyers realize that lenders routinely carry out a second (or third) credit check before closing. If your credit score has taken a hit, your lender could cancel your loan — or increase your mortgage rate. That means no late payments and no new credit cards until the loan process is complete.

Buy a home one step at a time

If you’re just getting started, then consider the VA loan program. VA loans can save you a lot of money and make your homeownership dreams come true.

VA loans typically come with lower interest rates than most other mortgages. The ICE Origination Insight Report shows they’re consistently lower than FHA and conventional loan interest rates. VA home loans also require zero money down and no continuing private mortgage insurance.

See if you’re eligible for a VA home loan (May 1st, 2023)

Source: militaryvaloan.com

Apache is functioning normally

May 2, 2023 by Brett Tams

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode starts with a discussion about Social Security.

Then we pivot to this week’s money question from Amy, who wrote, “Hi, Nerds. I love your podcast and I wanted to get your take on a question I have. I am in my late 30s and I am just starting to think about investing for retirement. I have a decent amount of money in a savings account that I can use to invest. I’ve done a fair amount of research into investing, and index funds come up a lot as a smart option. My question is, aren’t ETFs an even better choice given that they’re more tax efficient? I plan to buy and hold and don’t expect to do much with my investments until I retire. Please help me figure out if ETFs end up costing investors less than index funds do when the time comes to sell them.”

Check out this episode on either of these platforms:

Our take on estimating Social Security benefits

Figuring out how much money we will need to live comfortably in retirement is a notoriously imprecise exercise. To make planning for our future selves a little easier, a team of Nerds created a Social Security benefit calculator, which generates an estimate of your Social Security benefit as a monthly and yearly figure. This number can help you figure out how much money you’ll need to have in other retirement savings accounts like IRAs to reach your retirement goals.

This number, while a useful data point, is still just an estimate. Your actual Social Security amount could be different depending on your income history and the age at which you retire. For example, today, you may plan to retire at age 62, the current earliest age of eligibility for Social Security. In reality, you may end up working until the full retirement age of 70. Delaying Social Security withdrawals for those eight years will significantly increase your retirement benefit.

Our take on tax-efficient retirement investing

Saving for retirement can feel like a never-ending chore, especially when you won’t see the fruit of your (literal) labors for several years. To entice us to save, the government offers tax breaks on certain types of retirement accounts, namely 401(k)s and IRAs. With traditional 401(k)s and IRAs, you get your tax break up front so that retirement contributions reduce your taxable income. Roth 401(k)s and IRAs, on the other hand, delay the tax benefit until retirement when you can make withdrawals tax-free.

Contained within those retirement accounts are the actual investments: stocks, bonds, mutual funds, index funds, ETFs or options. ETFs and index funds are popular options because of their relative low cost and promise of high returns. Generally speaking, ETFs have less tax liability than index funds. It’s possible to owe capital gains taxes on your profits on index funds without even selling a single share.

Our tips

Understand how accounts are taxed. Roth IRAs, 401(k)s, and other retirement accounts are taxed more favorably than brokerage accounts.
Consider different investment options. Once you have your retirement account, you have a number of choices like target-date funds or mutual funds.
Investments have their tax differences, too. ETFs are more tax efficient than index funds, but the difference is fairly small and it’s not typically a major factor in retirement accounts.

More about tax-efficient investing on NerdWallet:

Episode transcript

Sean Pyles: Choosing the right investments for your retirement accounts can be a head-spinning endeavor. Do you continually tweak your investment mix or just let things ride?

Liz Weston: And how do you choose between retirement accounts like 401(k)s and Roth IRAs?

Sean Pyles: Well, this episode we will help a listener sort out their retirement investment decisions.

Welcome to the NerdWallet Smart Money podcast, where you send us your money questions and we answer them with the help of our genius Nerds. I’m Sean Pyles.

Liz Weston: And I’m Liz Weston.

Sean Pyles: OK. We’ll get to the part where we ask our listeners to send us their money questions in a bit. But first, Liz, welcome back.

Liz Weston: Hey, it’s great to be back. Thank you.

Sean Pyles: So Liz, you had a little eat, pray, love journey through Europe, spent a lot of time in France. Do you have any profound money lessons for us now that you’re back?

Liz Weston: Well, this is the biggest one, don’t wait until retirement to travel and do the stuff that you want to do. I’ve been taking paid and unpaid leaves multiple times in my career and they are so worth doing if you can swing it.

Sean Pyles: That sounds lovely. Well, I am glad that you’re back. And listeners, just so you know what’s up on our end too, my other co-host, Sara Rathner is about to head off on her own spiritual journey called maternity leave. So Liz will be back in the hosting seat with me over the next few months. All right. And now we are at the part where we ask our listeners for their money questions. So to keep it short and sweet, listeners, we know that you have burning money questions and it is our job to answer them. So send your money questions our way.

Liz Weston: Maybe you want some advice about how to make the expensive summer travel season more budget friendly, or you’re wondering about how to pay for a bathroom remodel or maybe your question is even less specific. Whatever you’re wondering about, please send us your questions. Leave us a voicemail or text us on the Nerd hotline at 901-730-6373, or you can email us at [email protected].

Sean Pyles: This episode, my other co-host, Sara and I answer a listener’s question about how to choose the most tax efficient investments for their retirement account. But first, to kick off this episode, Liz and I are talking about another big part of retirement planning, Social Security benefits, specifically understanding how much you might get.

Liz Weston: It’s easy to underestimate how important Social Security is going to be to your retirement planning, but it is huge. Every thousand dollars in monthly income that you get from Social Security is $300,000 that you don’t have to save.

Sean Pyles: Wow.

Liz Weston: Yeah, and not only is that income guaranteed for life, but it’s inflation adjusted, so your buying power isn’t eroded over time and you don’t have to make a bunch of decisions about how to invest the money, it just comes to you. So one of our Nerds, Tina Orem, has created a calculator to help you estimate your benefit. Welcome to the podcast, Tina.

Tina Orem: It’s great to be back. Hi.

Liz Weston: Tina, right about now, a lot of our audience is thinking, “Huh, I’ll never see a dime from Social Security.”

Sean Pyles: Yeah. Well, we’ve been hearing for years that Social Security is going broke.

Tina Orem: Yeah. So in March, the Social Security Administration actually released a statistical analysis and it basically said that that part of Social Security, the so-called trust fund, is going to run out of money in 2034. And at that point, the estimate is that the taxes you and I pay on our earnings, basically a part of it, will still be enough to pay something like 80% of promised benefits. So, I mean, 80% isn’t nothing.

Liz Weston: Yes, and Social Security is the most popular federal program ever. I can’t imagine any politician who wants to get reelected allowing people who are getting benefits to have those benefits cut. So the program may change, but it is highly doubtful that it’ll go away.

Sean Pyles: Yeah. And also just to beat back the cynicism among my fellow millennials and my Gen Z brethren, I think the whole “Social Security is going to run out of money, so why should we even try” defeatism could be a self-fulfilling prophecy. So if folks in my generation really want this benefit, make your voice heard and ensure that it’s there for you. The battle is not over, folks. So anyway, Tina, let’s hear about this calculator that you devised.

