There were some significant changes in laws that New Mexico taxpayers might be able to apply to their 2022 state income tax returns.
Among those taxpayers affected are retired seniors, those who receive military pensions and full-time nurses, said Charles Moore, communications director for the New Mexico Taxation and Revenue Department.
New Mexico House Bill 163 eliminated most of the state’s tax on Social Security. It was signed by Gov. Michelle Lujan Grisham in March 2022 during the regular session and is estimated to save this group of taxpayers about $84 million in total.
Individuals earning less than $100,000 income, married couples filing jointly, heads of household, surviving spouses making less than $150,000 and married couples filing separately with income not reaching $75,000 won’t have to pay. So
for most retirees “this is really big,” Moore said.
He explained that up until the 2022 tax year, New Mexico had been following the federal rules to tax this source of income: That is up to 85% of Social Security benefits could have been taxed if an individual’s combined income exceeded $25,000 and a couple’s income was more than $32,000, the Social Security Administration stated. New Mexico began taxing Social Security in 1990. About 450,000 of the state’s 2.1 million residents receive Social Security, the Associated Press reported.
Another break within this same tax law is an income exemption for armed forces retirees of up to $10,000 on their military retirement income in 2022. The amounts will increase in 2023 to $20,000 and in 2024 to $30,000.
There are about 141,500 people who have retired from the military living in the state. Veterans comprise nearly 9% of the state’s population, according to an economic impact report prepared for the New
Mexico Economic Development Department and released in July 2022.
Some changes could also help families and working people. For example, full-time hospital nurses will receive a one-time income tax credit of $1,000 on their state returns. “Even if that credit knocks down their payment to zero,” Moore emphasized.
People with low or moderate incomes are encouraged to look for credits. The Child Tax Credit is worth $175 on 2022 tax returns, for example.
Those who weren’t required to file 2021 state income tax returns because they didn’t earn enough money should consider doing so soon because they might be eligible for Household Relief payments.
Very low-income earners who missed the deadline to apply for 2022 relief payments to the state’s Human Services Department can file a 2021 income tax return by May 31, 2023, and still be eligible for a rebate.
Residents who aren’t required to file are those who make no more than $500 as an individual with no dependents and up
to $1,000 as a couple or someone with dependents. “It can be beneficial,” Moore noted.
Moore also advises New Mexicans to do two things when they file.
Electronic filers are more likely to receive their refunds more quickly. And whether you’re sending your return electronically or in the mail, send the return as soon as possible.
Other features this year include a new checkbox on the state’s tax return that allows the Taxation and Revenue Department to share care information taxpayers supply with the state’s Human Services Department to find out whether they qualify for Medicaid. There will be another box to check if someone is interested in compliant, low-cost health care plans.
For more information, see tax.newmexico.gov.
Reporter Terri Harber can be reached at 575-622-7710, ext. 308. or reporter03@ rdrnews.com.
provided for use by the foundation that do not require rent and are available for use throughout the filing period.
errors. They will also go over the returns with the individual taxpayer.
Beginning next month, the AARP Tax Foundation will offer New Mexicans in some communities the chance to get their taxes done for free.
“We have locations across much of the state where we have volunteers operating sites that (offer) free tax preparation,” said Gene Varela, New Mexico coordinator of the AARP Tax Preparation.
Such services will be available by Feb. 1 and last up until about April 18, the deadline for people to get their taxes filed.
Through a contract with the IRS, the Foundation provides the services which allow people of any age or income level to get their taxes done, though its main focus is older individuals on the lower end of the economic spectrum.
Varela said volunteers staff offices in churches, community centers, churches, libraries and other venues that can be
“It varies in communities depending on what is available,” he said regarding where the Foundation sets up its tax preparation sites.
But such services are not available in all communities.
“We have pockets in the state where we just don’t have them and part of it is we rely on volunteers, which means we have to have a group of individuals willing to serve as volunteers to work and develop and open a site,” Varela said.
For example, there are no sites in Roswell this year, but there are in other communities such as Carlsbad and Hobbs.
Volunteers, Varela said, are trained and must pass certain certification tests required by the IRS to handle sensitive taxpayer information and assist people in navigating the tax code.
At least two volunteers will look over each tax return to minimize the risk of
However, because the work is not done by professionals in many cases, the types of returns they can prepare and process are limited.
