Roth Versus Traditional IRAs

An IRA is one of the most common types of retirement savings accounts. You’ll need to choose between a traditional or Roth IRA.

Making the Choice

The main difference between a traditional and a Roth IRA is how you can get a tax break. Traditional IRAs allow you to make tax-deductible contributions, while withdrawals are taxable in retirement. On the other hand, Roth IRAs allow you to make tax-free withdrawals once you retire.

Most people start the debate about the advantages of a traditional or Roth IRA by asking themselves if they think their tax rate will go up or down in the future.

If you can answer that question confidently, you can choose the type of retirement savings account that will provide you with the most significant tax break. For instance, if you’re planning on being in a higher tax bracket in the future, a Roth IRA might be the best choice. On the other hand, if you expect lower tax rates in retirement, a traditional IRA might be the best choice.

Since it’s hard to predict your tax rate when you retire, it’s essential to consider other factors, such as your lifestyle and goals, when choosing a retirement savings account.

Why Most People Choose a Roth IRA

One of the main advantages of a Roth is that it allows people to withdraw money from their retirement accounts without paying taxes or a penalty. Unlike traditional IRAs, early withdrawals from a Roth are not restricted. You can do so without paying taxes and penalties if you have to take money out of your retirement account.

However, if you’re planning on taking money out of a traditional retirement account before you retire, you’ll likely be penalized by the IRS. This means you’ll have to pay a 10% early withdrawal penalty and taxes on the money you’re taking out. There are some exceptions to this rule, and you’ll need to be more careful with your money.

Unlike traditional IRAs, a Roth allows retirees to make withdrawals without having to start taking minimum distributions at age 72. A Roth also does not require minimum distributions. If you’re still alive and have a Roth, you can continue growing the money without taking minimum distributions.

If you’re not highly disciplined, you might have more after-tax savings in a Roth IRA. Although both retirement savings accounts provide a tax break, the Roth has an overlooked benefit. Unlike traditional IRAs, the tax benefit from a Roth can only be withdrawn once you retire, which means you won’t be tempted to spend the money before you retire.

One of the main advantages of a Roth is that it allows people to get more after-tax savings if they’re not planning on investing the money they’re getting back from their traditional retirement account. Most companies provide a similar tax break to traditional IRAs by offering a Roth option for their employees. If you’re not planning on investing the money you’re getting back from your retirement account, then you should consider a Roth instead.

Conclusion

The main advantage of a traditional IRA is that it provides a tax break. This benefit can be very advantageous for high-income individuals, as it allows them to save for retirement without making much money. In the long run, it can also make it more affordable to save for retirement.

Although a Roth is more advantageous than a traditional IRA, you’ll eventually have to deal with the tax burden in retirement. With a Roth, you’ll have the advantage of the tax break without having to make a lot of money.

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Originally published at EtienneKiss-Borlase.net

Best Ways to Increase Wealth as a Young Adult: Part 2

Here are more strategies to increase wealth early in your career.

 

Minimize Living Expenses

Having a budget and an automatic allocation of your income can help keep your expenses and lifestyle under control. Amazon is an excellent example of how easy it is to buy things you don’t need. Jeff Bezos is a multi-billionaire due to the company’s success. Besides cutting back on certain expenses, try implementing other strategies to keep your living expenses under control. These include getting a roommate, reducing your TV subscriptions, and eating at home more. Having a budget can help you grow your wealth faster.

 

Invest for the Future

According to Don Roork, a financial advisor, young adults tend to make poor investment decisions due to their emotions regarding the market. He said that this is because they are more likely to make mistakes when the market is volatile.

 

Roork suggests that young adults establish a plan and stick to it to avoid making irrational decisions. He said that volatility is expected in the market, and building a diversified portfolio is an excellent way to take advantage of the market’s changes.

 

Roork also said that young adults should not allow their emotions to influence their decisions when it comes to investing. He noted that starting in their 20s, they will be ahead of the crowd when the market begins to fall.

