personal finance tips

Retirement investing through the decades

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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Investing to grow your retirement savings is a long-term project. The earlier you begin, the better, thanks to compounding interest.

You don’t have to worry about saving a lot at first. It’s all about forming a plan you can stick to.

Here are suggestions for retirement planning through the decades.

Your 20s: Open a 401(k) and IRA

You will likely land your first job in your 20s and can begin saving money for retirement. But before doing so, make sure you have enough cash to pay for three to six months’ worth of living expenses, in case an emergency arises. If you set up a retirement account and then withdraw from it to pay for emergency expenses, you may be subject to taxes and a penalty payment.

Once you have emergency savings, start funding a 401(k) if your employer offers one, especially if the company matches some of your contributions. If you turn down the option to contribute to a 401(k) plan that matches, you’re essentially giving away free money. In 2017, you can contribute up to $18,000 in a 401(k).

You also can open an individual retirement account, or IRA. In 2017, you can contribute up to $5,500.

If you can’t save enough to maintain both a 401(k) and an IRA, go for the 401(k) because contributions are automatic, pretax and subject to matching.

Your 30s: Consider a Roth, adjust asset mix

If you open an IRA in your 20s or 30s, you’ll want to consider a Roth IRA. Unlike a regular IRA, you don’t receive a tax deduction for contributions to a Roth. But when you withdraw money from a Roth IRA during retirement, it’s all tax-free. The money you withdraw from a regular IRA is taxed as regular income.

So if your tax rate is likely to be higher when you withdraw money from your IRA than it is now, you’re better off with a Roth IRA.

When it comes to allocating your retirement investments, try to put at least 60 percent in stocks during your 20s and 30s. But it all boils down to your risk tolerance. If you are unwilling to stomach losses, don’t put everything in stocks. The worst thing you can do is buy stocks and then sell them for a big loss.

Your 40s: Stay focused on the long run

Many people purchase homes in their 30s and 40s. It’s important to remember that your house is not part of your retirement plan, says Mick Heyman, an independent financial adviser in San Diego.

“I haven’t seen too many times that somebody buys a great home, sells it at 60 and then lives off the profits,” he says. So don’t spend so much money on a home that you can’t afford to save for your retirement as well.

You also must be realistic in providing for your children. Don’t spend so excessively on your kids that you neglect your retirement savings goals. That may even mean putting retirement plans ahead of your children’s college. Tuition payments can come from many sources, but retirement funds will have to come largely from the parents.

Your 50s: Capitalize on catch-ups

The 50s are the peak earning years for most people, so it’s even more critical to save. The government gives you some assistance, allowing increased contributions to IRAs and 401(k)s through “catch-up provisions.”

For IRAs, people 50 and older can contribute an extra $1,000 this year — $6,500 in total.

For 401(k) plans, participants 50 and older can put in an extra $6,000 — $24,000 in total.

If you have children who are now out of the house, you might have enough money to finance those catch-up payments.

Your 50s are a good time to opt for more safety in your asset allocation, experts say.

“Somewhere in your 40s and 50s, you want to transfer to more conservative stocks, and make sure you aren’t all in stocks,” Heyman says. “Start having 20 to 30 percent in bonds.” He also recommends orienting your stock holdings toward dividend-paying blue chips. They offer safety and income payments that you’ll appreciate during retirement.

Your 60s: Plan an income strategy

This is the decade in which you may well retire, which means you’ll begin withdrawing from your retirement funds.

The traditional rule of thumb is that you can cash out about 4 percent of your portfolio in each year of retirement. But with low interest rates limiting the amount of income your portfolio will generate, 3 percent may be more appropriate now.

Ideally, you should have two years’ worth of living expenses in cash to avoid having to dump your investments when markets are weak.

