MAKE MONEY ONLINE POSTS: 04/17/17

الاثنين، 17 أبريل 2017

CLOSING BELL: Market has its biggest day in 6 weeks

Banks posted some of the biggest gains Monday. Wells Fargo jumped 2.7 percent. Among consumer-focused stocks, Amazon.com gained 2 percent.

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Yikes: Looks Like Americans Now Owe Over $1 Trillion of Credit Card Debt

One trillion dollars.

It’s an unimaginable number, really.

Take a million dollars and multiply it by a million, and you get a trillion dollars.

Fun fact: That’s America’s credit card tab right now.

We sure do love our plastic, don’t we?

We Have Some Good News And Some Bad News

No lie. Americans’ collective credit card debt just topped $1 trillion, its highest level since the country’s last recession in 2008, according to new Federal Reserve data.

Technically, we owe $1.0004 trillion on our credit cards, but who’s counting an extra $400 million or so? That’s chump change, man.

The balance is 6% higher than it was a year ago, and a 16% increase from 2012. Credit card balances plummeted during the recession as we all tightened our belts.

Naturally, there’s a good-news-bad-news aspect to all of this.

The good news: “Rising consumer borrowing is often a positive sign for the U.S. economy,” The Wall Street Journal reports. Basically, it means people are buying more stuff, and that’s a good thing.

The bad news: From sea to shining sea, we all owe a lot of money.

More Americans are struggling to pay their credit card bills, Bloomberg News reports.

“There are signs of trouble looming. Missed payments … are on the rise in the credit-card market,” the WSJ reports. “Delinquencies are expected to pick up by the end of this year.”

If you’re one of the many who are struggling to pay off credit card debt, here are three steps you can take to help lighten the load:

1. Figure Out What You’re Dealing With

Map out exactly what kind of debt you have.

For example, which companies do you owe money to? Are any of your debts are in collections? What are your minimum monthly payments on each credit card or loan?

An easy way to do this is to sign up with a free service like Credit Sesame. This tool shows your balance on any unpaid bills, credit cards or loans. It also offers tips on reducing your debt and raising your credit score.

2. Consolidate Your Debt

Once you fall behind, you may find yourself getting crushed by credit card interest rates north of 20%. You’ll never catch up that way. You’re spending so much on interest, you’ll never pay off your balances.

If you’re financially treading water like this, it’s worth consolidating and refinancing your debt.

An easy place to start is Even Financial, which can help you borrow up to $35,000 (no collateral needed) to pay off your existing debts. Type in your info, and it compares interest rates from several lenders.

3. Choose Which Debts to Repay First

You’ve probably heard conflicting advice about the best way to pay off your debts. That’s because different methods might work better for different people and situations.

The two best-known methods for paying off debt are the debt snowball and debt avalanche methods.

Avalanche: You pay off your debts with the highest interest rates first — most likely your credit cards. Doing that can save you a lot of money over time.

Snowball: You pay off your debts with the smallest balances first. You may pay more in interest in the long run, but this way allows you to eliminate debts from your list faster. That can motivate you to keep going.

Which method should you use? The one that works best for you.

Paid in Full. That’s the Goal.

One trillion dollars.

That’s what Americans owe on their credit cards.

Sure, it’s an unimaginably big number, but that doesn’t mean you have to be one of those who fall behind.

Roughly a third of all monthly credit card balances are paid off in full before the user has to pay any interest.

The average U.S. household is carrying about $175,000 in mortgage debt, $50,000 in student debt, $29,000 in auto loans — and nearly $16,800 in credit card debt.

So if you keep swiping that plastic, you have a lot of company.

The trillion-dollar question is: Can you do it without getting carried away?

Your turn: What’s the most credit card debt you’ve ever had?

Disclosure: Here’s a toast to the affiliate links in this post. May we all be just a little richer today.

Mike Brassfield (mike@thepennyhoarder.com) is a senior writer at The Penny Hoarder. Much to his regret, he’s quite familiar with credit card debt.

This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.

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Manhunt continues for suspect in Facebook video killing

"He could be nearby. He could be far away or anywhere in between," FBI agent Stephen Anthony said on Day 2 of the manhunt for Steve Stephens, a 37-year-old job counselor for teens and young adults.

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Netflix on the verge of hitting 100 million subscribers

The milestone will be reached this weekend if Netflix's projections are correct. Netflix made the prediction Monday with the release of its first-quarter earnings.

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Gordon Ramsay Isn’t Leaving His Money to His Kids — and Here’s Why

Celebrity chef Gordon Ramsay recently made headlines after he told The Telegraph that he won’t be leaving his fortune to his four kids.

This is a guy who made as much as Beyonce last year — about $54 million, according to Forbes.

In 2015, he told the business publication he had “more money than I’ll ever need.”

Yet, his kids — 18-year-old Megan, 17-year-olds Jack and Holly, and 15-year-old Matilda — shouldn’t plan on having their dad’s money one day roll into their bank accounts.

“It’s definitely not going to them, and that’s not in a mean way; it’s to not spoil them,” he told The Telegraph.

Ramsay also said he doesn’t let his kids fly first class with him and his wife, Tana.

“They haven’t worked anywhere near hard enough to afford that,” he said. “At that age, at that size, you’re telling me they need to sit in first class? No, they do not. We’re really strict on that.”

Ramsay doesn’t even let them indulge at his fancy restaurants.

“Last time we went to Royal Hospital Road [his three Michelin-starred flagship restaurant in London] was for Megan’s 16th birthday, and that was the first time we’ve ever eaten there with the kids,” he said.

Ramsay, who says he had a rough upbringing, said he’s never been “turned on about the money.” He said he worked hard to get beyond the life he had and is lucky to have the success he’s earned.

Though Ramsay doesn’t want his kids getting hand-outs in life based on his fame and fortune, he isn’t completely hard on them. He and his wife agreed they’ll put 25% down on homes for each kid, though he stressed he wouldn’t be buying the homes outright.

Right now, the kids receive a weekly allowance of £100 ($125.94) for his oldest daughter who attends university and about £50 ($62.97) each for the rest.

“And they have to pay for their own phones, their bus fare,” Ramsay said. “The earlier you give them that responsibility to save for their own trainers and jeans, the better.”

Start Teaching Your Kids About Money Now

While it’s safe to say the majority of us aren’t rolling in the dough like Ramsay, he does make some valid points about the importance of teaching kids financial independence.

This dad uses a written contract to teach his daughters about money management, saving and pay negotiations. This mom implements nine cool ways to raise future frugal shoppers.

It’s OK to introduce the topic of money at an early age. Here are five things your 5-year-old should know about money. Teach your little ones about compound interest using these four creative methods.

This book club teaches kids ages 4-10 about personal finance and helps parents learn how to have positive money discussions with their children.

Do you have teens and you don’t want to send them out into the world unprepared? Try these unique ways to get teens interested in money management, or use these tips from a woman who started a personal finance blog at age 16.