 

Use Extra Income Wisely

Getting a raise or bonus can help boost your standard of living, but it’s essential to set aside some of it. You can use the money for various expenses, but you should also set aside some for your savings. Some experts suggest a 50-50 strategy, which involves half of your new income going to you and the other half going to investments or savings. This method can also apply to tax refunds.

 

Have an Emergency Fund

According to a 2018 report by the Federal Reserve, about 40% of Americans don’t have enough money to cover an emergency expense. This is shocking, and it’s no surprise that many people fall behind on their bills.

 

One of the most critical factors that young adults should consider when building wealth is having an emergency fund. This can help them avoid unexpected expenses that could prevent them from achieving their goals. Most experts recommend establishing a savings account for at least three to six months of their income. However, even a few thousand dollars can significantly offset an unexpected expense. Establish an emergency fund in a separate account from your savings and checking accounts. This will allow you to avoid spending it. Also, make sure that the funds earn interest.

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

Best Ways to Increase Wealth as a Young Adult: Part 1

If you’re a young adult, you might think that money is hopeless for most people. Most publications and news outlets have labeled millennials as freeloading individuals who would rather spend their money on things they want. It’s common for young adults to live in their parent’s basements and struggle to find well-paying jobs after college.

 

Despite the negative headlines these stories generate, they don’t represent the reality of today’s young adults. Misrepresentations of them can also be dangerous. The idea that young people earn less than $40,000 a year and only work until they die is frightening. If they’re set up to fail, why bother?

 

If you’re a young adult, then you have the opportunity to start building wealth right now.

 

Automate Payments

A great way to start increasing your wealth is by setting up recurring payments for various expenses, such as your bills and retirement contributions. These payments will automatically be deducted from your bank account, ensuring you don’t fall behind and rack up late fees. 

 However, make sure to review them regularly. This will help you to identify areas where you can improve and increase your savings.

 

Contribute to Retirement Funds

Despite the tough job market and the rising student loan debt, young adults still have plenty of time to build wealth for their retirement slowly. According to Anthony Montenegro, a financial advisor at The Blackmont Group, there is still plenty of time for them to build wealth.

 

One of the most important factors people consider when building wealth is the time they have available to take advantage of their investments. According to Montenegro, having more time to build wealth is a distinct advantage over starting to save for retirement at the age of 55.

 

Even if you have already started to save for retirement, you must continue to increase your contributions each year. This will allow you to take advantage of the tax-free gains generated by your investments.

 

According to financial advisor Jose Sanchez, you can increase your contributions to your retirement accounts by 1% each year until you reach the point where you can fully fund them.

 

If you can get away with it, increase your contributions to your retirement accounts by whatever percentage you can. This will allow you to take advantage of the tax-free gains generated by your investments. You can also build wealth by opening a Roth or traditional IRA.

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

How to Choose a Reliable Financial Advisor

If you’re not a financial expert, choosing a financial advisor can be a difficult decision. There are so many specialized areas that it can be hard to know which one to choose. For instance, estate planning is different from investing. Financial planning is also different from budgeting.

One of the best ways to start is by choosing a financial advisor who is a robo-manager. This financial advisor can help you manage your investments and make intelligent decisions. They can also help you build a financial plan and manage your risk tolerance. You can start with a simple online account with a fee of only a few dollars.

However, if you’re planning on investing in a more advanced way, such as for estate planning, you might want to consider a human financial advisor. Here are some factors you should consider when choosing a financial advisor.

Know What You Need

Before you start working with a financial advisor, you must identify why you need help. Some questions you should ask include: Do you need help with budgeting? Do you need help with investing or creating a financial plan? These questions will help you determine what kind of financial advisor to look for.

Check Credentials and Background

You should also check the credentials of the individuals working for you. For instance, if you’re looking for a certified financial planner or a chartered financial analyst, these designations require that the individuals act as fiduciary.

Many financial advisors have a lot of experience, and you can thoroughly examine their bodies of knowledge. They also agree to follow a code of ethics.

The code of ethics for financial advisors states that they should act in the best interest of their clients. This includes placing their clients’ interests above their own.