Tina Orem: Sure, yeah. We put this calculator together because we know a lot of people wonder what they’re going to get from Social Security and when they’re going to get it. And I think that’s a reasonable thing to wonder, especially when you’re thinking about your retirement savings and those bigger questions of, how much money will I need every month and where’s that money going to come from? So this calculator is intended to help consumers with that. And I want to be sure to give a shout-out to our engineering team, the product team, our editors, we all helped produce this calculator. And I’m saying that not just to be sure to acknowledge and credit the people who worked on this, but I also want to tell people that this calculator is made by a team of people, and we vetted it and tested it and we put a lot of thought into how to make it useful and easy for consumers.

Liz Weston: Awesome. So what do people need to know about using the calculator?

Tina Orem: Okay, a few things. So the first thing I want to say is that the calculator is easy to use. You just enter your date of birth, you enter the age of which you want to start taking Social Security retirement benefits, your annual income this year, and then an estimate of your annual salary increases going forward. So that’s it. The second thing I’ll say is that this is an estimate, we don’t have access to the last 35 years of your personal income and earnings history. So that’s what the Social Security Administration uses to calculate your exact, to-the-penny benefit. So we make an estimate of your previous earnings based on what you tell us you earned this year. So the catch is, if you were out of the workforce for several years, or maybe you had income and it fluctuated a ton, or you were in a line of work where they may not have withheld Social Security taxes from your paychecks, your benefits are much harder to estimate with this tool.

But if you had a fairly steady paycheck and Social Security tax has been coming out of those checks, this tool should give you what we think is a pretty good estimate of the size of your monthly Social Security retirement benefit check at various points in time. And I say various points because there are three in particular that are of particular interest when it comes to Social Security: There’s the age at which you want to retire, there is what Social Security Administration calls your full retirement age, which I’ll get to in a second, and then age 70.

Sean Pyles: OK. So this might be a good time to remind folks of how Social Security benefits are actually calculated. Tina, can you give us a super quick, simple explanation of this very complicated matter?

Tina Orem: Yes, because it turns out the formula for calculating Social Security benefits is actually pretty complex. But simply put, how much Social Security tax you pay into the system over time influences the size of your eventual retirement checks. That’s the first thing to know. The second thing is that when you decide to start taking Social Security retirement benefits has a really big effect on the size of your check. And there’s one key age to that I want to point out, and that is what I said, the full retirement age. So that’s the age at which you’re entitled to 100% of your Social Security retirement benefit. And the Social Security Administration decides what your exact full retirement age is, and that’s based on when you were born. So for most people, it’s sometime between age 66 and 67.

Liz Weston: I’m guessing for most of our listeners who are born in 1960 and after it’s going to be age 67. You can start Social Security as early as 62, but you’re essentially settling for a permanently reduced check, and why would you do that?

Sean Pyles: This was one of the most interesting parts of the calculator as I was playing around with it is seeing just how much you can get monthly or annually by delaying your retirement even a year or seven years or something like that. You can get thousands of dollars more per year just by holding off the age at which you received these benefits.

Liz Weston: Oh yeah, it’s huge. And there’s been a lot of research done over the past few decades showing that most people are better off waiting. And that’s sometimes a hard message to get through: Like people want to grab the money when they’ve got it, but you really do get more than sufficient payoff if you wait.

Sean Pyles: And another cool thing with this calculator is that you see the Social Security break even age, which is the point at which the amount of benefits you receive having waited a few to start getting your benefits begins to outpace the amount you would’ve gotten if you’ve started getting them at an earlier age.

Liz Weston: Yeah.

Sean Pyles: All right. Well, Tina, what should folks do with the information they get from this calculator?

Tina Orem: Well, I think one good use of this information is to get an idea of what’s really going to be available to you when you want to retire. So for example, if you’ve used our retirement calculator and you have an idea of how much money you’ll need per month during retirement to live the life that you want to live, then knowing what portion of that is going to come from Social Security can help you get a tighter handle on how much you need to save for retirement.

Another thing the calculator I think will get you thinking about is when you want to retire. So if you know that you’re going to get a bigger monthly check by waiting to start taking benefits, would waiting work for you? How long is too long? When will it be no longer worth it or affordable to wait? So that information can help you get on the same page with your partner and with yourself frankly about when you’re really going to retire.

Sean Pyles: And where can people get more information around Social Security benefits?

Tina Orem: Yes. Well, NerdWallet does have a ton of helpful content about Social Security on the site, everything from how it works and different types of benefits that come from the Social Security Administration and what happens to your retirement benefits in certain situations and ways to maximize your benefits. And of course, you can always take a look at the Social Security Administration’s website or visit a local Social Security office.

Liz Weston: And we should mention that if you do have a more complicated situation, you can see your actual Social Security estimated benefits on its website by creating a my Social Security account. Probably a good thing to do anyway just to secure that and make sure that nobody else can get your information, but it’s a way to see what Social Security’s estimates are based on your actual earnings history.

Sean Pyles: All right. Well, Tina, thank you so much for talking with us and for building this super cool calculator.

Tina Orem: Yeah, my pleasure. I hope it helps people.

Sean Pyles: And with that, let’s get onto my money question conversation with Sara.

This episode’s money question comes from Amy. Here it is, as read by Smart Money producer, Rosalie Murphy.

Rosalie Murphy: Hi, Nerds. I love your podcast and I wanted to get your take on a question I have. I am in my late 30s and I am just starting to think about investing for retirement. I have a decent amount of money in a savings account that I can use to invest. I’ve done a fair amount of research into investing and index funds come up a lot as a smart option. My question is, aren’t ETFs an even better choice given that they’re more tax efficient? I plan to buy and hold and don’t expect to do much with my investments until I retire. Please help me figure out if ETFs end up costing investors less than index funds do when the time comes to sell them. Thank you, Amy L.

Sara Rathner: To help us answer Amy’s question on this episode of the podcast, we’re joined by investing nerd, Alana Benson. Welcome back to Smart Money, Alana.

Alana Benson: Thanks for having me.

Sean Pyles: Alana, it’s always so good to have you on because we have so many investing questions and our listeners do, too. But before we get into them, a quick disclaimer that we are not about to give any investment advice, we are not ever going to give you investment advice or tell you what to do with your money. This is for general educational and entertainment purposes. Okay, let’s talk about some different investment vehicles that people can use to invest or save for retirement. 401(k)s and Roth IRAs are pretty common, but what about straight-up brokerage accounts or robo-advisor accounts?

Alana Benson: So I just want to start off by clarifying some language for our listeners. First of all, saving does not equal investing. Saving can mean putting money into a savings account. It can mean stashing your money under your mattress. We do not necessarily say that that’s a good idea, or it can mean putting it into a high yield saving account. But investing means putting your money into a specific investment account, which is different than a bank account, and then purchasing investments from there. So a lot of people use that language interchangeably, just like to clarify, maybe we say saving for retirement, but really we mean investing for retirement.

Sean Pyles: Yeah. And one key important difference is that when you do have an investment account like a 401(k), you have to make sure that the money you’re putting into there is being invested because some people will make this really tragic mistake where they’ll put money into these accounts for many years and it will not have been invested, and then they’re not actually growing their money through investments and compound interest and all of that good stuff.

Alana Benson: Absolutely. That is a devastating mistake.

