The Money IDEA
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The Money IDEA
Ideas on How to Save and Ideas for What to Do with Your Savings!
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 Three tax savings strategies for a secure retirement to try right now With the increasing likelihood that Social Security and Medicare benefits may be reduced in the future, it’s more important than ever to use every technique available to maximize your retirement savings. These three outside-the-box strategies could make an enormous difference in your retirement readiness. The sooner you start, the more you may save.(BPT) - Individuals who rushed to prepay property taxes after the passage of the Tax Cuts and Jobs Act may have saved some money in 2018 — but that’s pennies compared to the long-term tax savings taxpayers should take advantage of before the TCJA’s individual tax provisions are expected to expire in 2026, according to Robert Fishbein, vice president and corporate counsel at Prudential Financial. Also expected to expire in 2026? According to trustees for Social Security, that’s when Medicare’s main trust fund will run out of money. With the increasing likelihood that Social Security and Medicare benefits may be reduced in the future, it’s more important than ever to use every technique available to maximize your retirement savings. Three outside-the-box strategies could make an enormous difference in your retirement readiness. The sooner you start, the more you may save. Fund an HSA for retirement health care Estimates suggest even a healthy 65-year-old couple will need at least $275,000 to cover retirement health care costs. A Health Savings Account, or HSA, provides a way to save that money without paying a dime in taxes. An HSA account is available to individuals enrolled in a high deductible health insurance plan. First, these individuals can fund their HSA through a tax-deductible contribution or pre-tax payroll deduction. Second, any interest and investment gains are tax-free. Finally, the funds can be withdrawn tax-free to pay for qualified medical expenses— a triple tax advantage over a traditional savings account. The best part? There is no requirement to use HSA funds in the year of contribution, which means funds can grow on a tax-favored basis for future health care expense needs. For 2018, family contribution limits are $6,900, or $7,900 if you are 55 or older, and those amounts are indexed for inflation in future years. If you start contributing the maximum even as late as age 55, and earn 3 percent per year, you could have more than $90,000 to pay for your retirement health care by age 65. If you start contributing the maximum as early as age 40, you could have saved almost $270,000. These funds will continue to grow tax-free in retirement until you need them. If you don’t use HSA funds in full before you die, excess funds are subject to income tax, but will be otherwise available for your heirs. Consider a Roth IRA conversion The typical dogma says that converting an IRA or traditional 401(k) to a Roth IRA does not make sense if you expect your tax rate in retirement to be lower than at the time of conversion. However, lesser known benefits of a Roth IRA may make it worthwhile to have at least part of your retirement assets in Roth IRA form. Start with no required minimum distributions. With a Roth you aren’t forced to draw down your funds once you attain age 70½ and can continue to benefit from the tax-free growth, thereby maximizing the after-tax funds eventually available for you or your heirs. Another significant benefit of a Roth IRA or Roth 401(k) is tax diversification. For example, you may choose to take taxable distributions up to a certain amount and then tax-free distributions to avoid a higher income tax bracket. If you are a high-income taxpayer, Roth IRA distributions are not considered income when determining thresholds for increased Medicare premium charges or the 3.8 percent income tax surcharge on investment gain. If your income is more modest, Roth IRA distributions are not considered income when determining whether you are subject to income tax on Social Security benefits. If anything, a conversion is more attractive now since you have an opportunity to convert and pay income tax with marginal rates that are generally lower than under prior law. Since individual tax law changes are temporary and tax rates will revert to the former higher amounts starting in 2026, you have an eight-year window to benefit from lower rates. Make “backdoor” Roth IRA contributions The tax law prescribes income limits so high-income individuals may not make a direct contribution to a Roth IRA. However, there are no income limits on converting traditional IRA funds to a Roth IRA. Any person under age 70.5 who has earned income by year-end can make an IRA contribution. While income limits may prevent you from making a pre-tax contribution, you can make this contribution even if you have fully funded a 401(k) or