You don’t have to be good at money yourself to teach your kids the basics. But if you desire more expert advice, read on:

Personal finance columnist and author Ron Lieber shared these tips on how not to raise spoiled kids

Personal finance guru Suze Orman shares smart advice on what your kids should do with the money they get as gifts

And while we’re all adulting now, some of our staff Penny Hoarders received allowances as kids. Here’s what they thought about it.

Your Turn: Are you spoiling your kids financially?

Nicole Dow is a staff writer at The Penny Hoarder. She plans to teach her daughter about financial independence but also plans to make enough money in her lifetime to leave some behind.

Just the Basics: What’s an IRA, and Do You Need One?

An IRA is an acronym that stands for individual retirement arrangement or individual retirement account. It’s the retirement savings plan you can put money into without going through an employer.

IRA Basics

Do you need an IRA?

Maybe. Maybe not. It depends on your situation.

Advisers generally suggest contributing to a 401(k) first if you can, especially if your employer matches your contribution. That plan stretches your money further.

But an IRA could be another smart way to save for retirement if:

Your employer doesn’t offer a retirement savings plan, or you’re about to move to a new job that doesn’t.

Your employer does offer a 401(k) plan, but it sucks.

You’re leaving your job to work for yourself or stay at home.

You’re already self-employed or don’t work, and you want to start saving for your future.

You have a 401(k) but want to save more than the annual limit (which is $18,000 if you’re under 50).

What is the Difference Between 401(k) and IRA?

The biggest difference is only an employer can sponsor a 401(k). You can open an IRA on your own — hence “individual.”

How much you can contribute each year is also way lower for an IRA — $5,500 a year ($6,500 if you’re 50 or older).

Both accounts offer a tax break. With a traditional 401(k) or IRA, you won’t pay taxes on the money you contribute to your retirement plan. (But you will when you withdraw it.)

OK, but Who is Roth?

Roth is the guy we always wanted Rachel to end up with — no, thorry, wrong Roth.

This Roth is actually a type of IRA (or 401(k), but those are less common). The key difference is when you pay taxes.

You won’t get the tax break on your Roth IRA contributions now. You’ll get it when you withdraw. And that could be better.

See, you’ll pay taxes now on, say, $5,000. Then, because it’s an investment, that money grows over the years. It could double or triple by the time you retire.

That means you’ve earned, like, $10,000 tax-free.

While anyone can open a traditional IRA, a Roth IRA is only for people who make less than $132,000 a year ($194,000 if you’re married).

So… What’s the Best Way to Save for Retirement?

Retirement planning is totally subjective, so you have to weigh the options for yourself, or ask a financial advisor.

We hope this untangles the info enough to help you ask the right questions. If you need more info, read our post on the difference between an IRA and a 401(k).

(Roth is also a guy, btw. He’s the late Sen. William Roth, who sponsored the legislation that created the plan. Take that to trivia night.)

Your Turn: Do you contribute to a traditional or Roth IRA?

Dana Sitar (@danasitar) is a senior writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).

Thinking About Getting a National Park Senior Pass? You Should Get It Soon

If you’re 62 or older and love the outdoors, this is the deal of a lifetime — literally.

For a one-time fee of $10, you can purchase a Senior Pass that will get you into all 417 national parks and more than 2,000 other recreational sites managed by the federal government for free for the rest of your life.

And the sooner you buy your pass, the better. The cost, which has been the same since 1994, is soon expected to shoot up to $80, according to the AARP.

Why is the National Parks Senior Pass Price Going Up?

The prices are going up because Congress approved the National Park Service Centennial Act in December. The act raises fees and sets up an endowment to help improve the visitor experience and provide more opportunities to volunteer in parks all over the country.

A notice from the U.S. Geology Survey, which sells the passes, says the price is expected to stay the same for the next few months, so you’ve got a bit more time if your 62nd birthday hasn’t rolled around yet.

There’s no exact date for the price to be raised yet, but the AARP expects the change to come sometime before the end of this year.

How to Get a National Parks Senior Pass

If you want a Senior Pass, you have to be 62 years old before you can buy it. That means if you’re still 61 when the prices change, you’ll unfortunately be stuck paying the higher fee.

But if you’re already of age, all you need is an ID to prove your age and residency.

The most economic option is to buy your pass in person. While some states like Delaware only have two places across the entire state to purchase a pass in person, other states like Arizona have several dozen.

Check this list to find out where you can purchase your pass in your home state. Be sure to call before you go to check the hours for the location.

If you don’t want to make the trek just to pick up a pass, you can also apply for yours online or with a mail-in application, but it will cost you an extra $10 for document processing.

Your Turn: Do you already have a Senior Pass? What parks have you visited with it?

Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder. The prices will change long before she turns 62.

This Shocking Report Shows How Little Americans Have Saved for Retirement

Listen up, America. We need to have a chat about retirement.

I know you’re busy. I know you’re stressed. I know you’re tired. But we can’t put this off any longer.

Take a look at your retirement fund. Are you 50? If so, do you have the recommended amount of six times your salary in there?

If you’re not — will you by the time you hit that age?

A new report from the Economic Policy Institute (EPI) revealed that the average family has nowhere near enough money in their retirement funds.

How does yours compare?

Americans Don’t Have Enough Saved for Retirement

According to the report by the EPI, the average family with adults between the ages of 44 and 49 has retirement savings that rings in at $81,347.

However, since so many families have no savings whatsoever, and some have hefty retirement funds, using the average to measure retirement health would be flawed.

So what’s a more truthful number? The report states the median savings, or those at the 50th percentile, for those families is only $6,200.

Most families still haven’t recovered what they’ve lost from the Great Recession and still haven’t contributed additional savings to make up for it, according to the report.

If you aren’t alarmed, you should be.

How You Can Boost Your Retirement Fund

You may be thinking, “Well how exactly do you recommend we save for retirement when we’re just barely getting by, Miss Smarty Pants?”

Well, it won’t be easy. But it’s possible — if you start now.

You can sign up for clinical trials, rent out your home on Airbnb and get seasonal jobs to help you start funneling money into a retirement fund.

Our post “12 Strategic Steps to Save an Extra $5,000 for Retirement in 12 Months” is a great place to start brainstorming ideas to generate money for your retirement fund.

In addition to side gigs, you can also venture into investing your money. Read our post “If You Invest $100 Today, How Can You Get the Best Return?” for a few tips on what may be the best option for you.

Still not sure how your retirement savings add up? Check out this calculator — it’ll tell you how much you’ll need to start saving monthly to stay on track toward a healthy retirement fund.

Here’s What You Should Do With Your Retirement Savings

Once you’ve got extra cash for your retirement fund, consider doing something with it that’ll make it go the extra mile, such as putting it in an IRA or 401(k), if available.

A 401(k) is a company-sponsored retirement fund that, thanks to compound interest, grows your money.

Companies usually promise to match a certain percentage of whatever you contribute into the account — meaning that you’re not only getting free money, but it’s growing while you go about living your life.

Sweetening the deal, 401(k)s provide you with a tax break by lowering your taxable income, since your contributions are taken out of your paycheck before it’s taxed.

