Congratulations College Graduate!

You now have your first job out of college. Or maybe you know someone who is in this situation. What do you do?

This is an exciting time in your life. You’re probably going from very little income to what seems like a lot of money. How do you manage unfamiliar situation?

Your first step is to create a budget. A good rule is 50/20/30. Learning this rule can help you with financial success!

The first 50% will go towards your fixed expenses. This includes things like rent, car payments, and insurance.

Next comes an allocation of 20% towards your savings & debt. Start building up your emergency fund (6 months of expenses). If you have accumulated student loans, you will start paying them from this part. If your employer offers a 401(k) with a match, make sure to put in enough to get the maximum match. You don’t want to leave free money on the table! A Roth IRA may also be a great savings vehicle for you.

The last 30% goes to your living expenses. This includes food, entertainment, and clothing. If there are big ticket items you wish to buy, like a TV, save some money out of this budget item until you have enough to purchase it.

Many people run into problems because they don’t have an emergency fund. The emergency fund insulates you from unexpected ‘life events’ like a car accident. By having this fund, you don’t have to go into debt to handle the situation.

Your budget isn’t etched in stone. It will change over time. But if you can stick to the 50/20/30 principles, you should be able to live comfortably without the stress of money.

Teachers: 403(b) or Roth IRA?

Teachers often have a wide range of 403(b) (or Tax Sheltered Annuity) options. They usually have choices of several annuities and some mutual funds. The 403(b) program offers the opportunity to defer taxes until retirement.

Tax deferral means you save on taxes today. Unfortunately, that means you will be paying taxes in the future. A future tax bill means a future debt to Uncle Sam.

Some people have found that they end up paying just as much tax in retirement as when they were working. How can that be? During working years, people often have some big tax deductions due to mortgage interest and kids. In retirement, people usually have their mortgage paid off and the kids are out of the house. Without those major deductions, people usually take the standard deduction, meaning they don’t have many write-offs.

This is where the Roth IRA can be handy. As you draw money out of your Roth IRA at age 59 ½ or later, the money is totally tax free! The one exception to this is if your initial contribution was less than 5 years ago, you must wait 5 years to take out the gains.

The Roth IRA also has the advantage of being able to withdraw the principal tax AND penalty free! While it isn’t a good idea to take money out of your IRA early, it is a nice option in case you have an emergency.

The Roth IRA does have some downside vs 403(b)s. As of 2017, you can only contribute up to $5,500 (or $6,500 if you’re over 50) while you can contribute up to $18,000 ($24,000 if you’re over 50). Also, you must earn less than $118,000 ($186,000 if married filing jointly).

The answer doesn’t have to be only Roth or only 403(b). Sometimes a combination of both can be the right choice. This makes sense when you can contribute more than the maximum Roth limits.

Which is your best option? 403(b) or Roth IRA? We can review your tax return and help you decide. As a financial planning firm that offers access to both 403(b) and Roth IRAs, we can help you make the right choice. Call us at (702) 870-7711 or email us at

Five Easy Steps to Use a Tax Return to Fund an IRA

Did you know that you can have your income tax refund directly deposited into an IRA? The maximum you can contribute is $5,500 (or $6,500 for those 50 and over) for 2016 and 2017. Best of all, you can split this between multiple accounts. So a husband and wife with a  refund of $11,000 can fully fund both their IRAs!

Here are the five steps:
1.     Prepare your tax return.
2.     How much is your refund? You can only fund up to the maximum limits of the IRA.
3.     How many accounts? If you have only one IRA to fund, that can be done on the 1040. If you have multiple accounts, prepare IRA Form 8888 to direct the refund to up to three accounts.
4.     Be careful! There are six cautions provided by the IRS on Form 8888. Make sure you do not fall into any of these traps.

5.     Follow up! If you are doing a deposit for the previous year, make sure the custodian codes the deposit correctly. If your refund is adjusted due to errors, you may need to do an amended return to adjust the IRA deposits.


Financial Literacy Month

April 2017 is Financial Literacy Month. This is a great time to review your financial plan to see if you are on track, or if you haven’t created a plan, do it!

First, let’s revisit the five key areas of Financial Planning:
Protection – This is your insurance program. When is the last time you reviewed your homeowners and auto insurance? If it was more than 5 years ago, go meet with your agent! Do you have enough life insurance? Has something significant happened in your life, such as marriage, divorce, having a kid, or buying a house? This is a great time to re-evaluate your life insurance needs.

Retirement Plan – How will you accumulate enough money to retire? Social Security was never designed to be 100% of your retirement income, so this is very important. A financial plan not only tells you how much money you need in retirement, but how you will save that money.

Tax Planning – Are you taking advantage of every opportunity to reduce your taxes? IRAs, 403(b)s and 401(k)s are great methods of reducing your taxes. In retirement, how will you draw your money out in a way that keeps your taxes low?

Estate Planning – Do you have an estate plan? If so, when was it last reviewed? A proper estate plan makes sure your money goes to who you want, when you want, and at the least cost possible. There are also other important documents like a living will and health care power of attorney that are essential to have.

Investments – Are your investments working for you efficiently? Do they meet your risk tolerance? Often people have no idea if their portfolio meets their risk tolerance. Here’s a quick thing to do: calculate your risk tolerance.

Where do you fit on your Financial Literacy?

Advanced – If you have been walking the walk for some time, this is a great time to fine tune your plan. Have you reviewed your beneficiary statements? If you can’t even find them, fill out new ones and send them in. It never hurts to update them, even if there are no changes.

Moderate – Maybe you have started planning. How about reviewing your plan to make sure your goals haven’t changed or to see if you’re still on track?

Newbie – This is a great time to get started! Time is money (see this: ) and the more time you have, the easier it is to achieve your plan.

Financial Awareness Month is a great time for everybody to review their financial plan, whether they have planning for many years or just starting out. A CERTIFIED FINANCIAL PLANNER™ practitioner can go a long way to helping you have an enjoyable retirement.