You can check a financial advisor’s credentials by visiting the websites of various professional organizations, such as the Financial Planning Board and the Chartered Financial Analyst Institute. While these credentials don’t guarantee that the individual is working in your interest, they can provide valuable insight.

Know What You Can Pay

Despite the reputation that financial advisors are expensive, there are various options that you can choose from when it comes to selecting a financial advisor. Before you commit to any services, you must understand the cost of doing business.

One of the most common types of fees that financial advisors charge is an annual fee that’s usually a percentage of the account’s balance. Most robo-services charge around 0.25% of the assets that they manage.

A financial planning service or an advisor typically charges either a flat subscription fee or a percentage of your assets. For instance, Personal Capital charges a flat rate of 0.49% to 0.89% of your assets under management. On the other hand, Facet Wealth charges an annual rate of $1,800, which goes up depending on your financial situation.

Traditional financial advisors typically charge a small percentage of the total amount they manage. They can also set a flat fee or a retainer. Some firms additionally offer a variety of fee options, such as a flat rate or an hourly rate.

The amount of money you’ll spend on a financial advisor can vary depending on your budget. For instance, if you have a small amount of money, a robo-advisor may be more cost-effective than an in-person advisor. However, if you have a complex financial situation, a robo-advisor may not be able to provide the guidance that you need.

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

The Current State of Cryptocurrency

The year for crypto investors worsened in June as the broad market’s rotation out of risky assets continued. Bitcoin, Ethereum, and other digital assets took a hit.

Rising interest rates and concerns about the US economy have triggered a sell-off in various risk assets such as tech stocks, growth stocks, and cryptos in 2022. Many investors are worried that the Federal Reserve will be unable to avoid a recession as it continues to tighten monetary policy.

The Fed raised its key interest rate by 75 basis points in June. It was the most significant increase in the rate range in almost three decades. After the meeting, Jerome Powell, the chairman of the Fed, indicated that the central bank could raise the rate by another 50 to 75 basis points in July.

What Caused the Fall?

The rising interest rates and concerns about the US economy have affected various asset classes, such as stocks and bonds. Consumer prices are rising at the fastest pace in over four decades. The Federal Reserve is aggressively raising interest rates to bring down inflation.

The Fed raised its key interest rate by a quarter of a percentage point on Thursday. It indicated that it could increase the rate by another 50 to 75 basis points in July.

The rising interest rates have raised borrowing costs for people and companies. It’s also raising concerns about a potential recession.

The S&P 500 index has dropped more than 20% from its record high set in January. It entered a bear market this week, which means that it has fallen 20% from its recent high.

Although cryptocurrencies have not been immune to the decline in the market, they are still down significantly from their highs. Since Bitcoin hit an all-time high in November, its value has dropped by around 70%. Other digital assets such as Dogecoin are also taking a hit.

Bitcoin’s supporters have always claimed that the digital currency would be an inflation hedge. However, it hasn’t behaved that way. As the value of Bitcoin has dropped, the value of tech stocks has also taken a hit.

June Performance Metrics

Bitcoin prices dropped by 38% in June. It ended the month at around $20,000. On the other hand, Ethereum prices fell by 42% month-over-month to about $1,100. This is because the network is preparing to transition from its current proof of work consensus model to a more energy-efficient one. Over the past year, Bitcoin has lost 60%, and Ethereum is down more than 50%.

Among the other popular altcoins, Avalanche, Dogecoin, and Polkadot were also down by more than 25% in June. The total market capitalization of cryptocurrencies peaked at around $3 trillion in November 2021. It’s currently around $866 billion, with around $2 trillion wiped out.

 

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

How to Pay Off Debts Quickly: Part 2

Once you’ve collected all of the information about your existing debt, it’s time to make a plan and put it into practice.

Make a Plan

Before you start working on a repayment plan, it’s important that you understand the big picture. There are two main strategies that can help you pay off your debts: debt avalanche and debt snowball. 

