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retirement Archives | Ovation Credit Repair Services

Retirement: Save a Million Dollars Right Now

By | Save Money

Retirement

Retiring as a millionaire may be easier than you think. With the power of compounding interest, you can become a millionaire by putting aside just a few extra dollars each month.

How Much Do You Need to Save for Retirement?

Here’s how much you need to save each month and how long it will take to reach a million dollars if you invest in an S&P 500 index fund. These numbers assume the index matches its historical ten percent per year rate of return.

  • $100 per month = 45 years
  • $250 per month = 36 years
  • $500 per month = 29 years
  • $1,000 per month = 23 years
  • $2,000 per month = 17 years

The lesson learned? Anyone can become a millionaire by setting aside only a small amount of money each month over their working life. If you got a late start or want to retire early, you can still get there with smart budgeting.

Where to Save

Warren Buffet recommends S&P 500 funds because they let you own 500 of the strongest companies in the United States at a low cost. Other investors prefer to use total stock market index funds that own every stock on the stock market or to put some of their money into an international index fund to add diversification.

You may also want to consider a target-date fund which gives you a mix of U.S. stocks, international stocks and bonds and automatically lowers your risk as you get closer to retirement. No matter what you choose, how much and how early you save will be the biggest driver of your success.

How to Find the Money

It can be hard thinking about the future when money is tight, but small adjustments add up. Instead of buying things because they’re only $X per month, remember that only $X per month will make you a millionaire.

Simple steps like packing a brown bag lunch and skipping a barista-made coffee can save $10 to $20 per day. If you have credit card debt, paying it off sooner or consolidating it at a lower interest rate can turn money wasted on interest into retirement savings.

The most important thing to do is to start right now. Remember, the sooner you start, the easier it will be to become a millionaire.

 

Sources:

http://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp

https://www.forbes.com/sites/robertberger/2017/03/27/an-sp-500-index-fund-is-it-a-good-investment/

http://www.investopedia.com/terms/t/target-date_fund.asp

Credit Score – 4 Reasons It Matters During Retirement

By | Credit Scores, Your Credit

Retirement and Your Credit Score

You’ve reached your retirement years. Congratulations are in order. What’s more, you might have enough money to live on thanks to some combination of savings, investments, a pension and Social Security payments. On top of that, you might not be planning to make any major investment, such as a new home, in the future. So who cares about your credit score, right?

Well, this idea is a common misconception among seniors. In fact, your credit report will matter a great deal to you for the rest of your life. Without one that’s above average, you won’t have access to the following financial benefits.

1. Loans

For one thing, your car could stop suddenly working due to age, an accident or another problem. If you want a decent chance of securing an adequate car loan, you must have good credit.

Likewise, the need for an emergency loan might arise. It’s certainly horrible to think about, but household accidents, abrupt illnesses and other crises can happen at any time. To avoid paying an exorbitant interest rate on such a loan, a high credit score is again essential.

2. Refinancing

The Consumer Financial Protection Bureau reports that 30 percent of Americans who are at least 65 years old make mortgage payments. In addition, the research company Strategic Business Insights has found that about 40 percent of Americans who are between the ages of 60 and 64 have mortgage obligations.

If you’re in one of those groups, you might want to ease your burden at some point by refinancing your mortgage, especially in a time of low interest rates. However ― and you may be noticing a pattern here ― you won’t be eligible for those low rates if you lack an acceptable credit score.

Not to mention, if you ever find yourself in trouble financially, you might wish to negotiate a cash-out refinancing. Doing so should be a last resort, but if you’d like access to such funds, you’ll probably obtain better terms with a strong credit report.

3. Rewards Cards

You might have a longtime aversion to using credit cards. And it’s true that a person who has trouble paying off credit cards would be wise to avoid them altogether.

On the other hand, if you’re diligent about paying your debts, your plastic can actually provide financial relief. That’s because it can give you so many rewards.

For instance, a cash back card will essentially supply you with free money as you make purchases, and those bonuses can really add up over time. Plus, credit card companies often give people small sums of cash just for signing up.

Frequent travelers can especially benefit from credit card usage ― by using platinum rewards cards in particular. That’s because those cards can help you earn free nights in hotels as well as discounts on airfare, rental car insurance, luggage fees and more.