Adjust your asset allocation so that bonds account for a larger part of your portfolio, given your need for safety and income.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Retirement Planning Means Peace of Mind in Boca Raton

Herman Boca Blog

Boca Raton offers beautiful beaches, world-class shopping, amazing restaurants and warm weather all year round, what’s not to love? That’s why, when thousands of Americans retire every year, many move to sunnier climates in Florida to enjoy the relaxation that comes with retirement. In a fluctuating economy, however, retirement planning doesn’t end on your last day of work. The expert team at Herman & Company CPA’s, PC offers unparalleled planning services to make your retirement even easier. For our clients enjoying sun and sand in Boca Raton, Florida, the team at Herman & Company CPA’s, PC provides integral support to ensure the relaxation and peace of mind that you deserve.

Retirement planning for Boca Raton

Herman & Company CPA’s, PC offers accounting services for both retirees and those planning for retirement. Wise retirement planning is all about preparation and taking stock of your portfolio! We have a well-deserved reputation for saving clients money and looking to the future to ensure optimal returns every year. As trusted financial advisors, we work with our clients to create individualized strategies to safeguard their portfolios. We take pride in navigating the complex world of taxes to save our clients time, money and undue stress.

Bright futures for Florida retirees

How you manage your investments and savings will determine the quality of your lifestyle after your retire. However, these decisions don’t need to be made alone; with offices in New York and Florida, Herman & Company CPA’s, PC is committed to helping our clients afford a lifetime of financial stability. With our personalized touch, advanced accounting tools, and up-to-date knowledge of economic trends and policy changes, we help our clients protect their savings and investments.

Retirement planning should be easy, but the complicated world of financial policy can cause unnecessary stresses and lost savings. With over thirty years of experience, the team at Herman & Company CPA’s, PC has successfully guided hundreds of clients through annual taxes and wise financial planning decisions, always with the same mission: to provide our clients with personalized support and financial stability. 

5 Tips For Holiday Shopping On A Budget

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

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The holiday season is upon us!  Avoid putting yourself in debt this holiday season by getting organized and developing a budget.  Here are 5 tips for holiday shopping that will keep you within a budget.

  1. Make A List

It’s always a good idea to create your shopping list ahead of time.  Write down who you are shopping for, what your budget will allow per person, and what you expect to buy.  Having an idea of what you’re looking for prevents impulse buying, and it’s a major time saver. Plus, you don’t want to forget to buy a present for little Timmy, whether he’s been naughty or nice this year.

  1. Develop a Budget

Take a look at your bank account and determine a realistic budget for yourself.  Once you have decided what you can afford to spend this holiday season, stick to your budget!  If you plan to spend $20 on a gift, only spend $20.  It’s easy to say, “What’s one of two more dollars?”  But if you spend a few more dollars on each person that money adds up and your budget has completely gone out the window.

  1. Shop With Debit Cards/Cash Instead of Credit Cards

Leave your credit cards at home and use cash or debit cards.  With a credit card it’s easy to just swipe now and worry about how to pay later.  Inevitably you’ll spend more than you intended and will be blindsided at the end of the month.  Using cash or debit cards forces you to be aware of how much you have left in your account and will help you stick to your budget.  Plus, you will avoid paying interest on your credit card bill.  The National Retail Federation predicts that the average American will spend $805 this holiday season.  If you charged all $805 to your credit card and only paid the $25 minimum monthly payment with an average annual percentage rate (APR) of 18% it would take you 45 months to payoff.  Over the course of those months, you would end up paying $1,107.70 instead of $805, meaning you paid an unnecessary $302.70 in interest. Definitely not worth it.

  1. Shop Early

Try to get your holiday shopping done as early as possible. Not only will you beat the chaos of the holiday rush but the extra time will allow you to shop wisely.  By giving yourself plenty of time to shop you get the luxury to compare prices and find deals on what you’re looking for.  Last minute shoppers are left with no choice but to buy regardless of the price.  Plan ahead so you don’t run out of time or money!

  1. Beware of “Deals” and “Sales”

Retailers are excellent at enticing shoppers and painting the picture of a “great deal.” While Black Friday and Cyber Monday sales may seem appealing (especially to a bargain hunter!) they don’t always save you the most money.  Retailers have been known to inflate original prices to make discounts seem larger than they really are.  They also make their sales seem like a one-time only deal but in reality offer the same discounts throughout the year. Don’t be fooled.

Follow these five helpful tips and give yourself the gift of enjoying the holiday season debt-free!

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

 

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