I knew that there are different tax brackets, but I have never paid attention to the details since my husband and I weren't making enough to get taxed more than 15% once you took off the standard deductions from our taxable income. Now that I’ve started making more from my online business than I ever did with my cubicle day job, my ears have perked up to tax bracket info. Since our tax bracket may change soon, I decided that I needed tax brackets explained to me. I want to know how our tax liability will be affected by my higher income.

What Are Tax Brackets?

Tax brackets help individual citizens determine the amount of their tax burden for the year. They are used by the Federal government to determine the total amount of taxes that you will owe based on the amount of taxable income that you earned during the year. The more you make, the higher your tax bracket. Keep in mind that you won’t lose money overall by being in a higher tax bracket, but the amount that you earned between one bracket and another will be taxed at their marginal rates, hence the term “marginal tax rates”.

For example, my husband and I had a taxable income less than $69,000 for the last five years, so we were mainly in the 15% tax bracket. If we have a taxable income after deductions of $80,000 this year, only the excess $11,000 will be taxed at the higher 25% rate. This means that it isn’t financially awful to be in a higher tax bracket – we will still net more overall.

Cur

The retirement dream is something that most people look forward to. They want to be able to spend their days doing what they want while having checks flow in from their retirement savings.

When those checks start coming in for many people, their average retirement income is substantially lower than what they were expecting. This has forced some retirees to cut back on their retirement dream and live on a lot less money than they thought they were planning. Let’s take a look at the current average retirement income in the US.

Average Retirement Income

Did you know that the average retirement income in the United States is just $29,000 a year? That is a far cry from the dollar amount that most people would have probably assumed that it would be. Over the past few years, seniors have been able to retire with under $30,000 in annual income flowing into their households despite the rising costs. But this amount barely covers enough to pay the bills, so some retirees have gone back into the workforce. Continue reading...

In the current environment, you need every advantage that you can find to get a job. There is a lot of competition and you will need to stick out from the pack. One of the ways that you can land a job is by having a great resume.

6 Basic Resume Tips that Focus on What Matters

A simple, concise, and well-crafted resume will speak for you in a great way.

1. Basic Fonts

Use simple fonts that are easy for employers to read, such as Times New Roman and Arial. These fonts are standard for most industries and will help employers take your resume seriously. Avoid using fancy fonts that type in cursive or look like hieroglyphics because they may be perceived as edgy or make your resume harder to read.

Building the proper retirement plan means allocating the assets in your portfolio properly for your retirement needs. A good 401k allocation strategy will include a diverse mixture of a number of different asset classes. This mixture could include stocks, bonds, mutual funds, and even cash. All of these asset classes serve a purpose and add a unique element when trying to max out your 401k contribution limits.

Here is a look at a few of the more popular asset classes that are available for 401k plans.

Stocks

Stocks are one of the primary assets that make up many 401k portfolios. 401k plans often give investors the chance to buy shares of their own company’s stock as well as general shares from other companies. Stocks are a risky asset class as they represent an investment in a single company. Their value is tied to changes in the company. The 401k allocation of a younger investor is likely to be a lot more stock driven than an older investor’s plan since a younger person has the time to take a larger risk for a larger gain.

It is very rare today for a person to stay with one company through their entire career. You may be one of the many who have left their place of employment and are trying to figure out what to do with their 401k retirement plans.

Most companies will only give someone a few months to make arrangements to move their retirement plan assets, and transferring a 401k can be a real headache if you are not sure what to do.

Feel free to follow these simple steps to make the conversion from 401k to Roth IRA if that’s what you choose to do. Continue reading...

You work too hard to sock away money in your 401k plan to let the proceeds go to just anyone, right? You may want to make sure that your 401k assets go to the right people.

One of the ways to do this is by checking your 401k plan forms and making sure that you have filled out everything properly. This will make sure that your assets transfer free and clear according to your wishes. To achieve this goal, you will need to set up a 401k beneficiary.

What Is a 401k Beneficiary?

A 401k beneficiary is the person who will inherit all of the assets in your 401k plan in the event of your death. There are a lot of things that need to be considered when selecting your beneficiary. You may want to consider tax consequences, the age of the beneficiary, and your marital status. You may also want to designate a certain percentage of assets that will be left to each of your beneficiaries. Beneficiaries also need to be changed in the event of divorce, death, or a change in living circumstances.

Borrowing against a 401k is one of those things that no one wants to do, but it may simply be unavoidable for one reason or another. An emergency situation could force you to borrow from your retirement to meet your liquidity needs. But if you are considering borrowing against your 401k plan, please be aware of the advantages and disadvantages of that choice.

Pros of Borrowing Against a 401k

The biggest advantage of a 401k loan is that it is a whole lot easier than borrowing money from a bank. Since you are borrowing your own money, you do not have to fill out a credit application. Unlike with a bank loan, you can get the loan from your own 401k with bad or poor credit with no problem. You just typically need to contact your 401k plan provider and request a loan.

Since you are borrowing your own cash, your interest rate will be a lot lower than with unsecured loans that you would get from a bank. This will make it a whole lot easier to pay off your loan at a faster rate.

401k plans are great savings vehicles for retirement. Many plans offer matches from employers, and they all provide tax-free growth of capital for account holders. While 401k’s are a really useful tool, they do have their limitations. Here are a few of the 401k withdrawal rules.

401k Withdrawal Rules

Since your contributions to a 401k are from pre-tax income, there are limits governing the withdrawals for the plan. In general, 401(k) plans only allow withdrawals at or after the age of 59 ½. Also, you will be forced to take a distribution by the age of 70 ½, or you will be subject to a tax penalty from the government. The distribution that is taken is known as the required minimum distribution and must be in line with the IRS guidelines. Failing to take the minimum distribution amount can result in a whopping 50% penalty.

As with most things, there are exceptions. There are special situations in which withdrawals can be taken without having to pay the early withdrawal penalties, such as in the event of emergency situations such as becoming disabled. You can also avoid penalties if you use the money to pay for college expenses. A first-time home purchase is considered an exempt transaction, too. Keep in mind that you will still have to pay taxes on your early withdrawals since you didn’t pay taxes on your contributions.

It can be difficult to keep up with all of the rules governing IRA accounts.  A couple of the biggest questions are usually “What are the IRA withdrawal rules?” and “What are the IRA limits right now?”.  Here is what I was able to find:

IRA Contributions

Before we get into withdrawals, I thought we better touch on the contributions that would have to happen first. Whether you invest in a Roth IRA or a Traditional IRA, they have the same IRA contribution limits.

In 2011, they both allow their account holders to make a contribution of up to $5,000 per year if they are under the age of 50.  Individuals over the age of 50 are allowed to contribute and additional $1,000 annually due to the catch-up provision.

Have you ever wondered what is the difference between a Roth IRA and a Traditional IRA?  You would not have been the first person to ask.

They can both be effective tools for helping people save money for retirement, but they do have different characteristics. One plan is better for people who are looking to lower their taxable base now, and the other is better for people who are looking to lower their taxable base later.

Let’s take a look at the difference between Roth IRAs and Traditional IRAs. Continue reading...