As luck would have it, the melting point of chocolate is not far below the human body temperature of 98.6 degrees — making it perfect for melting lusciously in your mouth. If that thought has you salivating, and especially if chocolate bunnies are the centerpiece of your Easter basket, you might want to hop over to your favorite candy seller sooner rather than later because the price of cocoa is on the rise. Cocoa bean prices jumped to a two-month high earlier [...]
Source Business - poconorecord.com http://ift.tt/1UK9dt4
الاثنين، 21 مارس 2016
Chipotle is Giving Away Free Chips and Guac. Here’s How to Get Yours
I just won free chips and guac from Chipotle, and I’m stoked.
I know. Free food from Chipotle. You’ve heard it before, right?
But they just keep doing it! We can’t turn down free food. Plus, this time, they’re making it fun.
Earn Free Guacamole at Chipotle With Guac Hunter
Today, Chipotle launched Guac Hunter, the online game that lets you earn a free order of chips and guacamole.
Seriously, the game is about as about as addictive as the guac itself.
How to play:
- Go to guachunter.com.
- You’re shown three rounds of photosets.
- Spot the five differences in each set before 45 seconds is up.
It’s like Highlights Double Check, except you get free food at the end — instead of a dentist appointment. (Where did you read your Highlights? Mine were always in the waiting room.)
And don’t worry, you don’t have to spot every difference to earn your free guac. You’ll get it just for playing.
At the end of the game, you’ll have to enter your name and phone number. Just like February’s free burrito promo, you’ll receive a text link to download your coupon for free chips and guac.
Free and clear — no purchase necessary. But you might want to purchase a burrito and put your free guac to good use!
Play before April 1. Coupons expire April 10. Only one coupon per phone number.
Want More Free Chipotle?
For more Chipotle deals, remember to check your junk mail for a coupon for a free burrito.
You can’t stack it with the free chips and guac coupon. But, let’s face it, you’re fixin’ for two trips to Chipotle, anyway.
And, no matter how you pay, here are six ways to get a bigger burrito without paying extra.
Keep it coming, Chipotle. We never stopped loving you.
Your Turn: Is there room in your life for all this free Chipotle, or are you tired of hearing about it?
Dana Sitar (@danasitar) is a staff 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).
The post Chipotle is Giving Away Free Chips and Guac. Here’s How to Get Yours appeared first on The Penny Hoarder.
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How Women Can Overcome Financial Obstacles
Money coach Bola Onada Sokunbi spoke with CBN News about why women are afraid to talk about money and what every woman should know about financial planning.
Source CBN.com - Finance http://ift.tt/1LBFjWq
Source CBN.com - Finance http://ift.tt/1LBFjWq
Just Who Is Hijacking the Republican Party?
Early this week a top Republican consultant whined: "Donald Trump is hijacking the Republican party." Really?
Source CBN.com - Finance http://ift.tt/1pXJhPi
Savings update: RCI tops easy-access table despite further rate cut
RCI Bank has cut the rate on its top-paying internet easy-access Freedom account to 1.16% before tax (1.45% after).
It still stands well ahead of the next best deal, Virgin Money Limited Access Saver, at 1.31% (1.05%) which limits you to making three withdrawals a year. There are no limits on the Freedom account.
Source Moneywise http://ift.tt/1RaPSzT
This Might Be the Best Internship Ever. Get Paid to Travel and Drink Beer
We thought Netflix was offering the best summer internship. Travel the world and spend your days on Instagram — how could it get better?
Well, you could get paid to drink beer while you do it.
Yup. World of Beer has pulled into the lead for “Best Internship Everrr” with its Drink It Intern position.
The craft beer tavern franchise is recruiting three interns to “hit the road this summer and search out the best craft beer and food the world has to offer.”
Interns will travel the U.S. and countries around the world to find “beer stories” and document them through blogging, video, photos, social media and pretty much anything else you can imagine.
The internship starts April 25, lasts four months and pays $12,000, plus travel expenses, Thrillist reports. That’s $3,000 a month, which is pretty freakin’ good for an internship.
Imbibing isn’t explicitly required of the position, but we imagine it comes with the territory.
The big question is, will WOB cover your bar tab?
How to Apply for the WOB Internship
The Drink It Intern requirements are pretty minimal.
Current students, grads and full-blown adults are encouraged to apply. You have to be at least 21 years old and a U.S. citizen or have a permanent U.S. work authorization.
It’s basically a social media internship, so you’ll want to be prolific on Twitter, Facebook, Instagram, Snapchat, Vine, Periscope and whatever new network launches before summer begins.
You don’t need a related degree or particular experience. You just have to be friendly, outgoing, willing to travel, and have an eye for adventure and good stories.
Oh, and you should really love beer.
Fill out your application here before March 26, and share a one-minute video to introduce yourself and wow recruiters.
More Opportunities for Craft Beer Lovers
If you’re into brewskies, but don’t think this opportunity is right for you, check out these other ways to get paid to indulge:
- Learn the craft, and become a brewmaster at a small brewery or brewpub.
- Apply to work at Advance Medical, which reportedly offers free beer on the job during “Beer Cart Fridays.”
- Volunteer at a beer festival.
- Become a liquor store auditor.
- Come work with us! The Penny Hoarder is hiring full-time employees and interns — and we always keep our beer fridge stocked.
Your Turn: What is your dream summer internship?
Dana Sitar (@danasitar) is a staff 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).
The post This Might Be the Best Internship Ever. Get Paid to Travel and Drink Beer appeared first on The Penny Hoarder.
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Rail passenger delay compensation should be easier, says regulator
The Office of Rail and Road (ORR), the safety and economic regulator for Britain’s railways, says eight out of ten passengers don’t claim compensation for delayed train journeys and wants to see this changed.
The ORR is calling for:
Source Moneywise http://ift.tt/1RaE54x
The $100,000 Challenge: February Update
Hey, everyone! We just wrapped up our 11th month of the $100,000 challenge for NutritionSecrets.com. As predicted, it was a down month.
Traffic was up overall, but because we were running short on fish oil inventory, revenue wasn’t as high as it was in the previous month.
For the month of February, traffic grew to 200,709 visits and 251,834 pageviews. That’s not too shabby, considering we had 159,945 visits in January, which had two more days.
As for income, revenue went down to $54,285.30… So, let’s dive right into the numbers…
Traffic
Shockingly, traffic was up significantly. It mainly came from search, but I never expected it to grow as January is an extremely popular month in the health and fitness space and February isn’t. As March rolled around, we noticed that the traffic growth started to slow down, but I’ll get into that in the next month’s update.
Mike posted about a post a day, which helped February’s traffic. As you can see from the screenshot below, there is a healthy mix in traffic. Google is our biggest driver of traffic, but that shouldn’t come as a surprise since it is for most blogs. The direct traffic includes email, and social media is starting to pick up.
If you are wondering how you can replicate similar results, you need to do two things:
- Write content using these guidelines.
- Use the templates in this post to find and build links. Make sure you use the “basic link request, PR pitch, and funny link request” templates. Although I wrote that post years ago, those tactics still work, and they are what Mike uses to generate links.
As you are building links, focus on getting them to all your internal pages. Don’t focus on anchor text; focus on relevancy and quantity. Over time, your rankings will naturally go up.