another employer plan. Once you have made your contribution to a traditional IRA, simply convert that amount to your Roth IRA. As long as this is your only traditional IRA and you have made an after-tax contribution, then an immediate conversion will have converted a tax-deferred asset into a potentially tax-free asset. If you have multiple IRAs, the IRAs are aggregated to determine how much is taxable upon conversion. While we spend much time on our investment strategies to help gain an extra percentage or two of investment yield, these tax planning strategies can be a more reliable way of maximizing your after-tax retirement income and wealth for your family — no matter how Social Security and Medicare turn out. Prudential Financial, its affiliates, and their financial professionals do not render tax or legal advice. Please consult with your tax and legal advisors regarding your personal circumstances. KEYWORDS
What should you be doing to prepare for retirement? Top tips and tactics from financial advisors7/10/2018  Top tricks to prepare for retirement Retirement is waiting just around the corner. People need good advice to help them build their nest eggs before "someday" becomes "now." Here are the best tips, advice and tactics for retirement planning from the top financial advisors in the business.(BPT) - You're 10 years or less away from retirement. You can clearly see the next phase of your life down the road and it's coming up fast. Are you ready for it? Do you have a comprehensive plan in place so you don't outlive your savings? If you're not as prepared for retirement as you should be, you're not alone. The Federal Reserve did a study and found that one-fourth of Americans have no retirement savings or pension. And a Money article reports 56 percent of Americans have less than $10,000 saved. Why aren't more people prepared? There are myriad reasons. Some people are stretched thin. Credit card debt, student loans, rising mortgage and interest rates all conspire to make it difficult for them to save. Others may lack information on the importance of retirement savings, or lack the financial savvy to be comfortable managing their own investments. And then there's the gap between men and women. The Federal Reserve’s study found that among women with any level of education, investment comfort is lower than among similarly educated men. Yet, retirement is waiting just around the corner. People need good advice to help them build their nest eggs before "someday" becomes "now." That's why the National Association of Personal Financial Advisors (NAPFA), a national organization representing Fee-Only financial advisors, conducted a poll of its members to get their top tips and advice for people who are nearing retirement. They want to raise consumer awareness about the urgency of preparing for retirement and the importance of having a comprehensive plan in place. Here are the best tips, advice and tactics for retirement planning from the top financial advisors in the business. 1. Make a list of retirement “needs” and “wants.” If you do not have enough savings for all of your “needs,” make a ten-year plan to increase your funds. 2. Take a hard look at any major debts you have and develop a plan to eliminate them. 3. Brainstorm any “big ticket” financial commitments (caretaking for a family member, etc.) for the next 10 years and consider how these items might affect your ability to save for retirement. 4. Continually monitor and analyze your asset allocation to make sure it is the right one for you. Understand whether you should move to a more conservative asset allocation or continue investing for growth. 5. Be tax efficient with your investments. For example, you should defer as much of your salary as you can to your defined contribution plans. 6. Save to an emergency fund and stay aware of your company’s financial situation. Companies are prone to reorganizations and layoffs, and older workers can be vulnerable. 7. Ask your HR department about the relationship between your current health insurance and Medicare, as well as what your options are when you reach age 65. Get information about any pension or defined contribution options and any other retiree benefits. 8. Research when stock-based compensation might expire and what stock awards you can retain after retirement. 9. Double check your reported Social Security earnings and resolve any discrepancies now. Explore your Social Security claiming options and make sure you understand the timing of applying for benefits. 10. Make sure that all of your estate documents are up-to-date. Verify that your named executors and proxies know your wishes and are willing to act on them if needed. If you think you’ll need help creating and sticking to a financial plan, NAPFA recommends working with a Fee-Only financial advisor who adheres to a strict fiduciary standard. These advisors are required to put your best interest first and don’t accept commissions on the products they recommend, which reduces potential conflicts of interest. For more information and resources on retirement planning, check out NAPFA’s infographic about the poll. To find a Fee-Only financial advisor in your area, visit the NAPFA website at www.napfa.org and NAPFA’s “Find an Advisor” search engine. KEYWORDS
