Best Places to Open and Setup a Roth IRA

If you have come to conclusion that you are ready to open a Roth IRA, it can be confusing on choosing the best place to setup your Roth IRA account. Jeff Rose from Good Financial Cents has created a movement he has dubbed the Roth IRA Account Movement in an effort to encourage young adults […]

Payday loans frequently appeal to people who run short of cash or encounter unforeseen expenses. Baby boomers are no exception, so it’s important for this generation to learn more about short-term lending. Greater knowledge on the risks and benefits of high-interest loans can help older Americans make sound financial decisions.

New Names

Baby boomers can remember the days when payday lenders only operated stores in seedy urban areas. It’s vital to understand that today’s loans come in different flavors that may disguise their true nature. Some major banks offer high-interest credit under names like “Easy Advance” or “Direct Deposit Advance.” Lenders also use a variety of names and marketing strategies to promote online payday loans.

How it Works

People often take out short-term loans by writing post-dated checks. A lender gives the borrower cash and deposits the check after the loan expires. This payment covers the interest, principal and any extra fees. Baby boomers who lack checking accounts can opt to repay loans with electronic bank transfers. If there isn’t enough money in the account, the borrower must “roll over” the loan and pay more fees.  Be aware of the interest rates on these loans and other stipulations to avoid falling into the payday loan trap.

Annual interest rates typically range from 200 to 400 percent. Although this far exceeds the finance charges on most other types of credit, many payday loans only last one to four weeks. An interest rate of 340 percent results in a 13 percent fee on a two-week loan. For example, the interest on a $350 loan would amount to $45.50. Some states let lenders charge fees to verify borrowers’ incomes or perform other tasks.

Retirement

Many baby boomers use Social Security funds or pensions to pay their bills. Payday lenders frequently accept retirement accounts as valid income sources. Unlike paychecks, these payments usually arrive on a monthly basis. This means that retirees are more likely to borrow money for two to three weeks. The longer duration raises the total price; a 21-day $150 loan costs about $32 at an interest rate of 375 percent.

The Social Security Administration recently stopped sending check payments to seniors. Instead, it directly deposits the funds in their bank accounts. Some lenders have taken advantage of this change by gaining permission to intercept these deposits. This often shortens a loan’s term without reducing the fees. The annual interest rate on a three-day advance at a national bank may exceed 1,200 percent.

Credit Records

Foreclosures and bankruptcies have harmed the credit scores of many older Americans, making it difficult for them to access traditional loans. This is a major factor that helps payday lenders attract baby boomers. These firms can charge high rates because they lend cash to almost anyone with a source of income. However, prompt repayment usually won’t improve the borrower’s credit score.

Alternatives

It’s important for baby boomers to know that many kinds of financial assistance become available as they approach retirement age. Seniors can apply for subsidized housing, tax credits, reverse mortgages, heating assistance and home appliance subsidies. Another option is to withdraw money from a retirement account. Keep in mind that penalties may apply if the account holder remains less than 59.5 years old.

Nonetheless, a payday loan may provide the only practical source of emergency funds. Baby boomers should carefully examine different lenders’ policies. A few firms offer senior discounts, but this isn’t standard practice. The most crucial objective is to find a reputable company like Northcash that doesn’t impose hidden fees or misuse personal data.

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Baby boomers are living longer, but perhaps facing more challenges than ever. Healthcare costs, layoffs and lack of pensions greatly affect financial planning. We must budget our lifestyles to meet rising costs and uncertainty. In certain cases, this may include taking investment profits.

Investors of all ages may sell investments for various reasons. These include:

  • Meet other tax liabilities: Proceeds to deal with outstanding taxes.
  • Portfolio Rebalancing: Bring your asset allocation back in check with time horizon and risk tolerance.
  • Cash to meet living expenses: Longer life expectancies and increasing costs may cause cash flow issues. Insurance may not cover certain medical procedures or costs.
  • Cover leisure costs: Take a dream vacation or other fun activities.

Whatever the reasons for selling, you have options to minimize capital gains when taking profits.

Two options include:

  • Specific Identification Method
  • Tax Loss Harvesting

Let’s take a look at how each of these methods trims your tax bill:

Specific Identification Method:

When you sell investments, the IRS assumes shares that were bought first are being sold. This is otherwise known as FIFO. (First In First Out). If older shares were purchased at lower prices (low cost basis), you will realize a larger taxable gain when selling.