One of the most common strategies that people use to pay off their debts is the debt snowball. Debt snowball involves paying off the smallest amount of debt first while maintaining the minimum monthly payments on other debts. This method works by taking the money that was used to pay off the smallest debt and using it to pay the next smallest one. Although it might not be as fast as debt avalanche, debt snowballing can be very motivating as you may be able to knock out several debts quickly at the beginning.

Another strategy that people use is debt avalanche. This method pays off the highest interest rate first while maintaining the minimum monthly payments on other debts. After that, consumers focus on the next highest interest rate and repeat the process until all of their debts are paid off.

Deciding on the right strategy can be a personal matter. For instance, according to Woroch, a debt avalanche is a more effective method for paying off your debts faster. However, it’s also important to approach this strategy on a case-by-case basis. A study conducted by Northwestern University revealed that people who tackled their small balances first were more likely to get rid of their overall debt.

One of the most important factors that you should consider when it comes to developing a debt repayment plan is your motivation and strengths. Even if the plan that you have is different from another person’s, as long as you can consistently pay off your debts, you’re still golden.

Budget Carefully

Before you start working on a repayment plan, it’s important that you first create a budget. This will help you prioritize your payments and ensure you make the minimum monthly payments.

Paying off debts should be a top priority since it can prevent you from achieving other goals such as having a family or career change.

Step number one is to reduce your spending. This will help you save money for future payments. Having a budget can also help you establish a plan for paying off your debts by cutting spending from some nonessential areas to funnel into debt payments. Budgeting takes discipline, but it’s worth it, in the long run, to be debt-free.

Celebrate Progress

If you’re still having a hard time sticking to the plan, make a point of celebrating your debt repayment victories. Set certain milestones and plan something fun to look forward to–maybe a larger purchase you’ve been putting off until you have a little more financial freedom or a nice dinner out as a family.

For instance, if you have a larger debt repayment goal, set small goals that you can easily reach. If you have a larger goal, then incorporate these small celebrations into your plan. As you reach this goal, then you can start to celebrate.

Before you start celebrating, make a plan and write down all of the important milestones in your plan. Having these goals will help you focus on a positive and fun goal. For instance, instead of planning on paying off $500, you can actually enjoy a night out with your friends after reaching a certain achievement.

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

How to Pay Off Debts Quickly: Part 1

There are many reasons why people get into debt, such as medical emergencies, unexpected expenses, and job loss. According to a survey conducted by The Pew Charitable Trusts, over 80 percent of Americans have some type of debt. It’s no secret that many people have difficulty living with their debt.

Unfortunately, many people get into debt due to their lack of knowledge about how to pay off their debts and avoid falling behind. This is why it’s important that they learn how to pay off their debts and create an effective plan to achieve their goals.

Know What You Owe

Even though it may seem daunting to start paying off debts, it’s important to keep in mind that the total amount of debt that you have is very important. Having a clear understanding of how much debt you have will allow you to create a repayment plan that works.

According to Andrea Woroch, a consumer finance expert, many people have multiple credit cards. Understanding the total amount of debt that they have across each card, and other outstanding loans is very important to start paying off. Having a clear understanding of how much debt you have will allow you to create a repayment plan that works.

This can be done by creating a spreadsheet or using a free app that will allow you to keep track of all of your credit card transactions.

Read the Fine Print

After you have determined the total debt you have, it’s important to start reading the fine print. There are several details that you need to know about each of your debts, such as the due date, minimum monthly payment, and interest rate. These details will help you determine the best possible repayment plan to knock out that debt as quickly as possible.

The minimum monthly payment that you have to make on your credit card is the smallest amount that you can afford to make each month. Most banks calculate 1 percent of the total balance to determine the minimum payment. Interest rates can have a big impact on how you tackle debt repayment–a higher interest rate will make debt harder to pay off over time, so knocking those out first can be a great way to start!

These two steps will set the foundation for your debt payment plan. Take time ensuring all of your information is accurate and organized, and then check back for part two where we’ll explore how to make a plan and stick to it!