You saw it with the NutritionSecrets.com challenge, and you will see it with your own website: you build links, and your traffic doesn’t go up. But if you wait 3 to 6 months, you’ll see it all kick in, assuming your content is high in quality and people want to continually read your blog.
Revenue
In February, we generated $54,285.30 in revenue, which is less than January’s revenue of $76,326.90. The main reason…we ran out of fish oil. I estimate that our income would have been closer to $98,000 if we had enough inventory. But we should be good for the month of March in achieving our $100,000 goal.
In the meantime, to supplement the revenue, we tested out being an affiliate for Organifi. We signed up through Clickbank and tested to see whether we could generate some extra money.
After a few days, we turned it off as it didn’t generate any sales. The main reason I think it didn’t work was because of the email copy they provided.
It’s a great product that I have tried in the past, which is why I didn’t mind testing it out from an affiliate perspective, but I should have known that their email copy wasn’t maximized for conversions.
Companies that offer affiliate programs typically have incentives. If you are the best affiliate for a certain time period, you get bonuses like a free car…and yes, I meant to say free car. I’ve seen people like Russell from Clickfunnels give away a Ferrari.
Organifi didn’t have large prizes to give away to affiliates, which usually means they aren’t as large as some of the other companies. And if they aren’t that large, the main reason behind that is because the offer usually doesn’t convert as well as other companies’.
Again, they have a great product, so instead of using their copy, we should have written our own copy to promote their product.
Inventory
I’ve been getting a ton of questions over the last few months about how to find someone to help produce tangible products. Most of them require minimum orders and money upfront, but it is all a negotiation game.
The person we use is Austin Song, who has facilities in Cleveland, Ohio (or somewhere around Cleveland)… He has staff and had extra hours that weren’t being used in his warehouse, so he was more flexible on the deal terms as he was paying employees when they didn’t have anything to produce.
The way I found Austin was purely by spending days Googling for people who can manufacture products. Austin is busy these days and won’t do the same deal again (or else you would have seen 4 or 5 more products from NutritionSecrets.com).
Expenses
We didn’t make much profit in February because we had to produce more fish oil.
Here is the breakdown of the expenses:
- Fish oil – $53,204.44 (including Amazon fees, shipping to Amazon for Prime, coupon-related expenses, and producing more inventory)
- Aweber – $69
- Designer – $250 (continually tweaking the homepage)
- Hosting – $249
- Mike – free (Mike doesn’t get paid, but he owns a percentage of the blog)
- Accounting – $210 (we are now paying a bookkeeper to help out with the books)
Overall, we turned a profit of $302.86. It’s not a great number, but that’s what happens when you have to dump a lot of cash into producing more product.
Conclusion
Overall, the month wasn’t too bad, considering we ran out of inventory. March should be an interesting month. From a revenue perspective, it shouldn’t be hard to hit $100,000 because we are also working on utilizing other channels to generate income.
Next, I should have a detailed update with new revenue channels (hopefully, they work) and what we learned.
How do you think the challenge is working out so far?
Source Quick Sprout http://ift.tt/1Rv0sE2
Questions About College Savings, Stock Trading, App Businesses, Side Gigs and More!
SUBTITLE – Reader Mailbag
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. Question about college savings
2. Researching before investing
3. How frequently should you trade?
4. Life insurance beneficiary issues
5. Finding specific vacation deals
6. Blogs with multiple topics?
7. Closing a line of credit
8. Handling reduction in income
9. Prioritizing credit cards
10. Starting an app business
11. Does our payoff plan work?
12. Getting 529 tax benefits
Every person alive has a particular mix of good and bad traits. A person might be incredibly nice to people in the community but secretly launders money. Another person might quietly give lots of time and money to charities, but treats his or her spouse with complete disdain and cruelty.
You should never expect a person you know to be wholly good or wholly bad, because they’re not. You might see a few good traits at a given moment, but that doesn’t mean that they’re nothing but good. At the same time, you might see a few bad traits at a given moment, but that doesn’t mean they’re nothing but bad. Like everyone else, that person is a mix of good and bad.
That doesn’t mean you shouldn’t trust anyone. In fact, it means the opposite. It means that everyone else is human, just like you, and that person perhaps deserves a little bit of forgiveness.
It can be really hard to keep that in mind, especially during difficult times.
Q1: Question about college savings
I am doing a senior capstone on how to invest money in college to make money for the future. I have been reading your website and found out a lot of good ways to invest for me and others. There are many articles on investing for college students but there are a few questions I am wondering about.
1. With student loan debt increasing in the recent years when entering college how much money should you invest and how much money should you keep aside for paying college?
– Mitchell
Mitchell actually asked a series of three questions, each of which deserved a standalone answer, so the first three questions of today’s mailbag come from Mitchell’s email.
My advice to parents with children that may attend college in the future is to make sure that your own retirement is well covered before saving a dime for their college education.
The reason is simple. When those children leave college, they’re going to be 20 or 25 or 30 or 35 years younger than you. They’re going to have a lot of time left in their career to take care of student loan debts. Time is on their side.
On the other hand, you won’t have that time. You’re likely to be within 20 years of retirement, and “catching up” on retirement savings in that timeframe is very, very difficult.
Your best approach is to always put retirement savings first. If you’re not sure you’re saving enough for retirement, make sure that you are before saving even a little for your kids.
Here’s Mitchell’s second question.
Q2: Researching before investing
2. College students are always busy with school. What would you recommend to them if they are looking to invest and how much time should they research before trying to invest?
– Mitchell
A college student is far better off spending their time studying to get the best possible grades and making sure that their student loans are minimized rather than studying up on investing strategies.
It is extremely rare that a college student has the resources to fully pay for their college tuition, room, and board while also having enough money left over to think seriously about investments.
Your best financial move as a college student is to simply reduce the cost of college. Period. Walk out the door with as little in student loans as you possibly can.
Now, here’s Mitchell’s third question.
Q3: How frequently should you trade?
3. Many people are afraid of trading money in their account for fees and other people trade too much. How much should you be trading your investments once you make them?
– Mitchell
My investment philosophy is to buy and hold broad-based inexpensive index funds so that you effectively own a sliver of the entire market rather than just the stocks or bonds of individual companies.
There really is no trading when it comes to this philosophy. You just purchase investments and then hold them until you have a real-world reason to sell them.
Unless you’re buying and selling on a very large scale, most of the time the cost of buying and selling will undo any extra benefits you might get as an individual investor from moving your investments around. The fees for buying and selling will simply devour a healthy portion of your gains and add to your losses.
Q4: Life insurance beneficiary issues
I have a question about life insurance. My ex-husband recently passed away. I was the original beneficiary but when I called the insurance company, they said he had changed the beneficiary. They obviously won’t tell me who the beneficiary is. A few years ago he mentioned at one point he was changing it to our 11 year old daughter.
I have moved and remarried within the last 2 years. If the company won’t confirm that my daughter is beneficiary “for privacy issues” how will I know?
Also, how does one name a guardian of the money for a minor? Did he just need to inform the insurance company at the time?
– Nina
If you are not the beneficiary and it’s not your policy, there’s really no reason for you to know who the beneficiary is.
The only exception to that is if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin) where you may have some additional rights here. If not, you have no party in the payout of this life insurance money. Your only route to “knowing” about the policy is if the beneficiary chooses to tell you.
As for a child, most of the time the life insurance company either won’t pay out benefits until the child is 18 or 21 (depending on the state) or else will only pay out benefits to a court-appointed legal guardian of the minor’s estate, who will basically just hold the money until the child is 18 or 21.