 The new tax law: What you need to know now (BPT) - With the Tax Cuts and Jobs Act of 2017 having been signed into law, here are some of the things you should be thinking about as tax season approaches, according to Robert Fishbein, vice president and corporate counsel, Prudential Financial Inc. 2017 tax returns The new tax law is generally effective starting in 2018, which means that your 2017 income tax return is largely unaffected. However, there may be actions you can take now to benefit from the change. For example, assuming you are eligible, you could fund a traditional IRA before the due date of your tax return; the income exclusion may be more valuable under higher 2017 tax rates. Lower tax rates and new withholding The hallmark of the new tax law is lower marginal tax rates for individuals. The IRS has issued withholding tables employers started using in February to reflect these lower rates. While this could mean lower tax withholding and more take-home pay, you should evaluate your personal income tax position to determine if you will pay more or less under the new law and adjust your withholding accordingly. If you make estimated tax payments, you should also estimate your tax liability under the new tax law and make necessary adjustments to your quarterly tax payments. Assuming your withholding or estimated tax payments need no adjustment may create an unpleasant surprise if you are under-withheld and owe penalty tax and interest when you file your 2018 income tax return. Higher standard deduction The new higher standard deduction of $12,000 for individuals and $24,000 for married couples will greatly reduce the number of taxpayers that itemize deductions. If you did not itemize in 2016, and your tax position is similar now, you will probably not itemize in 2017. The increased standard deduction, combined with lower marginal rates, may mean your tax liability will go down. If you itemized in 2016, compare your total itemized amount to the new standard deduction. If less, and assuming a similar tax position in 2017, you will likely no longer need to itemize. For many, this provision will turn out to be the greatest simplification aspect of the new tax law, since they no longer must track itemized deductions or complete multiple associated forms. No personal exemptions Some taxpayers will need to look more closely to determine if they will pay less or even more. The new law eliminates personal exemptions and reduces deductible items, such as limiting the total deduction for state and local income taxes to $10,000, reducing the amount of deductible mortgage interest and eliminating the deduction for interest paid on a home equity line of credit. Therefore, if you itemized deductions in 2017 and your deductions were greater than the applicable standard deduction, you will have to consider what deductions are available in 2018 and estimate your tax liability. In states with higher income taxes and property taxes, it is possible that the loss of itemized deductions will be greater than the benefit of lower rates and your tax liability could increase. Increased child and dependent credits The new law increases the child tax credit for children under 17 to $2,000. The income limits to phase out the credit are also significantly increased so more taxpayers will be eligible. In addition, there is a $500 credit for other qualifying dependents. Depending on your tax bracket, this could be better or worse than getting an exemption for each dependent. Increased AMT exemption Adding one more layer of complexity to your 2018 planning is the new tax law’s modification of the Alternative Minimum Tax or AMT. The AMT is a parallel tax system that requires you to calculate your income tax under the normal rules and then again under AMT rules, paying the higher of the two. The new tax law increases the AMT exemption, or the amount you can earn and not be subject to this alternative tax. If you have been subject to AMT in the past, you should review the new increased exemption and whether that will change. The bottom line The bottom line for most is whether they will pay more or less income tax in 2018 than in 2017. While it is likely many will pay less, you need to consider all the above before you know how you will be impacted by the new tax law. Please consult your legal or tax advisor concerning your particular circumstances. The Prudential Insurance Company of America, Newark NJ and its affiliates. KEYWORDS