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

Best Ways to Save for Retirement

Most people think that the best way to save for retirement is by simply saying “I want to retire.” However, this is not the case. There are various ways to achieve the right amount of money saved for your future. One of the most important factors that you should consider is the type of retirement plan that will allow you to replace your current income with a variety of money sources.

Getting a good understanding of where your retirement income will come from will allow you to plan for the future. Having a clear picture of your financial situation can help you make informed decisions.

In this article, we will talk about the various ways you can save for retirement.

1. Individual Retirement Accounts (IRAs)

One of the most popular ways to save for retirement is through a traditional IRA or a Roth IRA. These two types of accounts have different benefits, so do your research to decide what is right for you.

One of the main advantages of a traditional IRA is that it allows you to take advantage of a tax break. However, it also provides other benefits, such as the ability to grow your contributions tax-free.

2. Social Security

One of the most important factors that you should consider when it comes to planning for retirement is the type of retirement plan that will allow you to replace your current income with a variety of money sources. Social Security is one of the most reliable sources of income that you can expect to receive during your retirement.

One of the most complicated aspects of retirement planning is the amount of Social Security benefits that you will receive. The amount of these benefits will vary depending on various factors such as your age, your income, and your marital status.

3. 401(k)

One of the most popular ways to save for retirement is through a company’s retirement plan, which is known as a 401(k). This type of account allows you to invest money from your paycheck directly into your retirement account. Another advantage of this type of plan is that it allows you to receive free money in exchange for contributing to it.

Like an IRA, the 401(k) accounts come in two types: a traditional one and a Roth one. The former allows you to contribute pre-tax money, while the latter allows you to receive contributions with after-tax money.

4. Other Guaranteed Income Sources

Aside from Social Security, you can also supplement your retirement income with other sources of income, such as a pension or a life insurance policy.

Having a full understanding of your retirement income sources can help you determine how much money you will need to spend in order to maintain a comfortable lifestyle. Even if it’s not possible to retire for several years, planning ahead can help boost the amount of money that you can spend on your lifestyle.

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

Thoughts on the Future of NFTs

The world of art is constantly evolving. There are always new ways for artists to present their vision, and the increasing number of NFTs (Non-Fungible Tokens) is one of the biggest changes in the industry. This new movement is challenging traditional beliefs about who makes art and how it can be purchased. It also provides new ways for individuals to explore and create their own unique art.

Non-fungible tokens also referred to as art NFTs, are unique digital assets that can be linked to a piece of art. An artist creates an NFT, and then they perform a process known as minting, which creates a token that is tied to the unique work of art. When someone purchases an asset, they become the true owner of that piece of art, as its original value is held on the blockchain.

Due to the technological advancements that have occurred in the blockchain, there are many new ways that artists can earn money from their work. These include the ability to sell their assets on secondary markets, perform smart contracts, and even fractionalize their works of art.

Aside from being incredibly innovative, NFTs also have a high price. In the first six months of 2021, the market cap of these assets was around $2.5 billion. In December that year, Pak set the record for the largest single sale by an artist with his NFT drop. CryptoPunks, on the other hand, is currently selling for around $500,000 each.

The rise of NFTs has been attributed to their innovation and how they are changing the way the world of art is viewed. These trends show how art NFTs are currently impacting the world and how they will continue to do so in the future.

1. Artists Controlling Ownership

The digitization of art has changed the way people view the world of art, as it allows everyone to access it regardless of their physical location. The ability to browse through art has also changed the way people think about who makes it and how it can be purchased. With the rise of NFTs, artists are now able to create and distribute their work online. This new movement is challenging the traditional ways that people think about who makes art and how it can be purchased.

2. New Art Patronage

One of the main advantages of blockchain technology is its ability to allow artists to receive payments directly from their clients. This eliminates the need for them to create for corporations, brands, and mega-collectors. Through the blockchain, artists can now earn money from their work without having to create for third parties.

Through the digitization of art, artists can now create their work while also connecting with their audience. This has led to an increase in the number of people who are interested in collecting art. Many of these individuals may have previously not considered collecting art.