However, if your credit score is poor, it’s unlikely that you’d be eligible for any cash back cards, let alone one at the platinum level.

4. Insurance Rates

It’s wise to keep looking for the best insurance rates you can, even if that means switching companies from time to time. Why spend money on your insurance unnecessarily?

It might not seem fair, but home and car insurance providers might take your credit score into account when they’re determining your monthly rates. Yes, a low score can mean higher costs.

The thinking behind this strategy is that people with good credit scores are responsible individuals and less likely to cause car accidents, leave their homes unsecured, start fires by accident and so on.

So How is Your Credit Score?

At this point, you might realize that you’ve been neglecting your credit score for a while; you might even be starting to worry. Fear not. There are plenty of ways to boost it. To give you just a few examples:

  • Always pay all your bills on time.
  • Remember that not using your credit cards won’t help your credit score. If a credit card company ends its relationship with you because you’re not taking advantage of its card, it could hurt your credit score. For the same reason, try not to close your credit cards.
  • Use your credit cards for small, regular purchases, and make a habit of paying them off on the same day every month.
  • Keep searching your credit history for errors. If you have a friend or a relative who’s a financial expert, she might be able to help you find a mistake. Then contact the credit reporting agency that made the error to argue your case.
  • Obtain outstanding credit repair services, and watch happily as your score rises.

Finally, you’ll find that good credit brings an additional benefit, one that’s intangible yet invaluable: peace of mind. If your children or grandchildren need monetary help or if life throws an expensive curveball your way, you’ll have the means to improve the situation. After all, you’ve worked hard all your life. You deserve to enjoy your golden years without fearing financial hardships.

Sources:

http://www.aarp.org/money/credit-loans-debt/info-2015/credit-score-changes-for-consumers.html

http://abcnews.go.com/Business/credit-retirement-important/story?id=29789894

http://www.fool.com/investing/general/2016/01/29/why-your-credit-score-matters-during-retirement.aspx

http://www.foxbusiness.com/features/2016/03/18/keep-your-credit-score-in-good-standing-it-never-retires.html

http://www.forbes.com/sites/moneybuilder/2014/05/02/11-ways-to-raise-your-credit-score-fast/#3d14483c1716

http://money.usnews.com/money/blogs/on-retirement/2013/05/28/5-reasons-your-credit-score-matters-during-retirement

6 Things to Know Before Investing in a 401(k)

By | Budgeting, Personal Finance

While retirement may seem eons away, it’s never too early to start funding a retirement account. Parting with part of your paycheck each payday may be hard to swallow, retirement accounts offer many benefits outside of funding your future retirement.

Retirement accounts offer many benefits, but there is a downside as well. Here are 8 things you need to know before investing in retirement accounts:

  1. Tax Breaks

Putting money towards retirement while young allows your investments time to mature and for you to earn returns. You can decide to put money away in a savings account, but other options provide tax shelters. Investing in a 401(k), IRA or other dedicated retirement account provides a tax shelter that boosts your annual return.

  1. Employer Match

Many companies offer 401(k) plans where the employer matches the contribution of the employee. Forbes reports that the majority of large companies will match an employee’s investment, while only two thirds of small companies do. Make sure to review and understand your 401(k) contribution vs what your employer will invest prior to signing.

  1. Early Withdrawal Penalties

Deciding what amount to invest in a retirement account can be challenging. Life offers many surprises that come with unexpected expenses. You may have chosen to allocate a certain amount of funds from your pay to retirement leading to a large sum of money that you may need for future expenses. If you do need to access your retirement savings before the age of 59.5 you’ll most likely be subject to a 10% penalty on previously untaxed funds, contributions and earnings.  There are exceptions to this. As Forbes reported, you can pay for college or grad school penalty free with funds from and IRA account but not from a 401(k).

  1. Flexibility

If you’re looking for flexibility with your retirement account look into a Roth IRA. Legally you are able to contribute up to $5,500 a year in post taxed earnings to a Roth IRA. If you’re over the age of 50 your contribution maximum increases to $6,500. Your investment will grow tax free towards your retirement, and you can take back your initial contribution at any time for any reason without taxes or penalties. Forbes suggests investing enough in your 401(k) to receive a full employer match then fund a Roth IRA next.