 5 practical and fun ways to spend your tax refund (BPT) - It’s that time of year again when you may find a little bit of extra money in your pocket, thanks to your annual tax refund. There are plenty of practical ways to spend it, such as putting it toward paying off credit cards, loan payments or even starting a college fund, but there is always something tempting about taking that money and putting it toward something just a little bit more fun. Instead, consider something that is both practical and fun that you will use every day and will help you save money throughout the year. 1. Learn something new: Maybe you have been meaning to learn a new skill or explore a subject that you have taken interest in. Your refund is the perfect solution to fund a new hobby. A little bit of cash and a few extra hours a week can go a long way in honing in on one of your new (or old) passion points. Look into your local community college, dance studio, art center, etc. and check out the various classes offered to find one that piques your curiosity. If you are lucky, these courses could turn into something far more fruitful that will last far beyond tax season. 2. Be on the cutting edge: Haven’t you always wanted to be the first among your friends with one of the latest smartphones? Often though, it becomes too expensive between the phone, the update charge and the data fees. This year, use your tax refund to purchase one of the latest smartphones and a new wireless plan that allows you to save in the long-term. Achieve balance with Straight Talk’s $55 Ultimate Unlimited* Plan, and stay in touch with friends and family, stream the latest videos and navigate while you’re on-the-go without worry. While you reward yourself with the latest technology and unlimited* data, you’ll also give yourself the gift of saving on your phone bill all year long. 3. Plan a staycation: Planning a vacation can be tough with a hectic family schedule. Between working out the details and packing, the planning process can become overwhelming. Why make it complicated when you can instead vacation from the comfort of your own home? Use your refund to have family-based experiences in your hometown — many museums, zoos, waterparks, etc. offer discounted year-round family memberships, too. Even though your staycation may end once the weekend is over, the new membership will allow for family fun to continue throughout the year. 4. Get fit: Have you faltered on that New Year’s resolution to spend a few more hours a week at the gym? Your tax return is your second chance at getting into better shape this year. If the gym isn’t for you, put it toward trying a new exercise class, or better yet, do it with a friend or partner! Many workout studios give discounted classes for your first session, so you’ll have the opportunity to “try before you buy” — and if you love it, pick up a package of classes to reduce longer-term costs. 5. Cook a homemade family feast: While you could take your hard-earned tax return to a fancy restaurant, you could also make a fancy dinner right at home. Use your extra spending cash to revamp your kitchen with new appliances and ingredients that will allow for more exciting in-home dining. Splurge on a homemade pasta maker or a brand-new mixer, then work as a family to cook up your very own secret recipe. These purchases and new creations will result in a fun night of cooking for the whole family, but also will be around for years to come! You work hard all year and deserve to reward yourself with something fun and practical that can bring a little more balance to your emotional and financial health. For more information and ways to save, visit StraightTalk.com. *At 60GB, Straight Talk reserves the right to review accounts for usage in violation of its Terms and Conditions. Please refer to the latest Terms and Conditions of Service at StraightTalk.com. A month equals 30 days. KEYWORDS
With tax season in full swing, take time to consider how to get the most out of your tax return, which includes finding all the credits and deductions available to you. These often-overlooked tax breaks could potentially save you hundreds – maybe even thousands – of dollars if you itemize deductions.Don’t Overpay Your Taxes
Commonly overlooked credits and deductions(Family Features) With tax season in full swing, take time to consider how to get the most out of your tax return, which includes finding all the credits and deductions available to you. While many taxpayers claim common deductions, such as home mortgage interest and self-employment expenses, there are additional tax deductions that can lessen your final tax bill or increase your refund. These often-overlooked tax breaks could potentially save you hundreds - maybe even thousands - of dollars if you itemize deductions. To start, get to know the difference between tax credits and tax deductions. Tax credits reduce the amount you owe in taxes. In some circumstances, tax credits allow a refundable credit, meaning you may not only reduce the amount you owe to $0, but you can also get money back. Deductions, on the other hand, simply reduce your taxable income. Both can have a potentially significant impact on your taxes and are often worth the extra effort to include on your return. Some commonly overlooked credits include: 1. Child and Dependent Care Credit 2. Earned Income Tax Credit 3. Saver's Credit or the Retirement Savings Contributions Credit Some tax deductions that allow you to reduce your taxable income include:
2. Tax-Preparation Fees 3. New Moms 4. Career Corner 5. Wedding Bells 6. Medical Fitness 7. Road Warriors 
Refund AdvanceIf you're getting a refund, you typically want it as soon as possible, but that isn't always an option, especially if you are one of the millions of Americans who claim either the Earned Income Tax Credit or Additional Child Tax Credit. You could access up to $3,200 with a no-fee Refund Advance loan at zero percent annual percentage rate (APR), offered by MetaBank, at participating Jackson Hewitt locations. Terms apply, visit JacksonHewitt.com for details. Did You Know? 1. The IRS, as well as many states, allows taxpayers to catch up on missed credits or deductions, offering a three-year window for filing an amended tax return. You can secure unclaimed credits and deductions by filing amended tax returns to avoid losing any unclaimed funds from as far back as 2014. 2. With locations across the United States, including kiosks in 3,000 Walmart stores, the tax professionals at Jackson Hewitt make it easy to stop in when it's most convenient for you. 3. If you are a single parent, you can file as Head of Household instead of Single. This filing status can provide better deduction options and a lower tax rate schedule. Photos courtesy of Getty Images (Woman looking at computer, Man sitting on the floor with papers) SOURCE:Jackson Hewitt
Whether you’re considering ways to give to deserving causes or looking for the perfect gift for a loved one for a special occasion, remember that not every gift is a tangible item. In fact, some of the best gifts are those you can’t touch at all, but those that make the world a better place. Consider these giving options to make a lasting impact.
Make a Lasting Difference
(Family Features) Whether you’re considering ways to give to deserving causes or looking for the perfect gift for a loved one for a special occasion, remember that not every gift is a tangible item. In fact, some of the best gifts are those you can’t touch at all, but those that make the world a better place. Socially motivated gifts, of your own accord or on behalf of someone else, are much more than a one-time present. They have the potential to make a significant impact on lives or to further the work of a cause-based organization. Consider these giving options to make a lasting impact: Retirement plans: Because retirement plans are taxed differently than most assets, they may actually become a tax liability. Naming a nonprofit organization as a beneficiary of your retirement account can be an attractive option for leaving a legacy and reducing income, and possibly estate taxes, for loved ones. A tax-exempt organization may be eligible to receive the full amount, bypassing income taxes. This means, for example, that a $100,000 IRA can be worth the full $100,000. Life insurance plans: A gift of life insurance is an affordable way to make a significant gift while also enjoying tax savings during your lifetime. Benefits include the ability to give a significant gift at a fraction of the value; tax savings that can be immediately realized; a reduction in the final taxes of your estate and the ability to pass gifts outside of your estate. Gifts of real estate: You may decide that the greatest gift you can make is to leave your home or other property to a charitable organization. This kind of gift is ideal for someone who intends to continue living in his or her home or property through their lifetime, but still make a charitable gift. You can leave this generous gift by signing an agreement with an organization about maintaining the property so you can use it throughout your lifetime. You may even receive a tax deduction for your gift. Gifts of stock: Stocks, bonds and mutual funds that have appreciated in value are among the best ways to gift a nonprofit organization. You may receive a charitable income tax deduction for the full market value of the stock (up to a maximum of 30 percent of your adjusted gross income) and avoid paying the capital gains tax on any increase in the value of the stock. Gifts of cash: This type of gift is simple and eligible for an immediate charitable tax credit. Although many organizations allow you to specify how you would like the funds to be used, an unrestricted monetary donation allows the organization to allocate your contribution into the project or area that needs funds most. If you designate a gift on someone’s behalf, be sure to share a card or a note with the honoree letting them know about the contribution. Particularly if it’s a cause close to the heart, it’s sure to be just as gratefully received, if not more so, as any trinket you might buy. Find more ideas for gifts that make a lasting difference at eLivingToday.com. 