3. Increasing Diversity

Due to the digitization of art and the increasing number of NFTs, the number of influential individuals in the art world will also change. With more diverse groups and individuals being able to access art spaces, the world will become more representative of itself.

The goal of art is to provide people with a deeper understanding of themselves and their world, as well as allow them to have their perspectives expanded. To do so, the industry needs to focus on increasing the number of diverse voices in the space. In addition to providing educational opportunities for women and minorities, the crypto industry should also be working to create more diverse communities.

4. Added Features

In addition to being able to own the original artwork, there are also growing calls for additional features that allow people to benefit from the ecosystem. These include the ability to perform various transactions and manage the value of the art. Aside from being able to secure the transactions, additional features such as smart contracts and blockchain security are also being added to the NFT ecosystem.

A built-in utility for the NFT ecosystem could also include various additional features that allow people to benefit from the ecosystem. These include the ability to attach an NFT to something as simple as a statue or a reward.

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

Explaining 401k Retirement Accounts

A 401k retirement savings plan is a type of workplace benefit that allows employees to contribute to their accounts. It provides them with a tax break on the money they save. The annual contribution limit for a standard 401k is $20,500 in 2022. For those over 50, the limit is $27,000.

The term “401k” comes from a section of the tax code that governs this type of plan. It allows employees to automatically deduct their contributions from their pay. Depending on the type of plan they have, the tax break can be used when they withdraw their money or when they contribute.

If you’re like most people, you probably dozed off during employee orientation, you might’ve missed some of the best features of these plans. However, there’s a lot more to this type of benefit than you might assume.

Where You Get a 401k

401ks are available through employers. Unfortunately, not every company offers a 401k. If you’re one of those people, you might want to consider getting an individual retirement account (IRA) instead. This type of plan provides the same tax benefits as a 401k. An IRA is a type of retirement account that typically has lower fees and a wider selection of investments. However, it also comes with a few drawbacks, so do your research.

Why It’s Worth It

Most companies offer to match a portion of an employee’s contribution. This is typically a dollar-for-dollar match, which means that if you contribute a certain amount, your company will give you a portion of that money. How much they will contribute varies drastically depending on your employer and how much you make, but it’s generally a certain percentage of your annual salary. If you don’t contribute enough, you won’t maximize the benefits. Plan to at least invest enough in your 401k each year to maximize your employer’s matching contribution.

There are two main types of 401k retirement accounts: the traditional and the Roth. The former provides an upfront tax break, while the latter allows employees to make contributions with after-tax dollars. Although the Roth doesn’t provide the same tax break as a traditional account, it does come with a payoff.

Roth vs. Traditional Accounts

Before taxes are taken out of your paycheck, contributions to a traditional 401k account are taken out of your paycheck, which allows you to save a little more money. For instance, if you’re contributing $200 a month to a traditional 401k, you’ll save $200 after taxes are taken out. Aside from boosting your savings, pretax contributions to a 401k can also lower your income taxes. For instance, if you make $65,000 a year and contribute $19,500 to your 401k, you’ll only pay taxes on $45,500 of your income. The tax advantages of a 401k account are built into its structure, which means that no taxes are paid on the money that’s in it. This means that even if the investment grows, you won’t pay taxes on it.

Unfortunately, the tax advantages of a traditional 401k account won’t last forever. Eventually, the IRS will take a cut of the money that you’ve contributed. This means that even though you’re contributing to the account, you’ll still have to start paying taxes on it when you start making withdrawals.

A Roth 401k eliminates this issue completely. Unlike a traditional 401k, a Roth account doesn’t have to pay taxes on the money that you put into it. This means that you don’t have to worry about paying taxes on the money that you withdraw.

401ks Are Transferable

If you’re leaving your job, make sure you take your 401k with you! It’s often a great idea to convert it to an individual retirement account (IRA). This will allow you to keep the money in the account and avoid having to move it to a new account. However, rolling it over into a new 401k through your new job is also an option! Just keep in mind that many companies’ contributions won’t carry over if you only worked there for a short time.

 

This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.