Q5: Finding specific vacation deals
It occurred to me to bother you a little if you will let me as I try to put together a last minute Spring vacation for my family: My husband, myself and our 2 boys ( will be 8 & 10).
We’ve decided to take our first family spring break vacation that we’ll travel a little far away from WI. Ideally fly to some where warm and Myrtle Beach SC was recommended. Flights are insanely expensive from Madison but Milwaukee is better. I am wondering from reading your post on Spring break and if just from experience you can recommend to us an all-inclusive resort, hotel out there in the Myrtle beach area. That of course has the best deal as I’ve always got tips for great savings from your write ups. I am starting to see decent deals for flights, now lodging is my next piece to see if we can keep the vacation at a reasonable cost. We don’t drink so any nice all inclusive if any would be great for us. We want our boys to have a blast!
I will certainly respectfully welcome other affordable destination ideas that will be fun for boys ours age. So that if we have to switch gears will look at for this year still or next.
– Chloe
My usual strategy for selecting lodging at a specific destination is to browse through comparative sites like TripAdvisor, so I’d probably start here if I were researching Myrtle Beach lodging. I’d identify a healthy handful of places that I might want to stay, then I’d start digging through various sites that sell lodging to find the best deals, sites such as Hotels.com and Priceline.
When I’m comparing lodging at sites like TripAdvisor, I’m mostly just looking to avoid sites with serious problems rather than settling on a “perfect” site. This can be tricky in areas with lots of resorts – I usually find that I’m okay with dozens of resorts in that area and just wind up with a big handful of ones to “avoid.” I find those by looking at the worst-reviewed places first. When I start looking for bargains, I cross-check with the reviews on other sites, too.
It’s worth noting that our strategy here is in line with how we buy most things – we’re always looking for “bang for the buck.”
Q6: Blogs with multiple topics?
I want to start a blog but have a lot of ideas that I want to express. Not a “how to” blog but sort of just sharing of ideas on and observations. My topics are Guillain Barre Syndrome (a rare autoimmune neurological disease), caring for and celebrating my elderly mom battling dementia, and my battle with and observations of the effects of sudden diagnoses of Rheumatoid Arthritis and the changes it makes to life. This will not be a poor pity party but uplifting and supportive. Should I pick one? Or can I incorporate all these into one blog? I don’t care about making money but I do want it to be a blog that I have for a long time. Thanks for all your help and your wonderful advice. I’ve shared your page with my adult children. They can benefit from your candid and encouraging approach and conventional wisdom.
– Nina
You can always write a single blog on multiple topics like this, but a better approach might be to find threads that tie all of those things together and make that common thread your central topic.
Like it or not, people who become regular readers of websites usually do so because they’re looking for a particular flavor of information or entertainment. They want stuff that relates to a particular topic, one that’s clearly identifiable. Maybe they want celebrity news or tech news or, I don’t know, maybe something crazy like simple and clear personal finance advice.
My suggestion to you would be to think about what connects those topics. How about going a bit more general and talking about the challenges of overcoming chronic illnesses? You could tie in caring for your mother while dealing with your own chronic illness challenges. You could have guest posts or interviews with people who are struggling with different illnesses, too. You could obviously use yourself as a specific example, but you can expand on that in a number of directions.
Q7: Closing a line of credit
I have a $3000 line of credit with Dell Financial services which I’m not using. Had it for over a year and paid it off. Shall I close it so they don’t see it as a possible source of debt incurrence or leave it open unused? My goal is to raise my credit score. I have only one department store credit card with $300 limit. Your site addressed both sides but thought I’d ask anyway to be clear.
– Monica
The first question I’d ask is how old your Dell line of credit is and also whether it’s older than your other credit card.
If your department store card is older, you’ll probably be okay closing the Dell line of credit. If your department store card is newer, you’re probably still okay closing the Dell line of credit provided the card is more than a few years old. Neither case should have much of a negative impact on your credit score.
It may be a good idea to have a general use credit card, perhaps tied to whatever gas station or retailer you use most frequently (but not just one tied to a department store – a Mastercard or Visa you can use anywhere). They can come very much in handy in unexpected situations and can often save you money on purchases at your retailer of choice. Plus, it can have real benefits for your credit score going forward.
Q8: Handling reduction in income
I’m making less money on my job now. I can’t afford my basic living expenses. Rent & car take more then half of my income. I’ m thinking about letting my car go. I’m 2 months behind on my car.
– Marco
If you have access to transportation to get back and forth to work without use of the car, getting rid of a car can be a money saver.
I don’t know the exact state of the car at the moment. Is it on a lease? Do you have a loan on it? Is the car worth more than the remaining value of the loan? If you still owe more than the car is currently worth, you may have to default on the loan and have your car repossessed, which can really put a crunch on your credit score, but not having that car payment will make a huge difference in your ability to make ends meet. If you owe less than your car is worth, you can sell it to pay off the loan and perhaps have a small amount left over.
But before you do that, your first move should be to immediately contact your lender and see if you can come up with an arrangement that leaves you both happy. Make it clear that your job situation has changed and that you simply can’t afford the current payments. Most of the time, they will work with you as the business costs associated with repossession is usually going to be greater than the cost to them of working with you. They’ll usually try to refinance your loan in some fashion so that the monthly payments are lower, which will help you keep the car and maybe help you make ends meet.
Q9: Prioritizing credit cards
I have transferred $7,000 of an existing credit card balance to a new card. I will owe zero interest on that amount for 15 months. After that, the APR is 14.24%.
I also owe approximately $12,000 on another credit account at an APR of 9.5%
I am trying to figure out the best way to prioritize in order to pay these down. If they were both currently accruing I would start with the debt with the highest interest rate, but the 15-month delay (though welcome) is throwing me off.
– Carly
It really depends on how fast you’re able to pay off your debts. How large is your extra payment each month?
I did some back of the envelope math and I concluded that if you’re only making small extra payments (or aren’t making extra payments at all), you’re better off paying down the $7,000 debt first. Depending on how the interest is accrued, if you’re not going to have the $7,000 debt paid off at the 26 month mark, you’re better off paying down the $7,000 debt first. On the other hand, if you’re going to be paying at a faster rate than that, you should start hitting the other debt paid off first.
In other words, if your extra payment is less than $250 a month, pay down the $7,000 debt. If it’s more than $250 a month on average, make those extra payments toward the $12,000 debt.
Of course, all of this math is out the window if you’re still adding to your debt. If you ever want to get rid of this, you cannot be adding to your credit card balance.
Q10: Starting an app business
My question is about starting an online business. I have several ideas for apps or some other type of business but I have no idea how to find qualified IT people to help me. I’ve [looked into passive income generation] but it just left me frustrated. I’m going to do a meetup in my town to see if they might be able have suggestions.
– Jerry
I have some experience with creating apps for tablets and smart phones. I’m going to give you some very difficult advice. If you do not have the ability to sit down at your computer and create at least a workable version of this app on your own, don’t do this. You will not make money. You are virtually guaranteed to lose money. It will not end well.
The only way you will make money from this is if you have a sizable marketing budget behind this to get your app out there and the app is fairly simple to create and doesn’t require dedicated technical staff to write it and continue to update and maintain it. If it requires a lot of technical work to make it happen, you better have hundreds of thousands in the bank ready to go and be willing to lose most of it along the way.