If your place of employment doesn’t offer a 401(k), you still have a way to gather interest on your retirement funds: an Individual Retirement Arrangement (IRA).

IRAs are also open to people who aren’t working, such as students or stay-at-home parents.

No matter which option you choose, be sure to refrain from withdrawing money before you reach the age of 59 ½. If you do, you’ll face a 10% early withdrawal penalty.

Your Turn: How does your retirement fund compare to the median amount for American families?

Kelly Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.

Canada Offers Way to Invest in Medical Marijuana

For investors who believe that the marijuana market will be a booming sector, the Horizons Medical Marijuana Life Sciences ETF (HMMJ), which is now selling on the Toronto Stock Exchange offers a way to invest without taking on individual company risk.

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Here’s What Happens to All the Spare Change You Leave at Airport Security

I know you’re stressed when you go through TSA checkpoints.

You’re frugal and anticipate being able to get to the airport at least 12 hours ahead of time, so you haven’t paid for the ease and comfort of TSA PreCheck.

So you prepare to remove your coat, scarf, sweater, hat, shoes, belt, toiletries and electronics from your person and personal items and place them in what I am sure are grimy-as-hell bins to be peeped by a stranger in a uniform.

Oh, and you emptied your pockets, right? Better grab another bin, because all that change in your pockets has got to come out.

What comes after the jumping-jack-pose body-scan experience isn’t any easier. Everyone bunches up around the exit chute of the luggage belt to grab their belongings the instant they reach fresh air again.

But your change? Bet you forgot about your change. It’s barely a memory, replaced by concerns about how you will spend the rest of your disposable income on magazines and oversized bags of Chex Mix.

Just how much loose change gets left behind at airport security checkpoints? In fiscal year 2016, it was a whopping $867,812, according to the TSA.

That’s $100,000 more than the Transportation Security Administration reported people left behind in fiscal 2015.

The amount of undeclared money tallied by the TSA has risen steadily over the years – the agency counted about $383,413 left behind in 2008.

How’d We Get So Lazy With Our Spare Change?

First of all, this is a men’s problem. Women’s pockets are so small we couldn’t possibly have spare change on us.

Second of all, can you blame anyone for wanting to get out of the security checkpoint as fast as possible? No one, not even you, is at their best when waiting to go through TSA.

A TSA spokesperson told CNBC the agency has no theories as to why we’re leaving so much more change behind when we travel. Maybe an increase in air travel? ¯\_(ツ)_/¯

Of course, some of the biggest airports in the nation are the ones where the most loose change gets left behind. Here are a few greatest hits from the top-10 list:

John F. Kennedy International Airport, New York City: $70,615
McCarran International Airport, Las Vegas: $32,671.38 (That’s 38 cents you could have put in a slot machine!)
O’Hare International Airport, Chicago: $25,425.75
Logan International Airport, Boston: $23,691.83

What Does TSA Do With All That Money?

Great news! TSA gets to use your spare change for whatever it wants! (Within reason. No staff pizza parties.)

Since 2005, TSA has had the power to keep any unclaimed cash to use as it sees fit to increase civil aviation security. In the past, TSA has said the unclaimed funds would go toward expanding the TSA PreCheck program, which is the closest experience I’ll ever have to flying first class.

“TSA makes every effort to reunite passengers with items left at the checkpoint. However there are instances where loose change or other items are left behind and unclaimed,” Lisa Farbstein from the TSA Office of Public Affairs, said in an email. “Unclaimed money, typically consisting of loose coins passengers remove from their pockets, is documented and turned into the TSA financial office.”

There’s no word yet on how fiscal 2016’s gigantic change jar will get spent.

In the meantime, maybe it’s time to start preparing to go through TSA before you’re two away from the bin stack? I’m pretty sure this isn’t your first time flying. You should know this routine by now.

Your Turn: Have you ever left anything behind at TSA?

Lisa Rowan is a writer and producer at The Penny Hoarder. TSA PreCheck is the best money she’s ever spent.

Manhunt expanded for suspect in Facebook video killing

Questions About Sneaky Fees, Upgrading, Lifestyle Inflation, Eating at Home, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Struggling while near financial independence
2. Sneaky fees from investment firm
3. Ailing mother and financial struggles
4. Service work for lifestyle funk
5. Depositing checks
6. Investing and market timing question
7. Landlord unexpectedly not renewing lease
8. Getting into home eating routine
9. Buy now or next model?
10. Encouraging frugality in teenagers
11. Net worth as family?
12. Retire tomorrow?

It’s raining, one of those short little light rains that sometimes happen when the weather is a lot warmer in the last few days than it has been for a while. The crashing of a heat wave.

I’ve spent a lot of time outside lately. I’ve wandered in the woods. I’ve went on long walks. I’ve worked on a spring garden, getting it ready for planting. I’ve played baseball and soccer and Frisbee. I’ve looked for hidden eggs and hidden a few myself.

Right now, I’ve got the window open and I can actually smell that fresh rain. To me, it’s the smell of life. It’s the smell of plants opening up to that water from the sky, drinking it all in, and preparing to grow.

I feel good. I’m a little sore here and there. I’m sipping some coffee. There’s a gentle moist breeze on my face. It’s really early but it’s still warm enough that I don’t feel cold. It feels like there’s a big breath of summer out there, but it’s not quite there yet. Things are in bloom.

I love the springtime.

Q1: Struggling while near financial independence

I am struggling with what I should do for the next phase of my life financially. I am a single 52-year-old mom with 5 kids under age 10. I have a job I love, but it is 40 hours and the option to go part-time isn’t really there but might be available down the road. I work for the state so I have a state pension. We are allowed to contribute to both a 401K and a 403B; so I have been putting away 24K in each for the last 2 years (48K before taxes). My mother left me stocks and savings bonds. I have some of my own stock investments, and I signed up for a private annuity a few years ago through Transamerica. These investments total just shy of $1 million. I have 18 properties, 4 are not rented (my personal residence and vacation places) the other 14 are rental properties. I own these free and clear. Conservatively, the are worth 1.3 million and general approximately 7,000K a month before expenses. I have a coin collection I inherited that was appraised at S20,000 a few years ago. I have approximately S100,000 in cash in my bank accounts, and i also have $300,000 in my fidelity retirement accounts and $190,000 in my 403B account.

I am also a COL in the Army reserve and have served 29 years. I will get a pension from them at retirement. Right now I am juggling my career, military, parenting and rentals. I am TIRED! A huge part of my questions why am I doing this. My mother died 3 years ago (I took care of her the last 6 years of her life) and she scrimped and saved, and basically passed her wealth to me and my 2 siblings. I did my taxes this year and had a huge hit. I had received 18,000 from due savings bonds, and the military gave me a $25,000 bonus, so between those things and doing 20K of overtime, I made about $150K. I had to pay the federal and fix the Roth I paid into last Spring since I was no longer eligible. I had decided to not work overtime anymore. I am due to max out of the Army in May 2018, unless I extend which I have toyed with.