Sara Rathner: Yeah, the money defaults to essentially being held in cash in a money market account, same thing almost. So you should just be aware that what the money sits in when you put it in first before you tell it where to go is essentially cash. Once you tell the money where to go in terms of picking investments and you set up that automatic transfer of money from your paycheck into those investments, that’s when you can sit back and hope that the market works your way over the next 30 plus years, which it may or may not do, as we know.

Alana Benson: Yeah, and I think it’s really important as well to talk about where you invest, which means your account type, so a 401(k) or a Roth IRA. The actual account type is just as important as what you actually invest in from that account, which is stocks or bonds or mutual funds. So understanding the difference between an account, which is not actually an investment. So if someone says they’re investing in a Roth IRA, the Roth IRA is not the investment that’s going to make the money, it’s just the account type where those investments live. So they might be investing in stocks or mutual funds from their Roth IRA.

Sean Pyles: One thing we should probably clarify, as well, is that we talk a lot about Roth IRAs and 401(k)s because those are tax-advantaged accounts and we’ll get into what that means more in a little bit, but using a brokerage account or a robo-advisor account for retirement savings is not very common. People typically don’t use that as their primary investment vehicle, correct?

Alana Benson: That depends. I think if it’s someone who has a 401(k) available to them, then that’s going to be something that if you have an employer that offers that, that’s great. And 401(k)s tend to have much higher contribution limits, so you can actually put more money in. But if you don’t have an employer that offers that, or if you are self-employed, then you may be looking for other options.

Sara Rathner: So Sean mentioned 401(k)s and Roth IRAs, which are two different kinds of investment accounts that are often used for retirement savings. Is there a general order of account types for investing that financial advisors recommend?

Alana Benson: So typically the idea is to start with a 401(k) if you have one. 401(k)s are great, we talk about them a lot on this podcast. You often get an employer match through them, which equates to free money. So the idea is that you start with a 401(k). You contribute enough to get your employer match and then you consider pausing on that or put as much in that as you want if you don’t want to make this complicated. But if you’re OK with a couple complications, once you get your match, then consider IRAs. Traditional IRAs, Roth IRAs, they both have different tax advantages, but the reason that you would move from a 401(k) to an IRA is because the tax advantage for IRAs is really strong.

So you get your match with a 401(k), then move to an IRA once you can max that out, then move back to a 401(k) and you could max out that 401(k). I like to think of it almost like a waterfall with buckets. So if water is pouring into the first bucket, you fill up that first bucket and then once it starts overflowing, it can start filling up the next bucket. So don’t feel stressed out if you can’t necessarily do all those things right away, but the first bucket is getting that match. If you can contribute enough to get your match, that’s awesome, then the overflow goes into an IRA once you can max that out, then into maxing out your 401(k).

Sean Pyles: And what about folks who maybe don’t have access to a 401(k) through an employer? Can you talk about how solo 401(k)s and SEP IRAs might fit in?

Alana Benson: Yeah. So solo 401(k)s are great, they’re designed for business owners with no employees. SEP IRAs are another option. Folks who are self-employed are really going to need to look at their specific circumstance, whether they have employees or if they don’t and figure out what retirement accounts are going to work best for them. That may be a conversation to have with a financial advisor just because those things can get a little complicated. But a really important thing is that once you figure out where, again, that type of account that you want to invest in, maybe the order in which you want to have your money flow through those investment accounts, then you can figure out how you want to invest. So we have the where, which is the account type, the what, which is the actual investments, and then the how, which is, “do you want to choose your investments by yourself and manage them by yourself or do you want to not worry about that?”

So, if you don’t want to worry about it, you don’t want to think about it or stress about it, you can have a robo-advisor do it for you, which is a pretty low-cost way. These are online algorithms that basically take your risk tolerance, your age, other personal factors into account, and then they build and manage a portfolio for you for a fairly modest fee, which is great. That makes it super easy. You can automate it, have money taken out of your bank account, and then you don’t have to worry about it. You could also work with a traditional financial advisor, but that will cost more. And then if you want to do it yourself, you know, there’s all kinds of research. You can do stock investing, you can use mutual funds or index funds. There’s lots of options and we have lots of information on how to do that on nerdwallet.com, but that’s really how of how you do this.

Sean Pyles: I want to go back to a term that we’ve mentioned a couple of times so far, and that’s tax-advantaged. Alana, can you explain how that pertains to 401(k)s, Roths and the like, and why it’s such a big deal?

Alana Benson: So tax-advantaged is just a fancy word for, “you get a nice tax benefit,” which is a good thing, you should be excited about any kind of tax benefit because most likely it will equate to more money in your pocket. So traditional 401(k)s and IRAs, you can say, “Hey, I contributed this amount of money,” and so you’ll get a nice tax break up front. But Roth accounts, so either a Roth 401(k) or a Roth IRA, they don’t offer an upfront tax deduction, but you get to take your money out tax-free in retirement. So you put it in after you’ve already paid taxes on it, and then that money grows tax-free for many, many years. So a lot of people find Roth accounts more attractive for that delayed benefit, but it will depend on you and your individual tax circumstance. But again, this is why you might move from a 401(k) if it’s a traditional one to an Roth IRA, it’s because of that really healthy tax benefit.

Sara Rathner: OK. So in contrast to tax-advantaged investment accounts like certain kinds of retirement accounts, there are also taxable brokerage accounts too, and those are either offered by traditional brokerages or banks or robo-advisors and they don’t have this special tax treatment, right? How are they taxed?

Alana Benson: Again, we just want to clarify some terms and I’m really, really glad you asked this question because these things can often get conflated, which is why I’m so adamant about what, the where and the how. Robo-advisors may be able to be tax-advantaged if you use them in the right account. So again, robo-advisors, that’s how your investments are going to be managed. Many robo-advisors offer retirement accounts like IRAs, but not 401(k)s since those are offered through your employer. But if you open a taxable account through a robo-advisor, yes, it won’t have those tax benefits, but if you open a Roth IRA and you’re having it managed by a robo-advisor, then you will be able to get the tax benefits.

Sara Rathner: So again, it’s not about who is furnishing the account, but it’s about the type of account that you have.

Alana Benson: Exactly, and that’s why it’s so important to pay attention to your account. A lot of people, they might start up with a robo-advisor, don’t have the background information and the robo-advisor maybe would put them into a taxable brokerage account, but maybe they’d prefer to be in a retirement account. So it’s important to have that background even heading into something like investing with a robo-advisor so you know exactly what you’re getting yourself into.

Sara Rathner: Right. So all that being said, let’s go back to how these accounts are taxed. If you’re looking at a taxable brokerage account for investing purposes, what sorts of taxes do you need to just be aware of when you’re making investment decisions?

Alana Benson: Yes, this is the joy of long-term versus short-term capital gains taxes, which are taxes, so we aren’t huge fans of them. But if you are investing and you are making money, there will come a day where you need to pay taxes on the profits that you make from selling your investment. So you hold an investment for a long time, hopefully you make a bunch of money off of it, that money you might need to pay some form of capital gains tax. If you’ve held onto an investment for more than a year, you’re going to pay what’s called long-term capital gains tax, and that tax rate can be 0%, 15% or 20% depending on a couple factors like your taxable income and your filing status.

In contrast to that, if you hold onto an investment for one year or less, you’ll have to pay short-term capital gains, which are taxed at your ordinary income tax rate or your tax bracket. And the end takeaway of all of this is that long-term capital gains are likely more advantageous for you. And so, if you can hold onto investments for longer than a year, you’ll be taxed at a better rate.