Specific Identification allows you to specify which shares are being sold to reduce this tax liability. Higher cost basis shares will have less profit, which cuts capital gains. Money Manager Elliott Broidy is an investor known to consider tax efficiency when making portfolio decisions. However, specific identification is readily available to individual investors, as well.

Best Practice: Specific Identification is more effective with organization and planning.

Tips include:

  • Calculate needed funds: Specific identification works well with predetermined sums. Example: You need $5300 to pay federal taxes. Start with high cost basis shares and work backwards until the amount is reached.
  • Online Account Management: Your online brokerage or mutual fund accounts should sort by purchase price, share quantity and date.
  • Execution of Sale Orders: Be specific and confirm when selling shares over the phone.
  • Online Trade Execution: Look for a ‘Special Instructions’ tab on your sell order screen. Please call the help desk for questions.

Tax Loss Selling/ Harvesting:

Most of us have made portfolio choices that do not pan out. Pride often makes it difficult to sell these flops. Harvesting capital losses is financial incentive to part with losing investments.

Overview: You can apply up to $3,000 in losses against ordinary income for the tax year. Any balance is carried forward and available for future years. (In $3,000 increments)

Items to consider:

  • Wash Sale Rule: The wash sale rule is a caveat to harvesting losses. What does it mean? You cannot buy the same security 30 days prior or after sale to claim a deduction. However, investors may buy a similar security. So, you can buy another semiconductor stock to meet asset allocation needs, etc.
  • Tax loss sales and taking profits often have similar motives. For instance, you may sell a stock for changing fundamentals. The security may have a gain or loss at the time. Your options with a gain or loss are where the difference lies.

One Aspect of Tax Planning:

You can make more informed decisions by knowing the tax strategies available for your situation. A tax professional should be consulted for assistance, as needed.

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Financial Crimes: Keeping Your Money Safe in a Troubled Economy

March 24, 2014

With the job market still recovering from the 2008 recession and many financial institutions in trouble, keeping your money safe has never been more important. Criminals in the financial sector have found cunning new ways to take advantage of new technology and investor naivety, enabling them to lead businesses and individuals to complete financial ruin. […]

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Has the Internet made us Richer?

March 24, 2014

It has been over twenty years since the internet was made available to the general public. Since then internet access has been made available in restaurants and coffee shops, a myriad of devices ranging from cellular telephones to children’s video game systems can surf the World Wide Web and a significant number of people choose […]

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Currency Trading For Beginners

March 13, 2014

Currency trading, also known as forex trading, is the type of trade dealing with the exchange of a single currency into another depending on a certain rate. Those that participate in currency trading are larger financial institutions, like banks. Currency trading is very different from other markets since it isn’t controlled by a governing body […]

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Leasing vs. Buying: Which is Right for You?

March 3, 2014

If you’re in the market for a car, the first thing you should decide before visiting a dealer is whether you plan on leasing or buying. This decision will affect how you go about shopping for one so make sure you have given it some thought first. How do you know what option is right for […]

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Why Do Personal Loans have Restrictions?

February 24, 2014

There are many different types of loan. Each one comes with its own conditions for borrowing, which include restrictions on what the loan can be used for. For things like business loans, these restrictions are fairly clear. The loan can only be used for a business purpose and this has to be stated clearly at […]

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Actionable Tips for Finding Same Day Loans

February 14, 2014

Whether you are in need of cash urgently for a family emergency or simply need a hand to get through to the next payday, a same day loan could very well be the answer. The convenience of such a loan is sure to assist you during your time of financial troubles. With the economic climate […]

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Why a Business Loan Makes Sense

February 5, 2014

In today’s tough economy, it can be difficult for a small business to survive. High levels of unemployment and an ever-increasing number of business bankruptcies confirm that it’s harder than ever to keep a business afloat. Business loans are often the only way that a small-business owner can get access to the cash they need […]

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How To Combat The IRS When You Owe Taxes

February 5, 2014

Received a dreaded letter from the IRS informing you of owing back taxes? Most almost immediately fret once read, but knowledge is truly empowering when dealing with such a stern government entity! Here are a few helpful tips for combating the IRS when you may owe taxes: 1. Know your rights! Sounds simple enough, but […]

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Learning the Lessons of Austerity: Why Income Insurance is such an Important Financial Product

December 31, 2013

If there is one thing that the study of economic history tells us, it is that cycles of growth and decline have been prevalent since the dawn of civilised society. So while the scope and impact of recession varies in each instance, we should not be surprised when financial crisis and austerity takes hold. What […]

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