My children all have 457 accounts for college with about 10k each. We live in a city that has Say Yes program so their college tuition is paid for if they graduate. This has kept me living in a modest house in the city. My home is a 3 bedroom and while it is congested, it feels like home to me.

I am afraid to change my work routines and I am not sure why. I sometimes feel like I am just repeating what my mom did, not using the money she saved. I would just like your advice. One thing I would like to do for both me and my children is dual citizenship to Italy, since we are eligible. I imagine this will cost between 10-20K. And a Disney vacation. I don’t spoil my kids and want them to learn life isn’t about possessions or money. Thank you for reading!
– Nina

According to my back-of-the-envelope calculations, you have enough wealth in assets and guaranteed income to easily retire provided your lifestyle isn’t extremely affluent. If you commit to a 2.5% annual withdrawal rate, or commit to mostly just living off of rental income (and put it all under a management company), you can basically just sit back and not work any more. You’re effectively financially independent, provided you don’t splurge constantly.

The question you should be asking yourself is what exactly you want out of life moving forward. What is the most worthwhile thing you can be doing with your time, given that you have no need to earn an income?

You sound like you have a strong work ethic but that you feel almost on the verge of burning out. You likely want to be doing something with your time, but you’re doing too much. You might want to start by stepping back from one of those major commitments you have listed. Maybe you could hire a management company and step away from the effort of being a landlord. Maybe now is the time to retire from the Reserve. Maybe you could step back from your primary career. You easily have enough assets and income to do any of those things.

My guess is that you don’t want to change your work routines because you have a really strong work ethic and it feels somehow wrong to not be busy. I can completely sympathize with that, but at the same time, what is the point of having so many assets if they don’t afford you the freedom to step back and focus on a small set of true key things in your life instead of running yourself ragged?

Q2: Sneaky fees from investment firm

I have just noticed a fee on my wife’s Merrill Lynch Simple IRA that I never noticed before it is an Advisory Program Fee. This seems to be for additional “services” they provide although I don’t know of any recent services they provide and most of the time her contributions just sit in a cash account earning and estimated annual yield % of 0.02. Overall I have not been very happy with Merrill Lynch but I’m unsure how to proceed. Is this advisory program something she can opt out? The fee seems pretty substantial 160.61 for March with a mutual fund rebate of (9.21). I really think we need to change the direction of her employee contributions and just contribute the amount that her company matches (3% I think) and then open a Roth IRA for her probably at Vanguard. If she can opt out of the advisory program can she decide how the funds are allocated or are they just stuck where they are? Any advise in the right direction would be appreciated.
– Fred

It looks to me that the Advisory Program is a default part of a Merrill Lynch Simple IRA in that you’re signed up for that right off the bat. It does appear to be something you can opt out of, but my guess is that you’ll be met with some resistance in opting out as it’s a way for Merrill Lynch to earn some easy money off of you.

It’s practices like this that give financial services a bad name. They’ll tack on fees for services that customers don’t even know about and will never use and wouldn’t even use even if they knew about it. They might mention it along with 89 other things when you sign up, but it’s rarely something that anyone will take advantage of or even need and it just becomes a drain.

My advice to all readers is to look over their statements from financial institutions very carefully and question any and all fees and whether they’re necessary and can be waived. Of course, financial houses do need to earn some revenue from the services they provide, but they don’t need to weigh you down with unnecessary services either.

Related: Eight Investing Fees to Watch Out For

Q3: Ailing mother and financial struggles

My husband and I are just starting to get our financial footing after several major financial mistakes which led to bankruptcy. We are living essentially paycheck to paycheck while we work on keeping up with bills and trying to make better financial sense of our budget. Here’s the catch – my almost 80-year-old mother with beginning dementia and advanced Type 2 diabetes is now moving in with us. She cannot live on her own as she “forgets” to eat or take medications, etc. Unfortunately, I learned my lack of financial knowledge from my parents. Mom won’t pay off a re-fi on her house until she is 101! We are moving her from her 50 years to a new state, etc. Do you have any recommendations for resources to deal with transitioning Medicare and coverage from one state to the next, trying to work with her mortgage company to do something with the house, closing and opening new banking accounts, etc.? Everything I can find is either Federal and is so general is it not helpful or strictly local and doesn’t cover the state to state aspect of the transition.
– Sara

Your solution for working with her mortgage company to do something about the house is likely to simply involve selling the house and using the proceeds to pay off the mortgage. This likely involves cleaning out the house after your mother moves, then getting a realtor involved to sell it, then using the proceeds to pay off the mortgage.

As for the other programs you mention, just handle them one step at a time. For a new bank account, select a bank in your area (perhaps your own, for convenience) and ask them for help in transitioning. For Medicare, look at a guide for transitioning to a new state, like this one.

In general, if you’re unsure what step to take next, talk to someone who is an expert on your situation. You should always start by communicating with whoever it is your mother will be doing business with in her new location and talk to them about transition advice. They’re usually much more likely to help than the people in the state you’re leaving because it amounts to acquiring a new customer.

Q4: Service work for lifestyle funk

Your advice to the guy (‘Craig’) spending way too much money in a post-divorce funk was just fine – but there is another way that might work better for him.

Service work. On the weekends he does not have his kids or on days after work if he is at loose ends, he can find a place to volunteer. All kinds of places need help but can’t afford it – from walking dogs at the humane society to driving for meals on wheels to building houses for habitat for humanity. If he has ties to a faith home, he can look there first.

And, on the weekends he has his kids, he can do them a favor by including them in his service work rather than spending a lot of money on them. He can involve them in helping out at a local shelter, picking up litter, mowing the lawn of a sick or elderly neighbor, or cutting down invasive species (honeysuckle is one in these parts) at local parks.

He can still do other things with his kids, but directing them toward service work will also help them through the divorce process. The very best way to feel better about your life is to help improve someone else’s.
– Jed

I completely agree with you in regards to the value of service work. Community service projects have been some of the most valuable things I have ever done in my life.

If you’re struggling to find meaning in your life, look around your community for a service project to be involved with. I highly recommend starting with a local food pantry if you don’t know where to start. They almost always need helping hands and they provide an invaluable service to the community. The realization that I was helping to make sure that many schoolchildren in my area had food on the table was incredibly powerful to me.

There are many such organizations in most areas and many of them probably fly right under your radar. Look into food pantries and soup kitchens and Habitat for Humanity and other civic groups like the Lions Club. If you’re lost, knowing that you’re doing something that makes the lives of others better can really bring some meaning to the table that may not have been there before.

Q5: Depositing checks

I have a 19th century problem – I get paid (sometimes) with checks, and need a prepaid debit card that will allow me to deposit them without a smart phone app (I don’t trust banks or their software on my phone). Seems to me any card that uses ATM’s (American Express Serve for example) should be able to do that, but no. Do you know of any card that has a non-smart phone way to deposit checks?
– Cam

Most prepaid debit cards don’t offer an easy way to deposit checks because the companies behind them are not really banks in the traditional sense of the word. They typically don’t have the processes in place to handle paper checks, so they simply don’t allow customers to do so.