4 Ways to Make an Impact on ChildrenWhen looking for opportunities to make an impact on the lives of others, selecting a cause to support can be an overwhelming task with so many options to choose from. However, considering opportunities that can change the lives of kids is one way to make a lasting impact for generations to come. Helping children early on can change the trajectory of their lives, set them up for success and empower them to achieve their dreams. This is especially important for kids living in poverty who are not guaranteed access to things like medical care and quality educations. According to global humanitarian organization Children International, nearly half the world lives on less than $2.50 a day and 1 in 5 kids in the United States lives in poverty. Consider these ideas to make an impact on children in need now and well into the future: Become a mentor or coach. A positive role model can make a life-changing difference for a child from disadvantaged circumstances. As a mentor or a coach, you can help children explore and nurture their unique talents and guide them toward a successful future. Volunteer at a local school. Families increasingly rely on two incomes to support their households, which means parents are less available to lend their time to their children’s classrooms or schools. At the same time, public school funding is shrinking. As a volunteer, you can help fill these gaps and contribute to bettering the learning opportunities for children in your community. Sponsor a child. You may be surprised to learn how far a monetary donation can go. For example, Children International supporters can join a monthly giving program and sponsor a child in poverty for $32 per month. Your donation establishes a connection with an individual child who receives access to life-changing benefits like medical care, educational support and life-skills training. The institution is a CharityWatch top-rated organization that serves 250,000 children in 10 countries. If a reoccurring donation is not right for you, the organization also accepts one-time donations. Learn more at children.org. Donate new or used items. Service organizations such as shelters generally operate on tight budgets and rely on contributions from the community. Gently used items in good condition such as children’s clothing of all sizes and warm bedding are generally welcome. Photo courtesy of Getty Images (Young boy and Grandmother) SOURCE:eLivingToday.com  Working on a laptop (BPT) - It's happened to almost everyone: you leave a job and have a retirement account that you are no longer actively contributing to. It sits there for months — maybe years — because you're not sure exactly where to move it or what the process is like to roll it over. You know that money could probably be better invested, but moving accounts is intimidating, so it sits. "It's common for people to be nervous about transferring retirement accounts like IRAs and 401(k)s," says Nick Holeman, a financial planning expert at Betterment.com. "Moving accounts shouldn't be something you fear or put off because you think it's too complicated." Holeman says three main causes for concern are potential taxes, excessive fees and process complexity. However, these concerns are often based on misconceptions, and he wants to set the record straight to empower investors to take control of rogue retirement accounts. Potential taxes Many people worry about potential tax concerns when moving retirement accounts. They've heard about the high penalties for early withdrawal and figure the best way to avoid them is to let the account be. "A rollover is not equivalent to a withdrawal," says Holeman. "When you transfer retirement accounts through the appropriate processes, you're still keeping it in the same categorization. It just now lives in a different place." A rollover can also help facilitate better control of your money. For example, if you roll over an old 401(k) into an IRA account, you are no longer limited to the investment options selected by your employer. This freedom of choice can help you make more customized investment decisions based on your personal goals. Of course, it's important to remember that investing in securities always involves risk and there is the potential to lose money. Possible fees A rollover means closing an old account and opening a new account. This process can incur fees that will be unique to each provider. Many people worry about the potential cost, which causes them to leave accounts untouched. "Research account closing fees but be sure to keep in mind the big picture," Holeman says. "It's like ripping off a bandage. For example, a one-time $20 closing fee is better than a $100 annual fee that could be reduced when you move your account." Holeman's advice: always know what fees you're paying. Before selecting a new financial organization for your retirement savings, research fees and consider selecting a new account with no trading costs, commission fees, or rebalancing fees. For example, Betterment’s Digital plan charges just 0.25 percent per year and that covers goal-based financial advice, tax-efficient investing, automatic rebalancing, and other smart features that help you keep more of your money. Complexity "People tend to treat rolling over a retirement account like going to the dentist," Holeman says. "It's important but usually not urgent, so people tend to put it off." What's more, people are intimidated by all the paperwork, lengthy forms and seemingly complex steps, so they delay rollovers. Holeman says moving accounts is typically easier than most people think, and in fact, after the process is complete, many people regret not doing it sooner. "Often, moving retirement accounts can be done completely online thanks to advanced technology," says Holeman. "Betterment offers a '60 second rollover' for certain accounts from supported companies, and there's someone available to help should you have any questions. Moving accounts is typically easier than people imagine." You should carefully consider whether a rollover is right for your own personal situation, including the specific fees and services associated with your 401(k). Visit betterment.com/rollover to learn more about factors you should consider when deciding whether a rollover might be right for you. Betterment LLC distributed this article through Brandpoint.