Sara Rathner: Good thing to keep in mind for anybody who is thinking about the taxation of their investments, and Amy and their question mentioned a concern about the tax efficiency of their retirement investments. So it sounds like in their case, the 401(k) and Roth strategy combined could be an option for them. But let’s turn to different investment options within all of these different kinds of investment accounts that we’ve talked about so far. How feasible or common is investing in an ETF or exchange-traded fund or an index fund through your 401(k)? And maybe we should also start by defining those terms for our listeners who might be unfamiliar with them.

Alana Benson: I think that’s a great idea. ETFs are funds, so funds are basically baskets of investments. It’s a whole bunch of stocks all stuffed into one investment that you buy all at once versus buying a single individual stock. Exchange-traded funds are a type of funds as are index funds or index mutual funds. And a couple different things are important here. So whether or not you’re actually able to pick your own investments as specifically as exchange-traded funds or index funds is going to depend on your specific 401(k) plan, so that’s something that you’ll need to ask your 401(k) provider about.

But a lot of 401(k)s will actually set you up with what’s called a target-date fund. Target-date funds are really interesting because they automatically adjust your allocation over time. So if you start investing when you’re 20, your target-date fund will likely have a riskier group of investments held within it. And as you get closer to your target date of retirement, which is why they’re called that, your allocation will shift to be more conservative over time, and that’ll just happen in the background. That’s what most 401(k)s are made up of. So going in and changing what you’re investing in a 401(k) is pretty rare. You’ll likely just be in the investment in a target-date fund that is selected for you by your 401(k) provider.

Sean Pyles: Well, just to get to the core of our listener’s question and ask it straight out, are exchange-traded funds or ETFs a better “choice” for retirement investing versus index funds since ETFs are more tax efficient?

Alana Benson: Yes. So ETFs technically are more tax efficient than index funds just because of how they’re structured. When you sell an ETF, you’re typically selling it to another investor who’s buying it and the cash is coming directly from them and then you have to pay capital gains taxes. But it’s a little bit different with an index fund. And the long story short is that you could potentially owe capital gains taxes without actually selling a share because of how they’re structured. That being said, this happens a lot less frequently with index funds and ETFs than it does with other types of mutual funds. And from a tax perspective, ETFs generally have the upper hand over index fund, that’s true, but it’s a pretty minute difference and you probably will not have a huge tax bill just because you invested in an index fund versus an ETF. So if you have the option, maybe go with an ETF. If you don’t, I really don’t think you should be too stressed out about it.

Sean Pyles: OK. But in general, if you are investing for retirement through a retirement account like a Roth IRA or 401(k), the ETF versus index fund question probably isn’t that big of a concern since you most likely are not actively buying and selling stocks within these accounts, right?

Alana Benson: I’d say that’s true. And I think also to get to the listener’s question is that she’s talking about potentially doing this through a 401(k). Again, I’d stress like it’s fairly unlikely that you can actually do that unless your 401(k) provider allows you to do that. So the time that you’d run into this question is if you were investing, like you said, through a Roth IRA where you have to pick your investments yourself. Again, unless you are using a robo-advisor, in which the robo-advisor would pick investments for you. And most of the time robo-advisors invest you in a handful of ETFs and index funds as well. So you’ll be in the same investments no matter what.

Sara Rathner: So it sounds like what’s worth losing sleep over isn’t necessarily these decisions that don’t have massive differences between them, but more so just getting started on investing for retirement in the first place whenever you’re able to and consistently setting money aside for retirement over time and just letting those investments hopefully grow.

Alana Benson: Exactly.

Sara Rathner: So everybody save for retirement if you can. Anyway, Alana, is there anything else folks should keep in mind when deciding where and how to invest for retirement?

Alana Benson: I think you really said it. Keep in mind that the importance of account types should not be understated. So don’t just open a standard brokerage account if you think you could benefit from the tax advantages of something like a Roth IRA. Really make sure you know what type of account you want to get into and then start worrying about what types of investments you want to get into.

Sean Pyles: Well, Alana, thank you for joining us.

Alana Benson: Thank you for having me.

Sean Pyles: And now let’s get on to our takeaway tips. Sara, will you please kick us off?

Sara Rathner: Of course. First, understand how accounts are taxed. Roth IRAs, 401(k)s and other retirement accounts are taxed more favorably than brokerage accounts.

Sean Pyles: Next up, consider different investment options. Once you have your retirement account, you have a number of choices like target-date funds or a mutual funds.

Sara Rathner: And finally, investments have their tax differences too. ETFs are more tax efficient than index funds, but the difference is fairly small and it’s not typically a major factor in retirement accounts.

Sean Pyles: And that is all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected] Visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate and review us wherever you’re getting this podcast.

Sara Rathner: And here’s our brief disclaimer. We are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Sean Pyles: This episode was produced by myself with help from Liz Weston. We had fact-checking help from Pamela de la Fuente, Kaely Monahan mixed our audio, Jae Bratton wrote our show notes and a big thank you to the folks on the NerdWallet copy desk for all their help. And with that said, until next time, turn to the Nerds.

Source: nerdwallet.com

Apache is functioning normally

May 2, 2023 by Brett Tams

Like many Get Rich Slowly readers, I credit Your Money or Your Life with changing the way I approach my personal finances. This book transformed my relationship with money, and helped me to understand that by spending beyond my means, I was sacrificing a secure future for today’s passing pleasures.

One of the book’s key insights is that time really is money. Or, approaching it from the other direction, money is time. The authors write:

Money is something we choose to trade our life energy for. Our life energy is our allotment of time here on earth, the hours of precious life available to us. When we go to our jobs we are trading our life energy for money. This truth, while simple, is profound…

Our life energy is more real in our actual experience than money. You could even say money equals life energy. So, while money has no intrinsic reality, our life energy does — at least to us. It’s tangible, and it’s finite. Life energy is all we have.

I know this sounds a little hokey. In fact, when I first read Your Money or Your Life, I dismissed this section as New Age mysticism. That was a mistake. If you can look past the unfortunate terminology, there’s a lot of power to this concept. What Dominguez and Robin are actually saying is that time is money.

Your Money or Your Life uses this notion as the foundation to its philosophy of financial independence: time and money are intertwined, and the relationship between them frames all of our financial decisions. To illustrate, the authors encourage readers to calculate their real hourly wage.

Nominal Hourly Wage

We don’t earn as much as we think we do, write Dominguez and Robin. You may be paid $15 an hour, but your real hourly wage is less than that. Possibly much less.

Let’s say we have a friend named Joe and that he’s a plumber. Though Joe hopes to earn $250,000 a year eventually, he currently makes the national average for his profession, or about $48,000 a year for a 40-hour workweek. His nominal wage is approximately $24 per hour.

Based on these figures, if Joe the Plumber decides to buy an iPod nano ($150), he’s exchanging about six hours of his time for it. (6 hours worked x $24 per hour = $144 total wages, which is close enough.)

Ah, but it’s not that simple, argue Dominguez and Robin. Joe’s real hourly wage isn’t $24 — it’s something lower.

Hidden Expenses

Think about your job. Think of all the things you do and the money you spend that you wouldn’t if you did not work. How long does it take to drive to work? How much does the gas cost? Does your job require that you own a suit or a uniform? Do you have to take vacations to cope with the stress in your career?