There are rare cases where some guy with an idea makes money this way, but those cases are a handful. The app stores have literally millions of apps on them and the independent success stories right now are extremely rare. It’s not a good use of your time or your money.
My genuine suggestion to you, if you still want to pursue this, is to spend some time learning how to create an app. It might sound prohibitively difficult, but if you take it step by step, it’s quite doable.
Basically, if you’re an app developer already, write it yourself. If you’re an entrepreneur who’s really good at putting together teams and has a good bankroll, give it a shot. If you’re willing to learn how to write apps, start doing that with the end goal of creating this app you have in mind. Otherwise, just run away from this because it won’t end well.
Q11: Does our payoff plan work?
We were thinking of paying off a student loan and basically placing that higher rate student loan into a lower rate home loan. Below is some info on what our plan is.
Just sold home and have $150,000 in a bank account earmarked for the new home. Student loan of $73,386 @ 4.74% 9 years remaining. Auto loan of 34,846.02 @0.9% 4.5 years remaining. The auto loan would not be paid off early. We have $34,000 in a bank account that is earning more interest than the auto loan monthly finance charge.
We were thinking of payoff the student loan and have about $76,614 remaining. We are looking to build a home between 326k and 340k with 20% down. Roughly a $275,000 to $280,000 mortgage. Both my wife and I have FICO scores of 814+.
We want to add what we currently pay for the student loan payment of $1,651.50 per month to the future mortgage payment. (Student loan is $651.51 plus we add $1,000 to principal every month. So we would continue to add that money to future mortgage payment. The $651.51 would be part of the mortgage and the $1,000 would be used towards the mortgage principal.) At the end of the auto loan, we will continue that monthly payment to help pay down the mortgage principal. We are looking to pay off the mortgage by 2027, 11 years. We would even consider adding additional money to principal payments and hope to pay off the mortgage in 10 years or sooner.
We moved to Florida from NJ and have saved on healthcare, auto, and state income taxes. Those savings will be used towards home costs.
Does our plan of paying off the student loan and having a higher mortgage make sense or should we keep the student loan and put down a much higher down payment resulting in a lower mortgage payment? The mortgage rate should be roughly a full percentage point lower than student loan.
– Nadine
I think your plan makes sense. I would add a few tweaks.
For one, I would put the $34,000 for the car loan in an online savings account set aside just for that. I would set up an automatic payment plan for the car loan from that account so that you don’t even have to touch it other than to check that the payments are being made. You should have a little left in the account when the car is completely paid off, which you can then stick in your pocket.
The one part I’m missing here is what your current housing payments are. Are you renting at the moment? If that’s true, then you should be able to add your current monthly housing payments to your mortgage payment and pay everything off even faster.
Aside from those things, this seems like a very reasonable plan.
Q12: Getting 529 tax benefits
I have a newborn son and we live in California. I’d like to open a 529 plan for him but I know California doesn’t offer tax benefits for doing so. I own a house in Chicago that I rent out and file IL taxes for the income on it. Would opening an IL 529 plan benefit me on my IL rental income? If not, what state should I open an 529 plan in?
– Lisa
From what I can tell, Illinois’ 529 program (which they call Bright Start) requires you to be an Illinois resident to gain any tax benefit from the contributions. Most states tend to follow this pattern, in that the only way to gain any tax benefit (or any significant tax benefit) is to be a resident in the state.
There are a few states (New York being one) that do allow you to deduct 529 contributions to their state plan as a nonresident, but the problem with that is that this effectively increases your state taxes in the state you currently live in because your credit for paying out-of-state income taxes is lower than it was before. So, in your case, you might get a deduction on your Illinois taxes, but your California taxes would effectively go up by the same amount because your credit on your California taxes is now lower than before.
Basically, the only real way to get a benefit from 529 contributions is to contribute in the state you’re living in and where you earn most of your income where that state offers a tax benefit for doing so. Unfortunately, that doesn’t really apply to you.
As always, no matter who is giving the advice, you should check for yourself. Try running some numbers through TurboTax and see how it turns out for you under different scenarios. Most likely, all that will happen is that you would pay less state tax in Illinois and ore in California.
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 appeared first on The Simple Dollar.
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15 Super Flexible Jobs for Military Spouses
Military spouses have more career challenges than the average person.
You take care of more of the cooking and cleaning duties while your better half works long hours. If you have kids, deployments mean serving as a single parent for long stretches of time.
And on top of those physical and emotional duties at home, there are always bills that need to be paid.
Having to move every few years for your spouse’s new assignment can throw off career progress and make your resume look shaky, at best.
But where there’s a will (and in military families, there always is), there’s a way.
Military spouses can create their own careers that satisfy both the budget and the soul. It’s just a matter of finding out what works best.
Let’s take a look at some successful military spouse jobs.
Pro Tips from Military Spouses
Tara Glenn, who previously served — and met her husband — in the Navy, now raises her four children in Georgia.
She had a hard time finding a job that would accommodate her pregnancy and necessary care for her youngest child.
Baking came easily to Glenn. She researched cottage food laws in Georgia and found she wouldn’t need to spend a lot to get started.
“The permit wasn’t expensive and most of the ingredients we already had,” she says. “I did buy new muffin pans, though!”
She started selling at the local farmers market with a borrowed canopy, table and chairs. She eventually purchased her own booth equipment once she realized there was interest in her baked goods.
Alongside her weekly stint at the farmer’s market, Glenn found customers through her children’s school, her military neighbors and Facebook. She set a goal to be able to pay monthly tuition at her children’s school with her baking profits.
“We specialized in muffins and bread, had specialized flavors of both and used organic ingredients,” she explains.
In a good month last year, she’d sell about $700 to $800 worth of baked goods, which left her with $500 to $600 in profit.
“Keep an open mind when it comes to employment,” Glenn advises. Aside from her military service, she’s worked as a school photographer, gas station attendant and cashier over the years.
“It is hard moving from community to community and starting all over again every few years, but we are resilient and employers are beginning to notice.”
Hair stylist Caitlin Deigel’s Navy marriage has taken her from New England to California and back.
While working on her business management degree at University of California Santa Cruz, she remembered how much she enjoyed volunteering and giving haircuts at a homeless shelter back east.
But it was hard to go to school, work part time as a stylist, and make time to volunteer.
As she wrapped up her degree, she developed Social Worth — an online platform to connect hair salons with transitional housing services to provide free haircuts to the homeless.
“It is a happy coincidence that the business I want to run pairs well with military life,” Deigel says.
“As long as I succeed in the Connecticut/Rhode Island area where we are living now, I can move the business and grow it in a new area when we have to move again.”
Deigel will have to make new networking connections and acquire local business licenses, but her personal employment will be relatively easy to maintain.
She knows to take her business one step at a time, especially when she has extra responsibilities at home due to her husband’s assignments.
“The key to success and efficiency — whether it’s in the business world, military life or civilian life — is adaptability,” she explains.
So, what sort of career can you build as you also serve as a military spouse? Here are a few ideas:
If You’re Great With Words, Consider:
1. Proofreading
If you can catch a typo quicker than anyone, consider working as a proofreader.
You can even proofread transcripts, like court proceedings or medical dictation, on the road. Using just an iPad, you could make about $17 per hour.
2. Social Media Management
Craft the perfect tweets for a local business to make decent money on your own schedule.