  1. Bad 401(k)s

Not all 401(k)s are a good investment. Some 401(k)s have high administrative and investment expenses. According to an annual survey conducted by BrightScope, the most expensive 401(k)s – traditionally small plans – cost 1.53% or more of a worker’s contribution each year. Compare your 401(k) at BrightScope.com.

  1. Switching Jobs

It’s very common to switch jobs before retirement. When leaving a company make sure to role your 401(k) to an IRA on your new employer’s 401(k). This is called an institution to institution transfer. Withdrawing the funds from your existing 401(k) would be a mistake, since it would result in taxes and a 10% penalty fee. If you have a retirement account worth less than $5,000 your former employer could transfer your funds to an IRA with high fees and a negligible returns.

Investing in your retirement is an important and vital decision. Review all your options before investing. Was this article helpful? How do you plan to invest in your retirement? Let us know in the comment section below.

A Good Credit Score and Retirement Go Hand in Hand

By | Credit Scores

We all know that in our economic environment a good credit score can be an added plus when we find ourselves needing to make a large purchase, deal with a crisis, or just enjoy taking a well-deserved vacation.

Planning ahead for any eventuality is imperative when contemplating retirement, especially when you consider that we have to begin the process 40 years prior to the actual event.

Age milestones keep us on track for retirement, but watch for pitfalls

Age 50 — This is the age when most of us begin to think seriously about our retirement planning. You can now use the catch-up provision made available on your qualified retirement accounts. Regular IRAs and Roth IRAs allow you to increase your contributions annually by $1,000, and your 401(k) contribution can increase as much as $5,500 annually.

Age 59 ½ — With an IRA, if you run into an adverse financial climate or illness — or just need additional funds available — you can withdraw a portion of your money without the 10 percent withdrawal penalty charged previously. You will, however, pay taxes on the money you withdraw. You should be aware that even though a Roth IRA does not have the tax consequences associated with regular IRAs (because it uses after-tax dollars), you must hold the Roth IRA for a minimum of five years or you will still pay taxes upon withdrawal.

Age 62 — At this age you may apply for your Social Security benefits, however it may not be an advantageous thing to do. Applying for benefits now will reduce the amount you receive to only 70 percent of the full benefit. If you continue to work, your benefits may be taxed or even withheld. Taking this into consideration, holding off on applying for Social Security until your full retirement age of 66 or 67 is still your best option.

Age 65 — It is critical that you file for Medicare at this time even if you will still be working and you’ll still be covered by your employer’s insurance. Medicare requires everyone to apply for their coverage within a seven-month window of three months prior to their birth month and three months after their birth month. Failure to apply will cause your future Medicare premiums to be 50 percent higher, so this is an important milestone to remember.

Age 66 / 67 — At this time, depending upon your birth year (age 66 for those born between 1942 and 1954), you will be eligible to receive your full Social Security benefit even if you are still working. Be cautious, however, to allow for tax ramifications, as benefits are taxable. If you decide to file early at age 65 you will receive about 87 percent of your benefit and your spouse will in turn receive only 50 percent of that reduced benefit.

Age 70 — Up to now you have received a Delayed Retirement Credit of 8 percent annually for not filing for Social Security benefits at your age of eligibility. After age 70 this is no longer applicable, thus applying for benefits should no longer be delayed.

Age 70 ½ — This age is crucial to your retirement, as distribution requirements demand you begin to take the minimum withdrawals or be subject to a 50 percent tax penalty for the amount that should have been withdrawn. The government wants to make sure you pay your taxes on the tax-deferred benefits you have saved. The Roth IRA has its advantages here in that no minimum distribution is required.

 

A free credit review at retirement is a plus to put in your back pocket

Obviously, when retiring you will need to be on a defined budget and your living expenses may need to be adjusted to reflect that budget. Naturally, from time to time expenses outside this budget can occur that may require a payment plan of some sort or perhaps a new investment. In this regard, a good credit report is imperative in securing a lower interest rate or even an interest-free loan. A poor credit score can decrease your opportunity to receive an affordable loan and will also force you to pay a higher interest rate on your credit purchases.