Your Money or Your Life lists eight such possible job expenses, including a few which might be applicable to Joe:

Commuting — Joe’s office is 20 miles from his home. Every day, he spends an hour commuting to and from work in his 2000 Ford Focus, which costs about 38 cents per mile to operate. His weekly commute costs 5 hours and $76 (38 cents times 200 miles).
Clothing — It doesn’t take Joe extra time to get dressed in the morning, but it does cost him a little extra money. Several times each year, he has to buy new work clothes because the old ones keep wearing out. Maybe he spends $300/year doing this.
Food — Joe might take a sack lunch if he were on his own, but he works with a partner who prefers fast food. Joe likes McDonald’s and Subway, too, so he’s happy to go along for the ride. Each day, Joe spends about $5 and one hour for lunch.

Though Your Money or Your Life lists several other ways in which work can cost you money, these are Joe’s only expenses. His job costs him about 10 hours per week (or 500 hours per year) and about $107. We’ll round it down to $100 per week, so that’s about $5000 each year.

Real Hourly Wage

Once he’s estimated the extra time and money he spends on the job, Joe can compute his real hourly wage. The equation is actually very simple:

First, Joe subtracts his work-related expenses from his annual salary to find his actual earnings.
Next, he divides his actual earnings by the total number of hours he spends each year on work-related tasks (including business trips and Christmas parties, etc.).

This simple equation produces Joe’s real hourly wage.

Using our earlier figures, Joe the Plumber’s actual salary would be $43,000 per year ($48,000 base minus $5000 for commuting, clothing, and food). Joe leaves the house at 6:30 in the morning, and does not return until 4:30 in the afternoon, which means he’s devoting 50 hours per week — or about 2500 hours per year — to his job.

Joe is spending about 2500 hours per year to earn $43,000. His real hourly wage is $17.20. Not bad, but still much lower than the $24 per hour he thinks he’s earning.

Knowledge is Power

Why does your real hourly wage matter? Remember that time is money — literally. When he’s making $48,000 a year, it only takes Joe six hours to earn enough for an iPod. That’s less than a day’s work. But based on his real hourly wage, it would take Joe nearly nine hours to earn the same amount. To earn the money for anything he wants to purchase, Joe has to spend 40% more time working than he thinks he does.

Computing your real hourly wage allows you to see how much you’re really getting paid, which can change your perspective. When I first did this in 2004, it had an immediate effect.

At that time, I was spending a lot of money on comic books. After I calculated my real hourly wage and applied the number to my expenses, I was able to see how much time each book was costing me. Was it really worth three hours to buy a collection of Aquaman stories I’d probably never read? For me, the answer was “no”, and I began to reduce my spending.

This “real hourly wage” is also a great tool for comparing prospective jobs, especially when there are a lot of variables. All things being equal, a job with a higher real hourly wage is better.

Now that I’ve spent several hours of my life energy explaining this concept, later today I’ll describe an even better way to look at spending decisions, one that takes into account taxes and living expenses.

Note: If Joe really did earn $250,000 a year, and all our other assumptions remained the same, the iPod would only cost him an hour-and-a-half of his life energy.

How Much Time Does Stuff Actually Cost?

After you’ve computed your real hourly wage, you can use it to measure how much things cost. An iPod might cost nine hours of work, or a new sweater might cost three. (You don’t even want to consider how much a new car would cost…)

But does it really make sense to look at spending this way? Does this really tell the full story? During our discussion last week about unconventional money tips, BW wrote with a better way to look at spending. He points out that not every dollar can be counted as disposable income:

I don’t like to think about how many hours I worked for an item I want to buy because it makes the item seem too cheap…A better way to think about it is to subtract fixed expenses from pay first.

He’s right. Let’s say your nominal pay rate is $24 per hour. You compute your real hourly wage as recommended by Your Money or Your Life and find that it’s $17.20. But that’s not the end of the story.

From this money, you must pay taxes, purchase housing and transportation, buy food and insurance, and more. If we make the arbitrary assumption that your fixed expenses (including savings) consume 80% of your pay, your actual disposable income would be $3.44 per hour.

This provides a drastic change to the length of time needed to work for a $150 iPod:

Method	Rate	iPod Cost
Nominal Wage	$24.00/hour	6.25 hours
Real Wage	$17.20/hour	8.72 hours
After Expenses	$3.44/hour	43.60 hours

Using this example, it doesn’t take you just a day to earn an iPod, but an entire week.

Now, I don’t recommend that you walk around evaluating every buying decision based on “real wage after expenses” units. While educational, this is likely to quickly drain the joy from living. (You might run the numbers once and examine some hypothetical scenarios.)

However, I do believe it’s important to be mindful of your spending. Evaluating your purchases based on the time required to pay for them is an excellent way to become more aware of the actual costs for the things you buy.

Source: getrichslowly.org

Apache is functioning normally

May 2, 2023 by Brett Tams

If the past few years have often made you fantasize about living amidst uninterrupted wilderness, we have a treat for you.

Thirty minutes southeast of Missoula, and about 2.5 hours northwest of Bozeman, Montana, lies the sprawling Five Ranges Ranch — currently on the market for $25 million (Mauricio Umansky of The Agency along with Joy Vance and Jeremy Seglem of The Agency Bozeman hold the listing).

^{Photo credit: The Agency}

A massive 4,880-acre property that stretches from the banks of the Clark Fork River to the tops of the Garnet Mountain Range of the Rocky Mountains, Five Ranges Ranch is a truly rare offering.

It’s also a bonafide hunting paradise, being home to a native herd of over 300 elk, as well as upland birds and turkeys, with over 100 miles of game trails and wilderness roads to explore.

^{Photo credit: The Agency}

At the center of it all sits a majestic 8,510-square-foot main lodge, which comes with ample accommodation for guests and fellow big-game connoisseurs.

SEE ALSO: NASCAR Champ Tony Stewart’s house is a massive 415-acre hunting paradise

The Five Ranges lodge features two levels of living space and a third-level Sky Lounge with towering views of the Pintler Mountains.

^{Photo credit: The Agency}

Incorporating natural and handmade elements that pay tribute to the lodge’s locations — and the breathtaking landscape that surrounds it — the lodge features unique finishes like American Clay walls and ceilings, hand-forged ironwork, custom-made light fixtures, and reclaimed white timber oak flooring.

^{Photo credit: The Agency}

On the main floor, we find a hand-placed rock fireplace in the living room and towering two-story, floor-to-ceiling windows that open up to uninterrupted alpine and valley views.

^{Photo credit: The Agency}

Also on the main floor: a beautifully appointed kitchen, dining room, and library, as well as access to the expansive multi-level deck outside.

^{Photo credit: The Agency}

But it’s the ground floor that holds the key to funtown, as this space was specifically designed for entertainment.

SEE ALSO: Is the Yellowstone ranch real? We found the Dutton ranch in real life

As such, it comes with some extraordinary features like a high-quality game room with premium sound and video, hand-crafted white oak and persimmon wood Hellgate Bar, country club style locker room, and additional walk-out covered patio and entertainment space offering over 5,000 square feet of outdoor living.

^{Photo credit: The Agency}

But the lodge isn’t the only accommodation available on site.