Social media managers focusing on Twitter, Facebook, Instagram accounts and more usually earn at least $500 per month per client.
3. Transcribing
Fast, accurate typists can make $15 to $25 per hour as transcriptionists.
Much like proofreading, expect to deliver transcription assignments within a few days — or even hours — of receiving them.
If You’re a Numbers Whiz, Try:
4. Selling Clothing on eBay
Do great bargains jump out at you from thrift store racks? Can you spot the best collectibles, video games or designer items from aisles away?
Buy highly desired items at low costs and resell them to the highest bidder on eBay. It might take some time to determine your selling “sweet spot,” and you’ll need a place to store items until they sell.
But when it comes to flexible work, it’s hard to beat selling online.
5. Bookkeeping
You don’t need to be a CPA to be a bookkeeper. You don’t even need to be in the same town as your clients!
There are few costs in setting up a bookkeeping business, and you can earn $60 an hour to track clients online.
6. Selling Used Books
There are plenty of places to sell used books. Do you have the savvy to figure out which ones will earn you the highest profit?
Our founder, Kyle Taylor, once made $750 in one month selling used books online. Just make sure to have a sturdy bookshelf handy for storing your inventory!
If You Like Working With Your Hands, Think About:
7. Selling Baked Goods
Cottage food laws vary by state, so it may take time to get adjusted whenever you move.
But build a fan base on social media and you’ll have hungry customers lining up for your specialty baked goods.
8. Doing Clothing Alterations
Put your sewing skills to work providing alteration services for neighbors and friends.
If you’re experienced and quick at sewing, you could make $20 to $30 per hour.
9. Testing Knitting Patterns
Yes, companies pay knitters to test out patterns and products. Pay varies (some programs only pay in product), but knitting enthusiasts will enjoy this side hustle.
While you’re at it, why not think about selling your own patterns?
10. Doing Calligraphy
Got great penmanship? Here’s an opportunity to earn.
Your artistry on wedding invitation envelopes, birth announcements or gift items could be highly sought after in your community.
Top full-time calligraphers earn $50,000 a year, and with a solid online presence, it’ll be easy to take your work to your next duty station.
If You Like Working With Others, You Might Want to:
11. Take Customer Service Calls
If you have a technical background, you could make $9 to $12 an hour taking calls as an Apple At Home advisor.
Various other companies offer remote customer service jobs, but be sure to have a quiet space to work in while you’re on duty!
12. Become a Virtual Assistant
If you don’t want to spend all day on the phone, consider working as a virtual assistant.
VA roles vary depending on who’s calling the shots, but tasks might include curating content for social media and newsletters, responding to emails or formatting blog posts. Pay ranges from $20 to $60 per hour.
13. Offer Tutoring Sessions
From kids to adults, tutoring services are always in demand.
Work with home-schooled students on subjects their parents aren’t confident teaching; offer after-school sessions in students’ homes or at the library; or work with a tutoring company to host SAT prep classes.
Private tutors can expect to earn $13 to $20 per hour.
14. Take Care of Pets
Having a pet when you’re in the military can be hard. Sign up to be a pet sitter through a service like DogVacay to make life a little easier for your colleagues.
The dogs will help you reach your Fitbit step goal and cats will … well, they’ll just be cats.
15. Take Family Portraits
If you can’t stop nerding out over your new DSLR, put it to work.
You can earn a few hundred dollars at a time taking family portraits, or a few bucks per picture if you sell stock photos. Build up a client base and your portfolio will do most of your work for you!
Your Turn: Know of any other flexible jobs for military spouses? Let us know in the comments!
Lisa Rowan is a writer, editor and podcaster living in Washington, D.C. During her few years as an Army wife, she worked as a sales associate and a freelance newspaper reporter.
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Singletons take 13 years to save first home deposit
It would take 13 years for a single first-time buyer to save a deposit in England and Wales, and 46 years in London, according to new research.
The Time to Save Index, launched by estate agency Hamptons International and based on data since 1999, looks at how changing market conditions impact an average first-time buyer’s ability to save for a deposit.
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This Store Offers FREE Home Improvement Workshops All Year Long
Summertime and home improvement go hand-in-hand.
If you’re planning to spruce up your pad when the weather gets warm, you’ll be stoked to learn…
The world’s largest home improvement retailer offers FREE weekly workshops on a variety of DIY repair topics.
Here’s what you need to know.
How to Take Advantage of The Home Depot’s Free Workshops
The Home Depot offers free workshops at each of its more than 2,000 locations across the U.S., Canada, China and Mexico.
They take place every week on Saturday mornings and Sunday afternoons.
Upcoming workshops are consistent across locations and include outdoor lighting, interior painting and drywall repair, ceiling fan installation, faucet installation and building an outdoor wooden doormat.
Supplies aren’t included, but instruction is FREE. How cool is that?
The retailer also has classes targeted at women and kids — like classes on how to build a DIY vegetable stand, and how to build a butterfly house, respectively.
Even if you don’t have any home projects coming up, the free kids’ workshops (they get to keep their projects!) seem like a fun screen-free activity.
Click here to find out which workshops are coming up — and, if none of them sound appealing, here are a bunch of other ways to learn DIY home improvements for free.
Your Turn: Did you know The Home Depot offered these workshops?
Susan Shain, senior writer for The Penny Hoarder, is always seeking adventure on a budget. Visit her blog at susanshain.com, or say hi on Twitter @susan_shain.
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How to Choose the Right Mix of Investments for Your Personal Goals
There are only a few investment decisions that really matter.
Your savings rate is one of them. The amount you pay for your investments is another.
And of course, what you actually choose to invest in is right up there.
What might surprise you is that the specific investments you choose matter less than the types of investments you choose. That is, investing in the stock market at all has a bigger impact on your return than the specific stocks or mutual funds you pick.
So, how do you choose the right types of investments for your specific goals? This post will walk you through the decision.
What Is Asset Allocation and Why Does It Matter?
Asset allocation is the fancy term investors have given to the process of dividing your money up across the various investment categories like stocks, bonds, and cash.
And it’s important because how you choose to mix and match these different types investments is the primary way you exert control over two big things:
- Your investment return
- Your investment risk
This one decision does more than any other to determine both how much money you could earn and the probability of actually earning it.
What Types of Things Can You Invest In?
Given the importance of this decision, how do you determine the right mix of investments for your specific goals?
The first step is simply understanding your options. And while no two investments are exactly the same, we can group most investments into a small set of broad categories that share similar characteristics.
An investment’s category tells us a lot about how we can expect it to perform. Here’s how each of the major investment categories affects your overall plan.
Stocks
A single stock represents a piece of ownership in a company, and the value of that stock rises and falls based on the success of that company.
Stocks have the highest expected return out of all the traditional investment options, but they also come with the biggest downside risk.
For example, U.S. stocks have returned 9.5% per year over the past 87 years, but have also experienced annual declines as big as -43.84%.
Cash
Cash includes things like savings accounts, CDs, and money market funds.
These investments offer the lowest possible return of all the major options, but also the lowest downside risk. In fact, many cash investments (like FDIC-insured savings accounts) are guaranteed to keep your money safe.
Bonds
Bonds offer a middle ground between stocks and cash.
A bond is technically a loan you give to an organization in exchange for interest. And bonds offer a medium expected return with a medium level of risk.