Ovation credit experts can help you achieve your maximum credit score even if you have had credit issues in the past. Credit repair is vital to a successful retirement and starting early is your best means of protecting your future. Our guaranteed customized service will help restore your peace of mind as well as your credit rating and will ensure your retirement years will be the best time of your life. Give us a call today to learn more about how we can help you.

Don’t Let Unexpected Expenses Derail Your Retirement

By | Credit Repair, Credit Scores

unexpected-retirement-expensesCongratulations—retirement is in sight. You’ve put in the hours, banked your savings, monitored your credit report, and protected your credit score. Now you’re ready to enjoy the reward you’ve been working toward all your life. Picture it: no more lunches and parking to pay for. Sweatshirts and jeans instead of expensive suits or dresses. No more money taken out of your paycheck for Social Security, Medicare, and your 401k. You’ll really enjoy the good life when you have fewer expenses.

But will you? Before your last day on the job, make sure you’ve accounted for the possibility of unexpected expenses after you retire.

Rising Travel Expenses

Although certain expenses may go down at retirement, others can easily go up. Travel is a good example. You finally have time to see the world, so you’ll spend more money doing it. Take advantage of senior discounts from airlines and hotels, and travel during non-peak times during the day or week; you’ll save money.

Spending More on Health Care

Health care costs may rise after retirement, too. You’ll probably find that Medicare doesn’t cover everything your employer’s health plan did, so be sure to account for those extra expenses in your retirement planning. You can also bundle health care expenses to get a tax break; ask your tax professional how best to do it.

Taxes after Retirement

On the subject of taxes, retirement is when you start taking out money you’ve been putting into IRAs and 401ks for all those years. If your plan requires you to take a distribution, you might actually see your income, and your tax bill, rise. Don’t get a nasty surprise—consult your tax professional before you start taking money out of your retirement plans.

Retirement is a time for doing what you’ve always wanted to do; you’ve earned the right. Buy what you want, go where you want, live your dreams, etc. But remember, increasing life expectancies mean that your retirement years might last a quarter-century or more. Make a plan now to ensure that your savings are as long-lived as you are. Part of that plan should involve making sure your credit report is as clean as your old desk on your last day in the office. If your credit score isn’t what you’d like it to be, a credit repair service such as Ovation can help. Give us a call today to talk with one of our knowledgeable representatives.

How Millennials Can Retire Tax Free

By | Credit Repair, Save Money

retire-tax-freeIf you’re a millennial, the idea of retirement is far away and it doesn’t consume your time or energy thinking about or planning for it. However, with President Obama’s newest myRA account, there is now an easy savings option that may appeal to the millennial.

Roth IRA Lite

In many respects, the myRA is like a Roth IRA account. You can contribute up to $5,500 a year and you can only participate if your income is less than $191,000 (married) or $129,000 (single). In addition, the minimum opening balance for the account is $25. Like a Roth IRA, contributions don’t reduce your taxable income. However, the truth is that a myRA is more like a Roth IRA with training wheels because it has limited investment options. The ideal savings plan for a millennial that is comfortable exploring different investment options is a true Roth IRA, which will help you retire tax-free and give you more choices to grow your contributions.

Better than myRA?

The Roth IRA has two significant advantages for young people. First, unlike a traditional, pre-tax IRA or 401k, withdrawals in retirement aren’t taxed at high-income rates. As a matter of fact, with Roth IRAs, although you get no tax breaks for your contribution, withdrawals are tax-free.

When you do withdraw your funds from your Roth IRA, your income is likely going to be higher, and therefore your tax rate will likely be higher too. This makes waiting until retirement for your tax break more valuable than receiving one now, as with a 401k. The Roth option also provides a shield from tax and benefit penalties for higher-income retirees.

The second advantage of a Roth IRA for millennials is flexibility. As young adults, you might have unexpected expenses, such as graduate school, starting a business, or just making ends meet. If you withdraw funds from a traditional IRA, you will get hit with a 10 percent early-withdrawal fee. With a Roth IRA, meanwhile, you can get your money back without paying a stringent penalty.

What about 401k’s?