There are also two apartments — nestled below the lodge itself — that provide extra space for guests or people working on the Ranch, as well as several cabins dotted throughout the timberland and connected via off-road trails.

^{Photo credit: The Agency}

Equipment and machines necessary for the sprawling 4,880+ acre ranch’s upkeep also have their dedicated space, in the oversized 6,000-square-foot garage.

Rightfully touted as “a world unto itself”, the Five Ranges Ranch is one of Montana’s most exclusive real estate offerings and a dream retreat for big-game hunters and nature lovers alike.

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Source: fancypantshomes.com

Apache is functioning normally

May 1, 2023 by Brett Tams

A while back I wrote a review of Betterment.com, an investing website that aims to make investing easier and more accessible to everyone. The site has a ton of great features for beginning investors including that they allow for automatic investments in great low cost funds, and allocations are automatically adjusted on a regular basis. Betterment takes a complex topic and makes it accessible to everyone via their easy to use interface.

When I wrote the review I had almost all good things to say about the website. In short, I loved just about everything about it, except for one thing. Their fees.

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Betterment Fees

At the time I wrote the review Betterment had a fee structure that was a little bit more expensive than I was comfortable with. Their fees, for most beginning investors with $0-$25,000 in the account, it was going to mean paying a 0.9% annual management fee. Even if you had more in the account than that – it would mean anywhere from 0.3%-0.7% in annual fees. Here’s a look at their fee structure.

While those fees may make sense for some, it wasn’t something that made sense for a lot of people.

Betterment Fees Are Now MUCH Lower

The fees, while they weren’t outrageous, certainly put it in a position where I didn’t feel I would be using it for too much of my own investing. I only had a small amount in my Betterment account. You could probably do better by finding some low cost index funds from a company like Vanguard or another low cost mutual fund company. At the same time, I still liked what they were doing with their site, and how easy they make investing for the beginner.

This week, however, Betterment is announcing some big changes for their service. First, and most importantly in my eyes, they’re announcing that they’ll be lowering their fees across the board to make Betterment an even more attractive option, with fees extremely competitive in the industry. Here’s a look at their newer better fee structure:

So we go from a service that was charging .90% for most low balance investors, to one where the costs are much more affordable. They now have 3 plans, the “Builder”, “Better” and “Best” plans.

Builder Plan: Minimum balance of $0 and $100/month minimum deposit with a .35% annual fee.
Better Plan: Minimum balance of $10,000. Includes next day transfers. .25% annual fee.
Best Plan: Minimum balance of $100,000. Includes next day transfers and custom portfolio options. .15% annual fee.

If you just max your Roth IRA out for 2 years ($10,000), you’ll be paying the lower .25% fee. For balances lower than $10,000 you’ll still only be paying .35% – that’s a lot lower than the .90% we were paying before.

If someone is an existing customer and doesn’t want to deposit $100 per month, they can opt to stay in the old fee structure (if that makes sense for them). Alternatively, both existing and new customers with balances under $10K who do not want to deposit $100 per month can upgrade to the “Better” plan for a fee of $3 per month in lieu of the 0.25% annual fee. With that, auto-deposit would be optional and they would get next-day transfers.

Finally, all new customers get to use the site for free for the first 30 days! So if you’re not sure about this Betterment thing, you can give it a shot without having to worry about fees at all.

UPDATE: 2/1/2017 Betterment has changed their fee schedule once again. The fee is now a flat 0.25% annual fee for all users on the main “Digital Plan”, regardless of account size. The fee is capped at 2 million dollars. Other plan types, Plus and Premium have the ability for you to talk to CFP professionals, and have more hands on account management. They cost slightly more. There are now three main plans.

Digital Plan: The plan that most people will end up using, the Digital Plan, charges a flat pro-rated yearly fee that is 0.25% for all users regardless of your account balance.
Plus Plan: If you opt for the Plus Plan, where you get access to a team of CFP® professionals which includes an annual phone consultation. The cost is 0.40% annual fee (with a $100k account minimum).
Premium Plan: The Premium Plan gives you unlimited phone consultations with the Betterment CFP® professionals and costs 0.50% annual fee per year. It carries a $100k account minimum.

Custom Portfolio Option

It probably won’t apply to most of my readers, but I was wondering what Betterment meant when they referred to a “custom portfolio” option for people in their “Best Plan”. I reached out to a contact that I have at Betterment and this was their reply.

The custom portfolio option, which comes with the “Best” plan, is the option to actually get a customized portfolio to meet your specific needs. For example, if international exposure just doesn’t make sense for your particular situation (maybe you own an international business and do not need additional exposure here), you will have a consultation with our CEO, Jon Stein, and he will help you develop a custom portfolio with less international exposure. You will still be investing in this portfolio through the Betterment platform.

New IRA Options For All Users

Another thing that Betterment is announcing is that all users will now be able to invest in IRAs via their platform. That option was already available to users who have a regular Betterment investing account, but now all users can invest in IRAs, both Roth IRA and Traditional IRA.

In addition users now have the ability to rollover an old 401(k) or IRA to Betterment. That should make it even more attractive to a lot of folks who are looking for an option that is easier, and that has better investing options.

Conclusion

Before Betterment made changes to their fees I was already a big fan of the service. They take a complicated thing – investing – and make it so much easier for the layman. You just choose your allocation, how much to invest, and sit back and reap the rewards.

Now that Betterment has lowered their fees substantially I’m sure I’ll be using the service even more than I was before. It really is now becoming a legitimate option for millions of investors out there who don’t want to have a lot of day to day involvement in their investments, but who still want to get some good returns for their retirement nest egg. Throw in the fact that the site now allows for tax advantaged IRA accounts, and you’ve got a true winner.

Open A Betterment account and get a signup bonus.

The links on this page to Betterment.com are affiliate links. While I will make a small amount money if someone signs up for an account through my link, I only recommend others use sites or services that I would use, or have personally used myself.

Source: biblemoneymatters.com

Apache is functioning normally

May 1, 2023 by Brett Tams

How Today’s Inflation Compares to History and What You Can Do About It

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It’s no secret at this point — inflation continues to be a big issue for American consumers. The inflation rate year-over-year for March 2023 was 5% — and this is actually a bit of a dip, with inflation rates for the previous year going as high as 9.1%. This is understandably difficult for many people, as their wages may not be going up, meaning their purchasing power is going down. Many also have concerns about how inflation will impact the market, and by proxy their portfolios. New analysis from Morningstar looks at exactly how inflation will impact Americans’ portfolios, looking at two key historical lessons.

For more help with making sure your portfolio can stand up to inflation, consider working with a financial advisor.

Looking at History

Morningstar compared current market data with data from two other periods in American history where there has been high inflation — between February 1966 and January 1970, and between February 1977 and March 1980. While there is a lot of complicated financial math and analysis you can read in the original article, the gist of the matter is this — in both of these situation, there was a positive correlation between stocks and bonds — meaning that when one went up, the other went up as well. This is not the norm, as generally stocks and bonds correlation of close to zero or a negative correlation.

From November 2000 to 2020, the same general trend continued — stocks and bonds respective values were mostly independent, with some negative correlation. In 2021, though, the correlation moved to the positive side of the ledger, with a correlation coefficient of 0.58 in 2022 and 0.15 for the trailing three year period. For the two historical periods discussed above, the correlations ended up at 0.26 and 0.28, respectively.