 Young man managing his investments online (BPT) - You’re familiar with the saying “If it seems too good to be true, it probably is”? Just like any other scheme to “get rich quick,” attempting to buy low and sell high based on intermittent fluctuations in the stock market—also known as “market timing”—is almost always a losing proposition over the long term for the investor. Studies have repeatedly shown that those who attempt to align their investments with short-term fluctuations earn less than those who stay in over the long haul. “Once again, market fluctuations are messing with average investors’ minds,” says J.D. Roth, author of “Your Money: The Missing Manual” in Entrepreneur. “They panic and sell when prices drop, then fall victim to what Alan Greenspan in 1996 called ‘irrational exuberance’ and buy when prices soar. That's a sure way to lose money.” The truth is that even the most stellar investment advisor lacks a crystal ball into the future, and can only make recommendations based on historical research, industry guidelines, and experience. Unfortunately, past performance in the stock market is not at all an indicator of future performance. So what are some better guidelines for investing in the stock market? Consider the following sound strategies, built on the mounds of evidence saying market timing doesn’t work as a long-term strategy: 1. Establish a long-term plan. Set clear goals and objectives such as funding children’s college educations or investing for your own retirement. An advisor can help you evaluate risks, decide on asset allocation and set benchmarks for success while minimizing risk. 2. Use dollar-cost averaging. Instead of trading when you think it’s the right time, the principle of dollar-cost averaging (DCA) says to invest a fixed dollar amount at predetermined intervals. The result is that you’ll end up buying fewer shares when prices are high and more shares when prices are low. The advantage of dollar-cost averaging is that you put your money into the market earlier—increasing the likelihood of price change—rather than holding onto cash until you think prices are low. Regardless of whether you have a flat, positive, or negative price return, if your investments earn dividends, dollar-cost averaging is a useful strategy for earning dividend returns. 3. Ride the market by tracking an index and optimize your costs. Trying to achieve alpha—i.e., beating the market with price returns—isn’t necessarily the most evidence-based way of getting the highest returns over time, especially looking at your returns net of costs and taxes. By investing in funds that largely track a market index (index funds), historical results show that the lower fees typical of index funds and the long-term gains often outperform actively managed funds with higher fees. Investors should always focus on what they take home over the long term after fees and taxes. Looking purely at the price return can lead to lower-than-expected results. 4. Be aware of tax implications. A major reason why investors should lean on professional support in today’s world is so that they can optimize their investments to lower taxes. Specifically, how assets are located within tax-advantaged and taxable accounts can be managed to lower your tax liability. Also, investment losses can be “harvested” via a process called “tax-loss harvesting,” and that’s generally a process many investors cannot do themselves. Finally, any time you want to reinvest dividends or have reason to switch to a different investment, there are ways to make regular transactions as tax-efficient as possible. The same goes for making your eventual withdrawal. This kind of back-office tax work can have a major impact on how much you, as an investor, keep from your investment, so it’s important to find the right solution—whether that’s a financial advisor or learning to do it yourself. 5. Stay skeptical. When it comes to outlasting a spike in the market, any investor should be aware of their own biases and behaviors. Pay little attention to financial TV shows and other media reports that hype short-term fluctuations. And be cognizant of the speaker’s motivation. Those who think they have a real get-rich-quick scheme are unlikely to share it with others. Above all, don’t let uncertainty stop you from investing. If you look back all the way to 1926, keeping your money in cash/cash equivalents has underperformed both bonds and stocks. The key thing is to just get invested. Betterment optimizes its technology and experience to help you make informed decisions in your investment strategy. Founded in 2008, the company manages $9 billion in assets. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and Betterment’s charges and expenses. Betterment distributed this article through Brandpoint. Visit Betterment.com for more information.
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