Most individuals believe that a 401k is the best instrument for creating retirement savings, and yes, it is a good place to start — but it is most beneficial when used in tandem with a Roth IRA. A 401k allows you to save generally up to 6 percent of your salary with an employer’s match. However, if you’re planning a decent retirement and have other savings goals, it’s important to save more than 6 percent a year. That’s where a Roth IRA can make up the difference.

Get Going!

If you are ready to start your Roth IRA, remember that in 2014 you are able to contribute $5,500 per person, provided that your adjusted gross income isn’t more than $114,000 for a single person or $181,000 for a couple.

If you’re already saving in a 401k and fully funding a Roth IRA and can still save more, then it’s important to build an emergency account of three to six months’ worth of expenses outside the Roth IRA, so you can leave the Roth account untouched and growing tax-free. Once your emergency account is established, consider maxing out your 401k to maximize your finances and set yourself up for the most success upon retirement.

Help is Available

If planning for retirement scares you, you aren’t alone. For most millennials, it seems so far off that it isn’t worth planning now. But the truth is, the earlier you start, the better and easier it will be for you in the future. If you’re struggling to save or to make ends meet, it’s likely your credit is also suffering. Let us at Ovation help you. We offer a wide range of credit repair solutions customized to meet your unique needs.

Contact us today to see how we can help.

The New Meaning of Retirement

By | Credit Reports, Credit Scores

retirementYour grandfather or your great-uncle may have worked at the same job all his life, checked his credit report to keep his credit score high, paid off a mortgage, earned a full pension, and then quit working to spend a happy retirement in his golden years. But that’s not the experience most workers today will have.

We don’t always get to decide when our working days are over. Layoffs or business closings sometimes make the decision for us. Some people move into part-time work by necessity after losing a full-time job, while others take a part-time job at their own choosing, and consider themselves semi-retired. These part-time careers can often last for years, delaying what we used to think of as “retirement age’ of 70 or beyond.

What Retirement Means Now

The idea of a single, one-size-fits-all “retirement age” has become pretty old-fashioned. Age 65 was once the magic number, but changes in Social Security rules now permit people to start collecting full benefits anytime between ages 62 and 70. Here’s something else that’s different: people don’t necessarily work until they’ve earned enough money to retire and then stop. Statistics show that the more money you make, the more likely it is that you’ll keep working, because higher-paid workers tend to have better jobs that they want to keep. And people don’t necessarily retire because the stock market is high, or the housing market is good, or inflation is low. We retire because we want to, when we want to. Outside factors don’t have all that much to do with it.

Check Your Credit Score Before Retirement

One thing that doesn’t change when we retire is our need for credit. It’s a tool that helps us get things done. So if you’re thinking about retirement, check your credit score. If it’s not as sharp a tool as you’d like it to be, consider a credit repair service such as Ovation. Then, whether you plan to build birdhouses or work at the hardware store giving advice to people who are building birdhouses during your golden years, you’ll be able to do it without credit worries.

Retirement Planning: What You Need to Know About Roth IRAs & 401ks

By | Credit Repair, Save Money

roth-ira-401kPlanning for your retirement can be tricky if you aren’t well versed on the ins and outs of this very important life goal. When it comes to your savings plan, there are many options available to you. Two of the newer options include the Roth IRA and the Roth 401k. Both offer tremendous benefits but can be very complex. Below are five things you need to know before opening these types of accounts.

Pay now, not later.

While traditional Roth IRAs and 401ks provide generous tax breaks, the difference lies in the timing. With traditional IRA contributions, you avoid taxes when you put money into your account and you must leave the money in until at least age 59 ½ to avoid a withdrawal penalty. With Roth IRAs, there are no tax breaks for contributions, but you withdraw the principal anytime, tax free. This results in a big benefit for those in a higher tax bracket during retirement years.

Understand the limits.

To be able to contribute to the Roth, you must have earned income in the year you contribute, and unlike traditional IRAs, you can keep contributing past age 70 ½. The maximum amount you can contribute to a Roth IRA annually is $5,500, with an extra $1,000 if you’re 50 or older. Keep in mind that higher income taxpayers (above $114,000 adjusted gross income for single filers and $181,000 for joint filers in 2014) are limited or not eligible to contribute to Roth IRAs. Consult a tax advisor to find out more.

Use your employer.