What It Means For Your Portfolio

While understanding how the market has responded to past inflationary environments at a macro scale is great, most retail investors probably just want to know one thing — how does this impact my portfolio…and, as a consequence, my future?

Morningstar’s big takeaway is that the impact of adding bonds to a portfolio is muted during periods like right now. Normally, bonds are used as a way to reduce risk and improve diversification. While the future of interest rates and inflation remain murky, though, this may not be as effective right now.

That isn’t to say that you should pull all your money from bonds and throw it all into the stock market; bonds can absolutely still be an important part of your strategy, the effectiveness of bond investment may be a bit lower impact for awhile.

How You Can Respond to Inflation

The most important thing you need to ask yourself during a period of high inflation is if your portfolio is at the very least keeping pace with the inflation rate. If you’re seeing 4% annual growth in your retirement portfolio, that may seem like a great outcome; if that rate is coupled with a 6% annual inflation rate, though, you’re actually losing 2% annually in value.

There are many investment options available that are designed to serve as a hedge against inflation. One of the most popular are Series I bonds, which have an adjustable rate that is pegged to inflation. You are limited in how many of these you can buy, but if you’re looking for an investment that will give you a guaranteed rate of return that should absolutely keep up with even the nastiest inflationary time, I bonds are worth considering.

The Bottom Line

Though it has slowed down a bit, the inflation rate is still relatively high. As in past time period with similar inflation rates, the correlation between stocks and bonds currently positive, meaning they go up and down value together. This makes bonds less useful as a way to diversify and protect your money.

Investing Tips

A financial advisor can help you make the most of your money. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset’s free asset allocation calculator to see what your portfolios mix should look like.

Ben Geier, CEPF®
Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.

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Source: smartasset.com

Apache is functioning normally

May 1, 2023 by Brett Tams

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Investing columnist Matthew Amster-Burton has been answering questions from the Mint.com Facebook page and Twitter. This week: questions about 401(k)s and other retirement plans.

Rolling over a 401(k) to a Roth IRA

Al asks: Can I roll my 401(k) into my Roth IRA when I leave my job?

Sort of. How’s that for a satisfying answer?

Here’s the deal. Unless you have a Roth 401(k) (a fairly new and rare beast), a 401(k) is like a traditional IRA, not a Roth IRA. You put pre-tax money into a 401(k): unlike the rest of your paycheck, your 401(k) contribution goes straight into the account without the IRS taking its share via withholding. Of course, you’ll still have to pay taxes later when you withdraw the money… or convert it to a Roth.

If you roll your 401(k) over to a Roth IRA, you have to pay income tax on the entire balance. Since you’re leaving the money in a retirement account, there’s no early withdrawal penalty, but the converted amount is considered income and you could end up in a higher tax bracket. Furthermore, the tax payment has to come from outside the account. For example, if you’re in the 25% bracket and you roll a $50,000 401(k) over to your IRA, you’ll need to cough up $12,500 cash.

The bottom line: Roll it over to a traditional IRA. You won’t pay any tax or penalty and you can look into doing partial Roth conversions, or none at all, depending on your tax situation.

Pros and cons of 401(k)s and 457(b)s

Robert asks: What are the pros and cons of a 401(k) vs. a 457(b)?

If you’ve never heard of a 457(b), you’re probably not eligible for one, but stay with me a minute, just in case.

A 457(b) is a pre-tax savings plan similar to a 401(k). While 401(k)s are widespread, only public employees and certain highly compensated employees in the private sector have access to a 457(b). (Isn’t “highly compensated employee” a great euphemism for your boss’s boss? It’s right up there with “high net-worth individual.”)

If you have access to a 401(k) and a 457(b), you can contribute $17,000 (if you’re under 50 years old) to either or both. Yes, that means $34,000 in total. The main difference between a 401(k) and a 457(b) is that with the 457(b), you can make withdrawals at any age without a penalty, as long as you’re no longer working for the employer where you signed up for the 457(b).

If you’re a public employee, therefore, it generally makes sense to contribute to a 457(b) before contributing to a 403(b) (the government employee equivalent of a 401(k), and I am so sorry for the alphabet soup), as long as you don’t forego a matching contribution.

There’s a special wrinkle to non-governmental 457(b)s, however: unlike a 401(k), the money isn’t entirely yours. Until you actually withdraw it, it’s an asset of your employer and could be turned over to creditors in bankruptcy. The actual risk of this happening is remote, but it’s scary enough that private sector employees should fill their 401(k)s before considering the 457(b).

The bottom line: A governmental 457(b) is excellent, so use it; a private 457(b) is good, but riskier, so use it only if you fill up your 401(k).

Rolling over 401(k) contributions

Craig asks: Can I annually, or even more regularly, roll over contributions I have made to my employer’s 401(k) into my Roth IRA? I am under 59.

No—except in one unusual situation.

Generally speaking, you have to leave 401(k) money in the 401(k) until you change jobs, retire, or quit in a huff and slide out the back of the plane.

Some employers, however, allow in-service distributions of after-tax contributions. What this means:

You contributed the full $17,000 maximum to your 401(k)
Your company allows you to contribute additional money, after tax
That additional money can be rolled over into a Roth IRA

Yes, this means you have to max out your 401(k) before there’s even a chance you can do this. (Actually, sometimes you can also get away with it if you’re over 59-1/2.) If you’re a highly compensated employee (yay!) and are contributing $17,000 already, by all means, ask your benefits office about in-service distributions.

There’s one other situation where you might be able to do rollovers without cleaning out your desk. If your employer’s plan is a SIMPLE IRA, rather than a 401(k) (yes, a SIMPLE IRA is yet another similar pre-tax retirement plan), you can roll over any money that’s been sitting in the plan for at least two years. And you probably should, because SIMPLE IRAs tend to charge high fees and offer lousy investment options.

The bottom line: You probably can’t do this.

Do you have an investing question for Matthew Amster-Burton? Head over to the Mint.com Facebook page or Twitter and ask away!

Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.

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Apache is functioning normally

May 1, 2023 by Brett Tams

Life insurance is an important part of most any financial plan. This is the case regardless of one’s occupation. When obtaining life insurance coverage, there are some professions – such as those who are members of the military – who may have a harder time in getting all of the benefits that they may need. For example, numerous life insurance policies will not pay out a benefit to beneficiaries if an insured is killed in the act of war.

Likewise, most life insurance providers will charge an additional amount of premium to cover those who are in “hazardous duty” occupations. And, even if an individual in such an occupation can obtain coverage, there may be a long list of restrictions that can make the coverage difficult to collect from in the event of a claim. This, however, is not the case for those who get their life insurance and other various benefits through Navy Mutual.

The History of Navy Mutual Life Insurance

Navy Mutual has been in the business of offering insurance and annuity benefits to military members since 1879 – often without fees, fine print, or frustration on the part of the policy holders regarding securing coverage.

This insurer, which is the Navy Mutual Aid Association (but referred to as Navy Mutual for short), is a non-profit entity that offers benefits to Navy and other military veterans. As a non-profit, Navy Mutual has acted as a mutual insurer, with payments going towards improving member services, and for reducing its overall costs.

For more than a century, this insurer has fulfilled its duty of supporting military families by offering numerous life insurance and retirement annuity options so that they can also experience the financial security they deserve.