Other
There are plenty of other types of investments, from real estate, to commodities, to options, and others.
Each of these types can be helpful in the right situations, but they aren’t necessary and often cause problems when they aren’t used correctly. For those reasons they won’t be considered in the rest of this post.
Need vs. Ability
Your job is to mix and match the options above to create an investment plan that helps you reach your personal goals. That is, what percentage of your investment money will you put into stocks vs. bonds vs. cash?
While that might sound daunting, it can actually be broken down into a few small decisions.
To start, here are three ways to think about how much risk you should take on.
1. Return Needed
What level of investment return do you need to reach your goal? If it’s low, you may be able to stick primarily to conservative investments like cash and bonds and take some of the risk off the table.
2. Risk Capacity
Financial planner Michael Kitces defines risk capacity as the extent to which “a ‘risky event’ [could] happen (e.g., a market crash) without damaging the underlying financial goals.”
For example, a 20-year-old investing for retirement typically has greater risk capacity than a 60-year-old, since there is more time to make adjustments if things don’t go according to plan.
The higher your risk capacity, the more room you have to reach for the higher returns of the stock market without fearing the potential negative consequences.
3. Risk Tolerance
On the other hand, risk tolerance measures your personal comfort level with risk. Some people are fine with the big ups and downs of the stock market, and others aren’t.
And since sticking to your plan is one of the most important factors for investment success, knowing ahead of time what you’re comfortable with will help you get better results.
Vanguard has a risk tolerance questionnaire that can help you figure this out.
Two Rules of Thumb
The three guidelines above can help you understand whether you’re able to take on more or less risk, but still, what does that mean in terms of actual numbers? What percent of your investments should you put into each category?
Here are two rules of thumb you can use to help you decide.
First, the younger you are, the more likely it is that you’ll want some significant portion of your investments in the stock market. This is both because stocks offer the best opportunity for long-term growth and because you have more time to make adjustments if things go awry. Holding 60% to 90% stocks is a common range for people in their 20s to 40s.
(Of course, even those of you near or in retirement likely want some money in the stock market.)
Second, in a worst-case scenario, expect that you could lose 50% of the money you have in the stock market in any given year. So if you have 70% of your money in stocks, you may face a 35% loss in a single year.
You would of course also expect your account value to recover over time, but this gives you a sense of the downside risk you might face.
Finally, remember that there is no right answer here. The most important thing you can do right now is make a reasonable choice based on the factors above, and start saving money. You can always make adjustments later if needed.
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.
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9 Tax Breaks for Parents: How Kids Could Save You $1,000s in Taxes
Does the thought of doing your taxes on top of caring for your kids make your head spin?
Take a deep breath: We found nine tax breaks for parents.
Whether your children are swaddled newborns or seeking college degrees; whether you’re single, married with kids or adopted this year, you’re eligible to get some money back on tax day.
Here are the top tax credits and deductions for parents to keep in mind.
1. Out-of-Pocket Medical Expenses
If you had a baby last year, paid out of pocket for medical expenses during your pregnancy and were never reimbursed, you’ll be able to itemize those amounts as deductions.
This tax code requires the expenses to be at least 10% of your adjusted gross income. That might seem unreachable, but since you’ll be billed item by item for prenatal care and childbirth, it can start to add up.
These women paid up to $6,285 by the time their last bill hit their mailbox, so make sure you keep your receipts!
2. Child Tax Credit
As soon as your child is born, you’re eligible for the Child Tax Credit, which provides up to $1,000 for every child under the age of 17, depending on your income.
This might seem obvious, but it’s important to note: Even if your child is born on Dec. 31, you can still claim them for that year.
Remember to claim this credit for each of your children — if you have more than one, they each qualify for it up until they turn 17 years old.
3. Adoption Tax Credit
The adoption process is notorious for being not only lengthy, but expensive.
The Adoption Tax Credit is worth up to $13,000 to help you alleviate that financial strain. This credit covers travel expenses, court costs and attorney fees, and even home-study costs.
It’s important to keep all receipts throughout the process and file for the year you adopted your child.
4. Earned Income Tax Credit
If you have three or more children and a low income, you qualify for the Earned Income Tax Credit, which can significantly reduce your tax bill.
And the more kids you have, the lower the income threshold becomes.
5. Child Care Tax Credit
Child care costs the average family $18,000 per year, according to a survey from Care.com, but you may be able to get a chunk of that back on your taxes.
If your child is 12 or younger and you pay for child care while you’re either working or looking for work, you qualify for the Child Care Tax Credit. This credit can cover up to 35% of those expenses or $3,000, whichever comes first.
Each child’s costs qualify, so if you have several children under 12, make sure to claim them all!
6. Head-of-Household Status
If you’re single and have a child, don’t overlook this crucial item: your status.
If you file as a head of household, you’re automatically eligible for a lower tax rate than if you file as single.
To be considered the head of household, you must:
- Be unmarried on the last day of the tax year–December 31st.
- Contribute more than 50% of the financial support of the household
- Have a child who lives with you for more than six months of the year
If your child is in college and still a dependent on your taxes, you can claim their college expenses. There are three different types of post-secondary school credits, but you can only use one at a time.
7. American Opportunity Tax Credit
During the first four years of your child’s degree, you can claim up to $2,500 for tuition and related expenses under the American Opportunity Tax Credit.
Your child must attend college at least part time. The income threshold for individual parents is $80,000; married couples must earn no more than $160,000.
Take advantage of this credit while you can — it’s only available through 2017.
8. Lifetime Learning Credit
Unlike the American Opportunity Tax Credit, there is no limit to the number of times you can claim the Lifetime Learning Credit to lower your overall tax bill.
Worth up to $2,000, the LLC covers tuition, fees, supplies and equipment.
Your modified adjusted gross income must be $65,000 or greater (or $130,000 or greater if you’re filing jointly with your spouse).
9. State Credits for Children in Elementary or High School
Some states offer benefits pay for certain items or activities during the school year.
In Arizona, for example, if your kids attend public school, you’re eligible for a tax credit if you paid any fees related to extracurricular activities, such as buying sports equipment or uniforms. You can even qualify for the credit if you spent money on their SAT/ACT tests or prep classes.
While it won’t affect your federal return, keep these credits in mind when filing your state taxes.
Other Parent-Child Tax Items to Consider
Ask yourself two more questions before filing your return, putting up your feet and enjoying a well-deserved break.
Which Parent Should Claim the Child?
A tricky part of being separated or divorced is figuring out who is supposed to claim the child on their tax return.
To make the call, the IRS typically looks at where the child sleeps for more than half the year, but there are some special exemptions as to who can claim the child and when.
It gets a bit tricky, but this IRS chart answers a variety of questions you might have.
Does My Child Work?
If your child has a job, make sure they file their own tax return.
Teens who work while in school usually don’t make enough money to have a liability. So, even though their employers have likely withheld taxes throughout the year, they’ll get them back in a refund check — which is a nice incentive.
Plus, it’s a great way to continue teaching them about money.
Your Turn: Will you take advantage of these tax credits and deductions?
Kelly Smith is an intern at The Penny Hoarder. She’s a junior at The University of Tampa and pinches pennies so she can travel the world.