In general, use of an ATM to deposit checks is a feature of a traditional checking or savings account through a bank or credit union. Companies that offer prepaid cards may have arrangements with certain banks or credit unions to use their ATM networks for withdrawals, but generally don’t allow for deposits.

What you’re hitting on is a limitation of prepaid cards as they currently exist. They simply aren’t as feature-rich as a checking or savings account at a bank or credit union.

Q6: Investing and market timing question

Would you recommend that I invest in the Vanguard low-fee index funds now? I know it’s a bull market right now and stock prices are high. They’ve got to come down sometime. On the one hand, I’m anxious to put my money in investments, because sitting around in savings at a 1% interest rate isn’t really getting me much. But on the other hand, I’m worried I’m going to put pretty much all my money into a stock market that’s likely going to come down from the high it’s at. Should I wait? Or what would your strategy around the timeline be?
– Sammy

I don’t believe market timing works unless you have a crystal ball that can foresee the future. The reason for that is that we never, ever know when an unexpected event is going to occur. When will the next huge industry-creating technological breakthrough happen? When will a major political or diplomatic crisis happen? When will a few large-scale investors read the tea leaves and get cold feet? Or when will they read the tea leaves and get excited about something?

The truth is we have no idea. No one does. The market has certainly gone a lot higher than this in the past in relation to general economic indicators, but it’s also been a lot lower. Even if it were at an all time high, that doesn’t mean that it’s necessarily headed straight for a drop.

Investing for individual investors should be centered around individual needs. None of us have the resources or the ability to invest in ways that might shift the market and we’re not able to predict the general future. However, we can predict to some extent our own future, so we should invest according to our own plans and our own sense of risk. If stock investing in general feels too risky for you, find other avenues for investing.

Related: Why ‘Beating the Stock Market’ Is a Lie

Q7: Landlord unexpectedly not renewing lease

My wife and I live in a house with an annual lease. For six years we’ve renewed the lease with no problem. This year, I didn’t get around to renewing it in Feb. or Mar. like I usually do and so when I called the landlord a few days ago he said that he thought we weren’t staying and had already leased the house to someone else. We’re basically out at the end of the month. This is very upsetting to both of us as we really like this house and have done lots of little things to make it our home. What can we do?
– Dan

There isn’t much you can do in terms of staying where you’re at. If the lease is ending and there’s no clause about renewing or continuing the lease, then the property owner has fulfilled his obligation to you. They can move on for almost any reason and usually have no reason whatsoever to tell you about it.

Most landlords do typically contact reliable tenants well in advance of a lease termination to either discuss renewal or to give some advance notice of ending the lease, but they’re generally not required to.

Start shopping around, in other words. If this landlord and/or management company didn’t handle things to your satisfaction, avoid them in the future and consider a negative review of their performance (but do take note of other things they may have done well – or not so well).

Q8: Getting into home eating routine

How did you establish a routine of eating at home? Husband and I trying to break habit of eating out or getting takeout each night. We do good cooking at home but then there’s a busy night and we immediately fall back into old routine of just getting takeout. How did you break this routine with two busy people?
– Tomi

Honestly, we used our slow cooker a ton. Whenever a night appeared to have any chance of being busy, we would prep a meal for the slow cooker before leaving for the day. That way, the meal was already done when we came home (or close enough so that all we had to add was pasta or some other simple ingredient and wait for just a bit longer).

We also kept a few very simple meals on hand to use in a pinch. We often fell back on very simple pasta meals and grilled cheese sandwiches with tomato soup, so we kept the ingredients for those things on hand.

We still use these tactics, to tell the truth. “Spaghetti night” is usually our fallback when things unexpectedly get busy. We always have a jar of pasta sauce, a box of pasta, and a bag of flash-frozen vegetables, from which we can put together a pretty decent meal in ten to fifteen minutes without much thought at all.

Q9: Buy now or next model?

Is it better to buy the current model of something now or wait until the next model comes out and limp along until then?

Cell phones for example. I have an older phone that is no longer capable of receiving OS updates. Trying to decide whether I should upgrade now or wait until the next round of models comes out so maybe the latest ones right now receive a price drop.

Thoughts?
– David

My philosophy is to keep using a device until it no longer meets your needs, then replace it with a device that seems to be a consensus quality choice for that type of item.

Take your cell phone. Is it no longer doing what you want it to do? When it ceases to be able to do those core functions, then replace it with a consensus “bang for the buck” phone and repeat the process.

Don’t choose to upgrade based on what’s on the market. Choose to upgrade based upon your needs no longer being met. Control your own destiny. Don’t let the market control it for you.

Q10: Encouraging frugality in teenagers

How do you encourage teenagers to be more frugal? My kids seem to have really expensive tastes and request that I buy all kinds of expensive foods and expensive stuff. They won’t even look at secondhand clothes stores and insist that I buy stuff at expensive stores at the mall. Getting tired of it.
– Terry

My approach in situations like this would be to buy them low-cost staple clothes, then give them a very small budget for items beyond that. Serve them simple meals that meet their nutritional needs and only go beyond that on your own terms because it’s something you like.

If you want to “treat” them, make it a rare occasional treat.

If they complain about it, show them some job listings, or come to some sort of agreement where they put forth effort to earn what you give them.

They’re teenagers. It’s time for them to start taking the yoke of responsibility for their lives. Cover their minimum needs and let them address things beyond that.

Q11: Net worth as family?

Is there a big or any real difference between calculating net worth for a family unit vs individual? All of our banking and budgeting is done on together on a family unit level so when I sat down to calculate our net worth for the first time, it was as a unit. However, all the literature seems be about individual net worth…
– Eileen

There’s absolutely nothing wrong with calculating net worth on a family level. Sarah and I do this, in fact.

The deciding factor on whether to do this jointly or individually, in my eyes, would be whether you consider your assets to be shared with your spouse or individually yours. Different marriages and partnerships operate very differently in that regard. I know some partnerships where the two members are completely individual in terms of finance, while others are completely fused with all assets shared.

Your net worth calculation should reflect the nature of the relationship you share with your partner.

Q12: Retire tomorrow?

Let’s say you suddenly had enough money to retire tomorrow. What would you do?
– Charlie

For me, enough money to retire early means that I have enough money in the bank to match our current income at a 2% withdrawal rate, plus enough money to fully pay for our children’s college educations and a starter home for each of them without touching the money needed for the 2% withdrawal rate. Anything less than that would probably not lead me to immediately retire.

So, what would I do if I had that? For starters, I would not destabilize my children’s schooling, so I’d not move anywhere. I do not feel I would be a good homeschooler, but I might consider looking around for the best possible school for my children. I am slightly biased against private and preparatory schools unless they have exceptional academic and social track records. I would probably move to another home, however, with more land on which to work on projects. I’d love to have a giant garden and a barn.

I would probably spend most of my time during the school year doing community work and trying to be the best possible parent. I would have a big winter garden – meaning I would plant stuff in the fall that would be harvested in the spring. I have a few creative projects I’d love to do that I don’t think will produce a whole lot of income, so I’d probably dive deep into them.