In addition to offering life insurance and annuities, Navy Mutual offers other helpful services, as well, such as assistance with obtaining government benefits to which military members are legally entitled, and educating veterans and their families on matters of insurance and financial security.

Also, beneficiary service and support is an important aspect of what is offered by Navy Mutual, as is the representation to the Department of Veterans Affairs. As a chartered Veteran Service Organization, Navy Mutual can provide its members with assistance that they need with their benefits. An added service is free secure vault storage of valuable documents for its members.

Navy Mutual Life Insurance Review

In addition to the financial and insurance related benefits it offers, Navy Mutual is well known for being a leader in community service, as well as in civic responsibility. The company is very active within the communities that it serves – particularly with those that pertain to military (current and former) members.

Just some of the areas in which Navy Mutual serves include the following:

Terminal Illness Options Counseling – Navy Mutual offers to counsel to military families – regardless of their membership status – at no charge or obligation, when an active duty military member has been diagnosed with a terminal illness. The company also presents various financing options to the survivors of those military members who die during active duty versus those who die during retirement. Also, the company provides survivors and military members with an explanation of various benefit election options that are available.

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Help for Military Families in Need – Navy Mutual also helps military members and their families in times of need by contributing to the Toys for Tots program, as well as to the Navy Marine Corps Relief Society, on a yearly basis.

As it pertains to benefits, the plans that are offered through Navy Mutual offer some unique components, such as the following:

No war clauses. Regardless of where a member serves, he/she does not have to worry about benefits being denied due to a war clause.
No military service restrictions. Most life insurance providers will charge an additional amount of premium to those who serve in the military – if they even cover military personnel at all – to provide benefits for hazardous duty situations, aviation, and acts of terrorism. At Navy Mutual, insureds do not need to worry about this, either.
Maximum coverage is available. Navy Mutual allows its members to purchase their maximum amount of life insurance coverage – which is currently up to $1 million – regardless of where the individual is currently, or where he or she is going.
No sales fees or commissions. Because Navy Mutual is not a commercial life insurance company, there are no shareholders to keep satisfied, and members can enjoy the benefits of low costs.
Portable coverage. Unlike some other insurers that cater to military members, the insurance coverage that is obtained through Navy Mutual can stay with the individual – even as he or she transitions from the military.
Fast application for the process for members who are preparing to deploy. Navy Mutual also offers expedited processing of insurance and annuity applications for those members who are preparing to deploy. This can help them to get a plan in place – often within just a few days.

Online application process. Navy Mutual also offers a convenient application process, so members do not need to meet in person with an insurance agent to get their information completed, and their policy in place. It can also help those members who are already stationed in war zones and other remote areas to still apply for coverage.

Navy Mutual is secure and stable from a financial standpoint, and the company is known for making timely payments of its policy holders’ claims. The company has more than $25 billion of total insurance in force and receives more than $80 million in total direct premiums. As of year-end 2016, the company had more than 114,000 policy holders in its book of business and more than $2.9 billion in total cash and invested assets.

Insurer Ratings and Better Business Bureau (BBB) Grade

Over the years, Navy Mutual has kept a high level of financial stability. One of the key reasons behind this is the company’s low overhead, as well as its consistently increasing number of new members.

The company also has substantial financial reserves so that it can pay out its policy holder claims promptly. Due in large part to its stable financial footing, Navy Mutual has received high ratings from the insurer rating agencies. This includes an A+ rating from Fitch Ratings Agency.

Also, even though Navy Mutual is not an accredited life insurance company through the Better Business Bureau (BBB), it has been given a grade of A+ by the BBB. This is on an overall grading scale of A+ to F.

Over the past three years, Navy Mutual has only had to close out one single customer complaint through the Better Business Bureau. This criticism centered on the company’s advertising and sales issues. (No complaints have had to be closed out with the BBB within the past 12 months).

Life Insurance Coverage Offered Through Navy Mutual Life

Navy Mutual Life Insurance offers an extensive list of different life insurance policy options to choose from. These include both term and permanent life insurance options. These include the following:

Flex Term Life Insurance – The Flex Term policy offers a way to obtain level term insurance coverage for a set period of time, along with small premiums. This coverage is guaranteed up to the insured’s age 50 (or to age 40, if the insured is a smoker). There are no restrictions, and the coverage can continue even after the insured is not longer in the military. This plan provides death benefit coverage from $50,000 up to $1 million – and there are no military service restrictions, war clauses, terrorism clauses, aviation restrictions, or travel restrictions. There are several additional notable features on this coverage, including a guaranteed convertibility option, accelerated death benefit option, and a child benefit rider that can be added.

Express Term Life Insurance – The Express Term plan is a term life insurance policy that members can secure immediately, without having to take a physical as a requirement for approval. This policy offers $250,000 in life insurance coverage for a full ten years at a fixed monthly premium. This can be a viable option for those who are preparing to deploy soon and need to secure life insurance protection for those they care about.
Level ll Term Life Insurance – The Level ll term life insurance product essentially takes over where the company’s Flex Term plan ends by providing level life insurance coverage – and stable premiums – for members up to the age of 85. This policy is offered in benefit increments of $10,000 – with a maximum coverage amount of $1 million. This policy is purchased in one-year increments, for a minimum duration of five years. There are actually three different underwriting categories for this policy – which can impact the amount of premium that is due. These underwriting classes include the Standard, the Select, and the Super Select. This plan can also be converted over to a whole life insurance policy with no physical required in order to prove evidence of insurability.
Flagship Whole Life Insurance – The Flagship Whole Life insurance policy option through Navy Mutual offers coverage for the member’s entire lifetime – provided that the premium is paid. This participating whole life insurance plan combines the protection of a permanent life insurance policy with the flexibility of tax advantaged cash value growth. This means that the funds inside of the policy’s cash value can grow and compound over time without the gain being taxed (unless the funds are withdrawn). The policy holder can borrow against the cash value for any reason, such as paying off higher interest debt, or even supplementing his or her retirement income. The death benefit on the Flagship Whole Life plan starts at $10,000 and goes up to $1 million. This program offers guaranteed lifetime death benefit protection, as well as a chronic / terminal illness rider. In addition, because Navy Mutual is a mutual entity, policy holders may also be eligible to receive dividends with this policy.

Other Products and Services Available

Navy Mutual also offers retirement annuities, which can help to ensure that members will have an ongoing lifetime income in retirement, as well as a way to save and grow money in a tax advantaged manner.

The company offers three annuity options, including a:

Single Premium Immediate Annuity
Single Premium Deferred Annuity
Flexible Premium Retirement Annuity

To deposit money into an annuity, members may use current savings, and funds that are already invested in a retirement account, such as an IRA (Individual Retirement Account) or 401(k).

How to Get the Best Premium Rates on Life Insurance Coverage Through Navy Mutual

When searching for the best premium rates on life insurance, it can be important to shop and compare to determine that the coverage you need is priced to meet your budget. If you are interested in comparing policies and premium quotes from several top insurers, we can help. We are an independent insurance brokerage, and we work with many of the best life insurance carriers in the industry today. That means we can provide you with detailed information about multiple options, and from there, you can choose which will be the best one for you and your specific needs. To see the policies and quotes geared towards your situation, just click here to fill out our quote form.

Source: goodfinancialcents.com

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