Recently, many employers have added a Roth option to their 401k plans. If you choose this route and make contributions to a Roth account through your employer, you won’t see any immediate tax savings, but your money will grow tax-free. A Roth 401k is a good option if your earnings are too high to contribute to a Roth IRA.

Consider a Roth conversion.

If you convert a traditional IRA account to a Roth, there is more potential for tax-free earnings. In the year you convert, you must pay tax on the full amount shifted into the Roth. It makes sense to convert if you expect your tax rate to be the same or higher in the future. It is also important to note that you will want to pay the tax owed on a conversion with money outside of the IRA. Drawing money from the IRA to pay the tax could result in an additional tax bill and a penalty if you are under age 59 ½. Be careful if you consider a conversion because it could trigger another tax event like boosting you into another tax bracket.

You must pass the test.

In order to receive tax-free and penalty free earnings, you must pass a couple of tests. First, you must be 59 1/2 or older.  If not, you will get hit with a 10% early withdrawal penalty and taxes if you take out earnings before age 59 ½. In addition, you must have had at least one Roth open for at least five years. There are some exceptions, like education expenses and first time home purchases. Again, consult a tax advisor for full details.

When it comes to retirement planning, it’s important to know your options. But having the right accounts in place is only the first step to building a solid foundation for yourself that will prepare you for financial success both now and in the future. It is also important to ensure that your credit is in good shape. Your credit is the one asset that will determine the majority of your financial decisions. If you are currently experiencing issues in this department, let us at Ovation help you.

We offer several credit repair solutions, customized to meet your unique needs. Contact us today to see how we can help.

Saving for Retirement and Credit Repair

By | Credit Repair, Save Money

retirement-saving-credit-repairEveryone knows that it’s important to save for retirement, but it can be difficult to know where to start. Without concrete goals for retirement savings, it’s difficult to plan for the future.  This article will give you a few tips to help you get started.

Have an Emergency Fund

Before you even start your retirement account, make sure you have at least a six-month emergency fund saved. It should be large enough to sustain you if you suddenly find yourself without a source of income. Having an emergency fund in place will save you from needing to use expensive forms of debt – like credit cards – to pay for essentials in a financial emergency.

Save at Least 10% for Retirement

Every time you get paid, feed your retirement account by setting aside 10% of your paycheck. The earlier you begin, the better. Starting to save for retirement in your twenties will net you far more money when it’s time to stop working than if you start in your thirties, forties or fifties. Remember the earlier you start, the more compound interest can build.

The Percentage of Bonds in Your Portfolio Should Equal Your Age

This is a general rule of thumb, but the closer you get to your target retirement age, the more you should distribute your investment portfolio toward less volatile investments like bonds. Earlier in life, you can afford greater volatility, but you want to make sure your portfolio won’t take a big hit in the years leading up to your retirement should the stock market decline.

Expect to Get 7%-8% Growth from a Diversified Stock Portfolio

Nothing is guaranteed, but your diversified stock portfolio should average 7%-8% growth. A properly diversified portfolio will result in more long-term gains for your investments by limiting volatility.

Plan on Replacing 70% to 80% of Your Pre-retirement Income

Although you may need to replace more – especially if you or your spouse currently have or anticipate special medical needs – plan to need 70% to 80% of your pre-retirement income to live off of in your “golden years.”  Keep in mind, though, some studies suggest that you may actually need as little as 35% of your pre-retirement income after retirement.

Save Eight Times Your Final Income for Retirement

Some investment firms recommend a retirement planning model that encourages you to set goals by age. It suggests that you should have saved eight times your income at 65, if that is your goal retirement age. Other benchmarks are one times your income at age 35, three times by 45, and five times by 55.

Plan on Withdrawing 4% from Your Retirement Savings Every Year of Retirement

Most retirement plans are built around the assumption that you will withdraw around four percent of your savings per year of retirement. The goal is to earn 7-8%, spend 4%, and invest the remainder to keep pace with inflation.

Every Situation is Unique

These tips are not written in stone. Everyone’s situation is different, and you need to make decisions that are the best for you. If you are struggling with your credit score, credit repair should be part of your retirement plan. Consider Ovation for your credit repair needs to get yourself in a situation where you can afford to give your savings more attention.

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