Our summers would be filled with adventures. We’d camp a lot. We would visit every major city in the US as well and travel abroad some, though we’d return to our home in the fall for schooling. I’d like to spend a few summers actually living in another country for a few months.

After the kids have grown up and left the nest, I’m honestly not sure what I would do. I would probably start a nonprofit that I’ve long thought about, but I don’t want to do it until I can truly throw a lot of myself into it without the commitment to parenting that I currently have.

It’s a fun thing to think about, but honestly, I do a lot of the elements of that dream in my life right now, so it just feels like a “more of the good stuff” kind of dream.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

The post Questions About Sneaky Fees, Upgrading, Lifestyle Inflation, Eating at Home, and More! appeared first on The Simple Dollar.

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6 Fruits and Veggies to Pick up at Your Local Grocery Store in April

The Magical Way This Grandma Funded a Trip to Disney World for Her Grandson

Meet Genevieve.

She’s an awesome grandma who earned enough cash on one of our favorite rewards sites to fulfill her grandson’s dream: a trip to Disney World.

That’s right — Genevieve was able to pay for a whole week-long theme park vacation just by taking surveys and watching videos in her spare time.

And did I mention she didn’t even have to leave the comfort of her own home?

How This Grandma Used Swagbucks to Save for Disney World

After working hard for 30 years, Genevieve and her husband were thrilled to retire.

But she soon found money was a little tighter than it had been while they’d both been making a regular income — and it cut into her ability to surprise her grandkids.

She loved sending them little treats — “You know, for times that Grammy isn’t around but wants to say, ‘I love you and I’m so proud of you!’,” she says.

That’s when she discovered Swagbucks, and instantly “fell in love” with it.

By taking surveys, watching videos and participating in focus groups, Genevieve watched her Swagbucks points — or SB — grow and grow. She cashed them in for Amazon credits, which her daughter paid her for in Target gift cards.

Then, Genevieve used the Target gift cards to buy Disney gift cards.

When added to the $575 in Disney gift cards she already had, Genevieve earned enough SB within a year to fund a week-long trip for herself, her husband and her grandson.

“I have the trip paid for and an additional $400 in Disney gift cards for spending money,” she explains.

“I also redeemed my Swagbucks for Visa Reward Cards that I used to buy Universal Studios gift cards… [and] for Landry’s eGift Cards, which we will use to eat at T-REX Restaurant at Downtown Disney.”

Whoa. Super impressive, right?

By strategizing how she spent her Swagbucks rewards, Genevieve made her grandson’s dreams came true.

Pretty crazy… just for answering some questions online.

Use Swagbucks to Earn Amazon Gift Cards and More

We’ve seen a lot of survey sites in our time, but none offer the level of tangible, achievable and useful rewards as Swagbucks.

If you’re ready to earn your own, it’s super easy to get started.

Once you sign up, you’ll be invited to participate in surveys to earn SB… sometimes up to 300 SBs for a single 20-minute questionnaire. Not bad!

You can also watch videos, search the web and use Swagbucks’ shopping portal — but surveys are the most lucrative.

Every 500 SB you earn will get you a $5 gift card to vendors like Amazon. And as Genevieve showed us, if you’re smart about how you save or spend them, those rewards can really add up.

Plus, Amazon in particular will actually give you SB back when you spend on certain categories of items. You might earn up to 4 SB per dollar spent — the equivalent of 4% cash back!

It’ll take some time, but if you put in half an hour a day filling out Swagbucks surveys while you’re watching TV, you could definitely be on your way to the most magical place on earth.

“For anyone who thinks they can’t afford to go to Walt Disney World, you absolutely can with Swagbucks,” Genevieve says. “I know because I did it.”

Your Turn: Where will your Swagbucks rewards take you?

OPENING BELL: US stocks posting early gains

Back from a long weekend, traders are pushing markets higher with technology and consumer-focused companies.

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How to Create a Trust Seal on Your Checkout Page

Trust is everything.

If you can’t earn consumers’ trust, you’re fighting a losing battle.

And what’s a specific area that makes many consumers wary?

That’s simple. It’s the way in which businesses handle payment information.

In fact, a lack of trust in credit card processing is one of the top reasons for checkout abandonment.

Research from the Baymard Institute found that “18% of American shoppers abandon the checkout because they don’t trust the website with their credit card information.”

This means you can kiss one out of every five shoppers goodbye.

And I totally get it.

I completely understand why some shoppers feel uncomfortable sharing their credit card information.

Identity theft and cyber crime are on the rise. This is people’s money and identity we’re talking about! I don’t blame people for being super cautious.

A study from Javelin Strategy & Research found that identity fraud hit a record high in 2016.

More specifically,

$16 billion was stolen from 15.4 million U.S. consumers in 2016, compared with $15.3 billion and 13.1 million victims a year earlier.

In the past six years, identity theft thieves have stolen over $107 billion.

Here’s what that looks like in graphs:

It has become a serious problem.

If you haven’t been the victim of identity theft yourself, there’s a good chance you know someone who has.

Just look at the increase in the number of identity theft and fraud complaints between 2012 and 2015:

This means one thing.

Most people don’t want to hand over their credit card information to just anyone.

They want to know for sure that the company they’re doing business with is taking every possible security precaution to ensure that their sensitive information doesn’t wind up in the wrong hands.

And I definitely understand where they’re coming from.

I know I avoid doing business with any website that looks sketchy and where security could be a potential issue.

In fact, I’ve found myself abandoning the checkout page several times on account of this.

It’s just not worth the risk.

How can you gain the trust of your online shoppers?

This puts modern business owners in a bit of a quandary.

You need to come up with an effective way to put shoppers’ minds at ease and let them know they’re in good hands when they do business with you.

What can you do?

There are several factors that shoppers take into consideration when determining whether or not they trust a particular website.

Some examples include:

How professional the site looks
How quickly it loads
Whether a trusted friend or colleague has used the site before
Whether the site contains well-known brands or products
Whether it has easy-to-find contact information

But there’s one factor that reassures shoppers above all else.

And that’s a trust seal.

In fact,

a survey conducted by Econsultancy/Toluna confirmed the power of trust seals when it asked participants which factors help them to decide whether or not to trust a website.

Just think about it.

How many times have you had your fears or doubts quelled when you saw a trust seal when you’re checking out?

I know this puts me at ease.

And there’s evidence that shows just how big of an impact trust seals can have.

Research on trust seals

This great article from ConversionXL tackles the topic of checkout optimization and the way trust seals affect security perception.

The post includes data from a study that used eye tracking to determine the exact impact trust seals have.

Here’s a screenshot of what this study entailed:

Participants then saw one of the following six trust seals:

As you can see, there are trust seals from several notable companies such as McAfee, PayPal, the BBB, and so on.

And here are the observational patterns (the patterns respondents’ eyes followed):

By examining these findings, it’s easy to see that trust seals are huge.

After shoppers initially look at the logo and “payment method” section, their eyes inevitably shift to the trust seal at the bottom.