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ComfyEarrings: The Idea That Turned into a Lucrative Home Business
Tell us a little bit about yourself and your entrepreneurial journey. Probably the most surprising thing is that I didn’t set out to become an entrepreneur. I wanted to be a freelance writer, but owning a business selling a physical product, like earrings, never crossed my mind. Instead, I just wanted comfortable earrings for myself. […]
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الأحد، 20 مارس 2016
National Geographic leads effort to promote authentic vacationing in the Poconos
A flotilla of rafts and inner tubes has been collecting dust in the former Portland Outfitter for six years. The river adventurers they were intended for start their trips in Poconos resorts upstream of this sleepy Delaware River borough. Instead, the kayakers and canoeists come ashore here only long enough to dry off before heading back.It's frustrating to see an economic opportunity float by just out of reach, said Mayor Lance Prator, the borough's most vocal [...]
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Deeds Done
Hamilton TownshipGlenn M. Price and Tina T. Burley to Eureka Stone Quarry Inc., Property Old Mill Road, $260,000Gilcon Investments LLC to 6792 Route 209 LLC, Land Monroe-Carbon Trail, containing 2.786 acres, $299,000Middle Smithfield TownshipRomec Inc. to Leslie and Sandra Roberts, Lot 23, [...]
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Buyer Beware: How Does an Annuity Work?
“How does an annuity work?”
“How do annuities differ from other investments?”
“Is an annuity really right for me?”
These are some common questions people have when it comes to annuities.
Why is there so much confusion surrounding this financial product? It’s because there are several different types of annuities, many financial advisors (or insurance agents) don’t tell the whole truth about annuities or they explain them poorly, and there are sometimes add-ons (called “riders”) that complicate annuities.
There are really two ways to react when you hear about annuities: throw your hands up and give up on figuring them out or consider them as an investment option that might be right for you. I encourage the latter.
But remember, that doesn’t mean that annuities are right for you. They’re right for some people, but not all.
Let’s take a dive into the world of annuities. We’ll start by seeking to answer the question: “How does an annuity work?”
Annuities could be right for some people, but not at all. #buyerbeware
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How Does an Annuity Work?
An annuity is a fixed amount of money that is paid to someone every year. Boom, we can all go home. Ha, not quite.
Annuities typically seek to lower the risk an investor takes on by making one thing certain: regular income. While that benefit might give you peace of mind, it’s not necessarily the best benefit if the benefit you’re receiving ends up being less than what you could get from other, albeit riskier, investments.
So really, there are two factors to understand about annuities. First, they have the potential to lower your risk when chosen over, say, stocks in the market. Second, they have the potential to lower how much money you make when chosen over, say, stocks in the stock market!
To understand how a particular annuity works, make sure to read the annuity contract.
This is really important. I’ve seen people scammed into buying ridiculous annuities that have outrageous fees.
Don’t believe me? Read how one woman paid over $3,500 in variable annuity fees and didn’t even know it.
Be careful.
Types of Annuities
To better understand how annuities work, let’s look at some types of annuities and their main features.
Fixed Annuities
These are very similar to bank CDs. And, like CDs, fixed annuities are similar to a savings account. You put in an amount of money, and that money creates some interest. This interest is then added to the account which in turn helps the account grow.
Pretty straightforward, right?
They are insured by insurance company, not the FDIC. So, like CDs, fixed annuities are insured, but remember that insurance companies are certainly not as stable as the FDIC. It’s possible that an insurance company that sold fixed annuities to you could go under, and if that happens, you might lose your money. The chances of this happening are probably very low, but it’s worth mentioning.
Ratings are very important for this reason. There are several rating agencies that test the financial strength of companies that issue annuities. A simple search online will reveal the ratings of these companies so you can choose companies that are the least likely to go under. I recommend you do so.
Also, big differences between fixed annuities and CDs include:
- If you surrender prematurely you may have to pay a surrender charge on principal vs. just losing your interest in a CD.
- If you surrender prematurely you may also be subject to an early withdrawal penalty as annuities are subject to retirement account rules since the interest is tax-deferred.
Annuities are supposed to lower the amount of risk you take on in your investing strategy. And, while they may do that in certain regards, fixed annuities do carry some risks.
Let’s talk about the first downside a bit. Having to pay a surrender charge on principal could certainly be seen as a risk. Even if you don’t intend on surrendering, life’s circumstances may prompt you to do so resulting in a loss. When you are considering purchasing a fixed annuity, it’s important to factor this risk into the equation.
The second risk comes from having to pay an early withdrawal penalty associated with having to surrender the annuity associated with a retirement account. Here again, if life’s circumstances force you to withdraw money, you’re out of luck. That’s why this is another risk you must factor into the equation before you buy a fixed annuity.
While those are some negatives about fixed annuities, there’s one positive that’s especially worth mentioning: the rates are usually higher with fixed annuities than with CDs.
I remember I once had a client who wanted a guaranteed return but CDs weren’t paying anything. I found him a 5-year fixed annuity paying 3%. That’s much better than the measly returns CDs were paying.
But, remember, fixed annuities aren’t right for everyone. When I was young, my mom wanted to set me up with an investment. What did she choose? You guessed it: a fixed annuity.
At the time I really didn’t know there were much better investment options out there for me. You know, ones where I could take more risk because I had practically my whole life ahead of me.
But I appreciated what my mom did for me. I found out later that my mom’s financial advisor was purely an insurance agent (insurance agents like this don’t always think about what’s best for their clients).
Make sure you know what you’re signing up for before you sign on the dotted line. Look for a professional you can trust who will take the entirety of your financial situation into consideration.
Fixed-Indexed Annuities
When you put money into a fixed-indexed annuity (also known as a “hybrid annuity“), you’re guaranteed that you can’t lose the money. That’s a benefit that’s not seen in the stock market.
But of course, there’s a downside. Many fixed-indexed annuities have caps that hinder you from riding a portion of the upside of the stock market. Even if investment index rises in the double digits, you might be capped at a single digit, for example. This isn’t true of all fixed-indexed annuities, though. Make sure you completely understand what you’re buying.
Fixed-indexed annuities also offer living benefits which can pay out an income stream for your life or a spousal benefit. The biggest confusion I see with these types of annuities – and also variable annuities – in regards to these benefits is how they are sold by shady advisors.
If an advisor pitches you a product that “guarantees you a 6% return without any risk to your principal,” this advisor doesn’t care about you and all they are doing is trying to do is make a sale.
Do these annuities offer a 6% return (I’m using 6% just as an example)? Well, kind of. And that’s where it gets tricky.
When most investors think of a fixed return they think of bonds or CDs. This is nothing like that.
The 6% return in this example is credited to the income benefit that the contract owner can take at a later time.
It’s not interest earned on your principal. Said another way, this is not added to your cash-out, walk-away value. Instead, this is added to your future income benefit that you can take at a later time.
It’s very similar to delaying Social Security benefits and each year your benefit increases. Same deal here. So as long as you don’t touch your money, the annuity company will give you an increase in the amount you can take out each year.
It can be fairly simple to understand how fixed-indexed annuities work as long as you’re working with an advisor that has your back and isn’t only interested in earning a commission.
Immediate Annuities
What are immediate annuities? Immediate annuities allow investors to receive payments immediately from the time the annuity is started.
These kinds of annuities are great for people who need money immediately upon investing (like near-retirees or retirees). Additionally, the payments that are received can be fixed or variable.
The biggest drawback to immediate annuities is that you may have to fork over a lump payment to the annuity company – and after you get past the 30-day “free look” period, there’s no turning back.