This goes to show that it’s an integral factor in whether a shopper decides to go through with the checkout process and actually make a purchase.

It makes sense that displaying a trust seal on your checkout page will increase trust, thereby boosting your conversion rate.

Are some trust seals more trusted than others?

You may be wondering whether shoppers respond more favorably to certain trust seals than others.

This chart shows us the specifics:

As you can see, the “PayPal Verified” seal was noticed the most, at 67%.

This was followed by the “Google Trusted Store” seal at 63% and “Norton Secured” seal at 59%.

It’s also important to note that survey respondents remembered certain trust seals more than others:

However, ConversionXL reports that the differences were fairly minimal.

According to them,

it’s clear that there weren’t huge differences between trust seals. Using eye tracking, we confirmed that all trust seals are equally noticeable.

In other words, it doesn’t make a massive difference which specific trust seal you use.

As long as you have one from a fairly reputable company, it should have a positive impact in terms of gaining the trust of your shoppers.

If you haven’t yet installed a trust seal on your checkout page, I highly recommend that you do so immediately.

This can have a tremendous impact on your conversion rate and overall revenue.

Want proof?

Look no further than a split test performed by Blue Fountain Media.

Here’s what their original checkout page looked like before they added a trust seal:

Here’s their checkout page with a Verisign seal:

Guess what impact this had?

Sales increased by a whopping 42%!

Notice that nothing else on the page changed—except for the “Your Privacy” section, which got replaced by the Verisign seal.

This isn’t to say that your sales will instantly jump up by 42%, but I can pretty much guarantee some type of increase.

Just imagine what a trust seal could do for your long-term profits—it could be major.

How do you create a trust seal?

Here’s how the general process works.

You choose a company, such as McAfee or Norton, and choose the plan you want (some basic plans are free, and more robust plans cost money).
They perform testing on your site.
Assuming everything looks good and your site passes the test, they will certify your site.
You install the trust seal.
It appears on your checkout page, and you’re good to go.

Of course, this is an oversimplification of things, so let me walk you through the process step by step.

I’ll just use McAfee as an example because I’m familiar with it.

The specific steps may vary slightly depending on the security company you choose, but the overall process should be basically the same.

Step #1 – Sign up

Visit McAfee SECURE to check out plans and pricing.

In the case of McAfee, it’s very straightforward.

There are two plans to choose from: “Free” and “Pro.”

Here’s how the two plans break down:

FYI, “Pro” costs $29 per month as I’m writing this.

Next, install the McAfee SECURE plugin on WordPress.

You can find it by searching the “Plugins” section of your WordPress dashboard:

Click on “Add New:”

Now type in “McAfee” in the “Search Plugins” search box:

Here we go:

Click on “Install Now:”

Then “Activate:”

Once you’ve activated the plugin, visit Settings > McAfee Secure to configure it.

You’ll see this screen:

Fill out the information:

At this point, McAfee will run some tests on your site:

Because you’ve already installed the McAfee SECURE plugin, the trust seal will automatically appear on your site.

That’s it.

It’s really quite easy.

As long as your website passes, you’ll have a trust seal installed on your checkout page in no time.

If you would like to see a video tutorial on this process, check out this post from WPBeginner.

Conclusion

Online security has arguably never been more important than it is today.

And the fear and skepticism so many people have is by no means unfounded.

They have a very good reason to be concerned and even a little paranoid.

As a business owner, you must address these concerns and put your customers’ minds at ease.

People want to know they’re not putting themselves at unnecessary risk by completing a transaction on your website.

According to research, one of the best ways to do this is by installing a trust seal on your checkout page.

This lets shoppers know that your site has been thoroughly tested and meets today’s security standards.

As a result, they can complete a purchase with confidence, which should bring about a higher conversion rate and an overall increase in customer satisfaction.

Fortunately, installing a trust seal on your checkout page is fairly simple, and some basic plans can be set up for free.

Find the security company that’s the best fit for you and complete the necessary steps to have a trust seal installed.

How big of a factor is a trust seal when you’re deciding whether you want to complete a transaction?

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Two Pieces of Unconventional Wisdom in the Traditional vs. Roth IRA Debate

There are some flaws in the conventional wisdom surrounding the traditional vs. Roth IRA debate that may be costing you money.

The conventional wisdom says that when deciding between a traditional IRA and a Roth IRA, you should compare your tax bracket now to your expected tax bracket in retirement and make your decision according to the following rules:

If you expect your tax bracket to be higher in retirement, contribute to a Roth IRA. You sacrifice the deduction today for tax-free withdrawals in retirement.
If you expect your tax bracket to be lower in retirement, contribute to a traditional IRA. The current tax savings will outweigh the tax hit later on.
If you expect your tax bracket to be the same in retirement as it is today, you’ll end up with the same amount of money no matter which account you use.

This logic typically leads younger investors to a Roth IRA, given the expectation that their income will increase over time. It also leads investors in lower tax brackets to a Roth IRA, given that it would be hard for their tax bracket to decrease.

But there are two key points that are missing from this conventional wisdom, both of which make the traditional IRA look more favorable, even for young investors and even for people in lower tax brackets.

Understanding them could result in more retirement income for you down the line, and maybe even an earlier retirement date.

Missing Piece #1: Evaluating the Right Tax Rates

The first missing piece requires a quick understanding of the difference between two different tax rates:

Marginal tax rate: This is the tax rate you pay on your last dollar of income. When you look up your tax bracket, what you’re really looking up is your marginal tax rate. Someone in the 25% tax bracket paid 25% of their last earned dollar to the government in taxes.
Effective tax rate: This is the average tax rate you pay on every dollar of income. Because we have a progressive tax code, different dollars are taxed at different rates. Someone in the 25% tax bracket is partially not taxed, partially taxed at 10%, partially taxed at 15%, and partially taxed at 25%. So their effective tax rate is lower than their marginal tax rate.

The traditional vs. Roth IRA debate typically focuses on marginal tax rate. The argument is that unless you plan on being in a lower marginal tax bracket in retirement, a Roth IRA like makes the most sense since it will at worst break even.

But this this argument ignores two things:

Contributions to a traditional IRA today will likely save you money at your marginal tax rate. Since the contribution limits are relatively small compared to the tax bracket ranges, it’s unlikely (though possible) that the contribution will span multiple tax brackets.
On the other hand, you may be withdrawing tens of thousands of dollars per year in retirement, and those withdrawals could absolutely span multiple tax brackets.

Given those two points, it usually makes more sense to make the traditional vs. Roth decision by comparing your marginal tax rate today to your effective tax rate in retirement. If your effective tax rate in retirement will be lower than your marginal tax rate today, a traditional IRA is likely the better choice.

This makes the traditional IRA case a lot more compelling, simply because the effective rate is often lower than the marginal rate, unless there’s a significant increase in income over the years.

Let’s look at an example.

Mark and Jane are 32 with one child. They make $70,000 per year, putting them squarely in the 15% tax bracket (marginal rate).

They’re setting up their retirement savings and they know that because of the tax deduction, they could afford to max out their traditional IRAs with $11,000 in combined pre-tax contributions. But they could only contribute $9,350 (post-tax) to their Roth IRAs, since they wouldn’t get the 15% tax break on those contributions. (Essentially, because it’s tax-deferred, they can contribute 15% more to a traditional IRA without affecting their take-home pay.)

Assuming that their income remains about the same and that they make those same annual contributions every year until they retire at 67, here’s how much income they would have available to them in retirement in each scenario (Social Security benefits were estimated here and taxes here):

Roth IRA

Roth IRA Income = $35,469
Social Security Income = $27,720
Taxes = $0
Total Annual After-Tax Retirement Income = $63,189

Traditional IRA

Traditional IRA Income = $41,728
Social Security Income = $27,720
Taxes = $4,229
Total Annual After-Tax Retirement Income = $65,219

This couple is in the 15% tax bracket both now and in retirement. According to the conventional wisdom, they should have ended up with the same amount of money either way.

But they have $2,030 more in annual retirement income using the traditional IRA because of the difference between marginal tax rate and effective tax rate.

Their $11,000 contribution today saves them 15% in taxes, while their $41,728 withdrawal in retirement is taxed at a 10.13% effective tax rate. That 4.87% difference generates the extra income.

It won’t always work out like this, but you should run the numbers yourself before assuming that the conventional wisdom is correct.

Quick note: This same logic applies when deciding between regular 401(k) contributions or Roth 401(k) contributions.

Missing Piece #2: The Opportunity to Convert

The second point that’s often missed in the traditional vs. Roth IRA debate is the fact that you can convert money inside a traditional IRA to a Roth IRA at any time, without any income limits.

This is what allows high-earners to get money inside a Roth using the “backdoor Roth IRA” strategy, but it also allows everyday people more control over when they take the tax hit of contributing to a Roth.

There are plenty of scenarios in which you might deal with a temporary decrease in income. Changing jobs. Switching to a single income. Starting a business. Unemployment. Early retirement. Going back to school.

Any of those situations may push you into a lower tax bracket, which could be an excellent opportunity to convert some of your traditional IRA money to a Roth IRA and gain some big tax savings.

Let’s say that you’re currently in the 25% tax bracket. An $11,000 contribution to a traditional IRA today saves you $2,750 in taxes, meaning that without adjusting anything else in your budget you would only be able to afford an $8,250 contribution to a Roth IRA.

But what if in a couple of years you go through one of those transitions and you drop into the 15% tax bracket? Well, now you could convert that $11,000 to a Roth IRA, pay $1,650 in taxes on the conversion, and save yourself $1,100 compared to making the Roth IRA contribution earlier.

Contributing to a traditional IRA now gives you more flexibility to control when and how you take the tax hit, potentially allowing you to capitalize on lower earnings years by converting money to a Roth.

On the other hand, contributing directly to a Roth IRA today locks in your current tax rate, removing the opportunity to save money by converting later on if your income decreases.

Making a Smarter Decision

None of this is to say that contributing to a traditional IRA is always the right move. The Roth IRA is a great account and can be used effectively for a lot of different financial goals, including retirement.

It’s just to say that the traditional IRA is often better than conventional wisdom makes it out to be. If know you how to evaluate it the right way, you may find yourself with an easier path to retirement.

Matt Becker is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the all most important financial decisions that come with starting a family.

Related Articles:

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Just the Basics: Here’s What You Need to Know About Your 401(k)

Everyone sort of knows a 401(k) is a common retirement plan. But what do you know beyond that?

A 401(k) is a plan your company might offer that everyone calls “free money.” But all you see is a chunk of cash disappearing from every paycheck.

You hear “free money” thrown around because it’s common for employers to offer a 401(k) match. Whatever you contribute, they’ll throw in the same amount, to a set percentage of your paycheck.

What an Average 401(k) Match?

There’s no hard rule, but the most common 401(k) match is 50 cents on the dollar up to the first 6% you contribute — or 3%.

(Here’s where we plug The Penny Hoarder, which matches up to 4%. We’re hiring!)

So, let’s say you earn $52,000 a year, and your employer matches up to 3%. You’ll get $1,560 a year extra toward retirement.

Big deal. You can’t live on $1,500 a year or even $3,000 a year in retirement, so why bother?

401(k) Basics: How Does the Investment Work?

Here’s the other reason they call it “free money.”

Your 401(k) isn’t just savings; it’s an investment. The firm that sponsors your company’s 401(k) invests the money in index or mutual funds. (We’ll save those details for another day.)

Then, through what the mathematically challenged like to call the “magic” of compound interest, that money grows. A lot.

If you invest $25 a week — or $1,300 a year — starting when you’re 21, for example, a typical return of 7% would give you more than $25,000 a year to live on in retirement. If your employer matches your investment, you only have to give up $12.50 a week.

Still confused? Don’t worry. Here are all the details about how ~~much~~ little you need to save to retire rich.

You can handle that, right, Penny Hoarders?

Your Turn: Do you contribute to a workplace 401(k)?

This Financial Book Club Makes Money Fun for Kids (and It’s FREE)

What were your favorite books when you were young? Their themes probably focused on dreaming big and sharing with others. But do you remember any books about saving and spending, or prioritization and self-control?

When I think about it, I don’t remember many children’s books about money and entrepreneurship from my younger years. But that’s not the case now. There are tons of books teaching kids basic concepts about personal finance through fun storytelling.

The Consumer Financial Protection Bureau (CFPB), which operates on funding from the Federal Reserve, saw an opportunity to take these books’ teachings a step further and started a kids book club to open the world of personal finance to young minds.

This Kids Book Club is so Money

The Money as You Grow book club is a financial education program that uses children’s books to start conversations about money. The CFPB designed the book club for kids ages 4-10 to spend an hour at home or at the local library reading, then talking about each month’s book with a parent or facilitator.

The program has 12 key ideas in three main learning areas: planning, money and me. Kids learn about things like setting goals, prioritization, earning, spending, saving, self-control and flexibility.

The CFPB has even designed themed icebreakers for each category! One of them includes a piggy bank puzzle (I might just print that one off for myself).

The CFPB also offers parent guides for 18 books on the list that summarize key ideas, suggest talking points and recommend activities appropriate for various ages. The goal is to start positive discussions about money instead of negative ones and use fun activities to build good money habits.

There’s also a table of financial capability milestones so you’ll know which age groups can handle what.

Not a Numbers Whiz? Not to Worry

The best part is that parents don’t need to know much about personal finance to read the books and go through the brief reading guide with their kids.

CFPB says it believes parents and caregivers are the No. 1 influence on children’s future financial capacities. You can start your kids off right no matter your experience.

You can download the implementation guide and book list here. It walks you through every activity the book club has to offer. And if you’re interested in bringing the Money as You Grow book club to your library or organization, you can order free parent guides in bulk from the CFPB website.

Your Turn: Are you interested in a financial book club for kids?

Jen Smith is an editorial intern at The Penny Hoarder and the blogger behind @SavingwithSpunk.