Compare that to fixed-indexed annuities and variable annuities where you still have access to the principal – although you might be subject to a surrender charge if you withdraw before the contract period is up.
Variable Annuities
I’m going to tell you right now: I don’t like variable annuities. Variable annuities are quite complicated, and while they may contain a lot of “features” or “benefits” that sound inviting, you have to be careful.
Variable annuities contain mutual funds (called “sub-accounts”) that are typically selected from a pool of 80 to 300 funds. While that might seem like a lot, keep in mind that were you to shop the market on your own, you would find thousands and thousands of options to choose from.
Variable annuities, unlike fixed or fixed-indexed annuities do not guarantee your principal. Remember: You’re basically investing into mutual funds. If the mutual funds take a hit due to a bad market, you could be out of luck.
When you hear about “guaranteed death benefits” (a benefit for beneficiaries should the annuitant die before payments begin) and “income guarantees” or “guaranteed withdrawal benefits,” remember to read the fine print to see how they work.
Specifically look for the costs you don’t initially see. Costs typically start with a mortality expense (called M&E). On top of that you’ll have the costs of the riders (the guaranteed death benefit or income guarantees mentioned above). Just when you think it couldn’t cost anymore you almost forgot cost of the sub-accounts (mutual funds), too.
All in investors could be paying close to 4% of total fees inside their variable annuities.
If you own a variable annuity, and want to know you much you’re really paying, request your free Annuity Stress Test at AnnuityTested.com.
Deferred Income Annuities
Deferred income annuities are very much what they sound like: you would receive payments at some later date. This later date is typically a year or later from the time you start the deferred income annuity.
Here again, like immediate annuities there can be either fixed or variable payments made – it depends on the specific deferred annuity.
For those payments, you’re going to find that deferred income annuities offer guaranteed lifetime income but at a later date than some annuities.
The question at hand is, “Why should someone sign up for a deferred income annuity?” The benefit from a deferred income annuity upon the year that you’re actually paid is likely to be higher than that of an immediate annuity. Why? There are two reasons . . . .
First, the insurance company knows that the longer you live, the less time you have on the planet. This reduces the amount of time they may have to make payments to you. And, with a deferred income annuity, because you will be taking payments at a later date (say, 15 or 20 years down the road), this fact would be true in your situation. Additionally, they don’t have to pay you for a number of years. Therefore, insurance companies are able to offer better payouts because the timeframe in which they will pay is reduced.
Second, deferred income annuities reduce the amount of risk you might incur from the markets. This might be advantageous as part of a retirement plan, as you could purchase a deferred income annuity 10 or 15 years (for example) before retirement and rest assured that you will have some money at retirement. If reducing your risk is important to you, the deferred income annuity can certainly make sense as an option to consider. Here again, the deferred income annuity may pay more than an immediate annuity.
This second benefit might not just lower your risk compared to traditional investing, it might give you a tremendous amount of peace of mind. Those beginning their investment plan a decade before retirement may find themselves worried about a stock market crash – and reasonably so. Remember the stock market drop after 9/11? How about after the housing crisis? Many retirees found themselves with severe losses in their portfolios after these events. Purchasing a deferred income annuity alleviates much of this concern.
To sum up, deferred income annuities might be relevant to those who are nearing retirement or who are starting retirement and would like to have some “longevity insurance.”
These policies are pretty popular, and they’re worth your consideration. Talk with a comprehensive financial planner to explore this option.
Also please keep in mind that there are other types of annuities, but these are some of the most common types. Also remember, that while these are some of the highlights of these types of annuities, some of the benefits and features may exist in other types of annuities as well.
A Simple Annuity Example
To better understand annuities, picture this. Say you have a wealthy uncle who is great at investing in the stock and bond market. He is financially secure and you’re unsure about investing in the stock market because you don’t want to lose money.
So, you make a deal with your uncle. You’ll send him payments over time (or perhaps a lump sum), he’ll go ahead and use his experience and his high tolerance for risk to invest the money, and he’ll send you payments every year that may include a portion of what he has made in the markets.
Now, your uncle wants to teach you responsibility and doesn’t want to provide this service free of charge (or maybe he’s a bit hungry for some more dough), so he’s going to charge you some fees. The fees differ depending on how you set up the deal.
You’re happy because (1) you want your principal protected, (2) you want guaranteed returns, and (3) you like the idea of predictable income. Your uncle is happy because he’s able to use his financial security to make some more money through the deal.
That, in a nutshell, is how an annuity works.
While this is a simple example, remember that annuity contracts aren’t so simple. Again, read them!
How Do Annuities Differ from Other Investments?
I’ve already answered this question somewhat earlier in the article, but let’s dive into a little more detail.
Many investors think of the stock and bond markets when considering where to put their money. So, that’s what we’ll focus on here.
When you buy shares of a stock, you’re buying ownership in a company. The price per share will fluctuate and it is up to the investor to buy low and sell high (to make a profit). However, this isn’t always easy – especially if the investor is buying over short periods of time.
A stock index is a measure of how well a group of stocks are doing as a whole. Perhaps you’ve heard of an “index fund.” Index funds track an index to provide similar returns as you would see from the index.
Bond index funds operate in a similar fashion. However, at the core, bonds are basically debts that are owed to you, the investor.
Now, what does all this have to do with annuities? Well, fixed-indexed annuities track an index (most commonly the S&P 500) but remember, they have constraints on them many times. While you won’t lose the money you put into a fixed-indexed annuity, your potential for index fund-like gains might be limited by caps.
What this means is that you are lowering your risk by going with a fixed-indexed annuity. I like fixed indexed annuities, but they still aren’t for everyone.
Another way annuities differ from other investments has to do with liquidity. With mutual funds, ETFs, or managed portfolios, if you need the money, it’s relatively easy to get to. Annuities are a different story.
Variable, fixed, and fixed-indexed annuities typically have a contract period that will range from 3 to 12 years – this is why you read the contract before you sign! While most allow an annual free withdrawal (10% per year of the principal plus interest earned is common) any amount above that is subject to a surrender charge. I’ve seen surrender charges has high as 9% before so this could be a huge blow if you were in need of some quick cash.
That’s why I tell anyone who interested in the security of annuities to never put all of their money into annuities.
Is an Annuity Right for You?
Maybe.
Typically, I ask investors these questions to see if an annuity makes sense for them:
- “How important is protection of your principal?”
- “How important is having a predictable income stream in retirement?”
I encourage you to read 15 Reasons Why You Shouldn’t Buy an Annuity – (And 5 Real Life Scenarios When You Should).
If you have an annuity and aren’t sure if you should continue with it (or how much you’re paying in fees), be sure to get your [currently free at the time of this writing] Annuity StressTest. Find out everything you don’t know about your annuity.
To truly determine if an annuity is a good fit for your retirement goals, you must have a thorough financial analysis. Buying an annuity just because it has nice features – “guarantee of principal” and “lifetime income benefits” – is not enough.
It’s imperative to reverse engineer your retirement income needs to see how an annuity could help with that amount. That’s why we encourage anyone interested in purchasing an annuity to go through our unique financial planning process, The Financial Success Blueprint™.
At the end of it you’ll have a good understanding if an annuity should have its place in your investment portfolio or if another strategy makes much more sense.
Don’t let annuities freak you out. For the best explanation of how an annuity works, you must look at the documentation to find out and seek a competent financial professional for more information.
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