“We do simpler returns and try to do as many as we can,” Varela said.
So services to complete returns on things such as rental properties, carry-over losses and many other types of losses are not available at most sites. Due to their more complicated nature and because New Mexico is a common law state, volunteers are not trained in doing returns of married couples who file separately.
“We don’t get into, you know, (those) that require much more detailed knowledge of tax law and procedures,” he said.
People interested in accessing these services, Varela said, should bring the Social Security card for all taxpayers, as well as any dependent they wish to claim.
Other documentation that is needed
includes the taxpayer’s W2 forms, 1099Rs, proof of retirement income and property taxes. Documentation of nontaxable income such as Social Security Disability Income and veterans benefits should also be brought.
Varela said people should wait until they have all documentation from income sources together before they go to get their taxes done.
People in most cases must schedule an appointment ahead of time.
“Sometimes they can take walk-ins, but that is not guaranteed,” Varela said.
Appointments can be made by either going to a site or by contacting them through the AARP Tax Foundation website. A listing of sites, as well as their contact information and hours of operation can be found at AARP.org.
Breaking news reporter Alex Ross can be contacted at 575-626-7710 ext. 301 or breakingnews@rdrnews.com.
Prices on the majority of goods and services have increased significantly over the last year-plus. Financial analysts report that inflation has reached heights that haven’t been seen in 41 years. According to the United States Department of Labor, the consumer price index, which measures changes in how much Americans pay for good and services, rose 0.4 percent in September.
As prices soared, families’ budgets were being pushed. What can people do in the face of rising costs on items they need, including those who may be on fixed incomes? These suggestions may help.
Frequently review your budget. Keep track of how much items cost right now. Document all spending by writing down a list of weekly expenses or utilizing any number of free budgeting apps available. Tracking what is going out may make it easier to cut costs on less essential items, such as streaming services or gym memberships.
Contact service providers. You may be able to negotiate better deals with a service provider, such as a mobile phone company or a cable television provider, if they learn you are considering leaving. If they can’t work out a deal, go with the less expensive provider. You can always switch back at the end of the term if you desire.
Stop automatic payments. Having subscriptions and other bills automatically deducted from your checking account is convenient, but those
rising costs may be overlooked. By viewing your bill and paying it each month, you can see where costs have increased and where you might need to rethink services.
Carpool to work or school. Reduce expenditures on gasoline by sharing the costs with another person. Determine if public transportation is more cost-effective than driving to work or school each day.
Consider alternative retailers. Brand loyalty to one supermarket or a particular retailer is quickly becoming a thing of the past. Nowadays it is wise to comparison shop across various stores to figure out where you’re getting the best deal. Venture into stores you may not have considered previously. Divide your shopping list by store category, visiting several for different items if it leads to big savings.
Unplug, literally and figuratively. Cut down on energy costs by unplugging items when not in use. Reduce dependence on devices to further stem costs on electricity and gas-powered appliances.
Prices continue to rise and consumers can explore various ways to stick to their spending budgets.
Financial trends come and go, and it appears as though one approach to finance that industry professionals have long touted is having a moment. According to Debt.com, 86 percent of the more than 1,000 respondents who participated in the site’s annual budgeting survey admitted they budget their spending. That marks a roughly 16 percent increase since 2019.
If budgeting is getting a star turn in individual financial planning, it’s well deserved. Budgeting can help people save money and achieve an assortment of financial goals, including paying down debt, financing tuition and planning a dream vacation.
Each person’s budget will be different, but that doesn’t mean people need to take wholly unique approaches to building a budget. In fact, a conventional approach to budget-building can help people from all walks of life.
Determine your net income. The Bank of America notes that net income, also known as “take-home pay,” is the foundation of a budget. In the era of direct deposit, it can be easy for anyone to forget how much money they’re taking in each month. Salaried workers can determine their net income pretty quickly and easily, while workers
who are paid by the hour and freelancers may need to do a little extra work and serve as their own bookkeepers as they try to calculate their net incomes.
Monitor your spending. Spending habits fluctuate, but some patterns will likely develop over time, and identifying these patterns is vital to building a budget. Individuals needn’t wait to track their spending. Log into your
bank account and see how you spent money each month over the last six months to a year. This can give you an accurate idea of where your money went after it came in. Monthly utility bills may be constants, but those bills tend to fluctuate depending on the season, so a closer examination can yield what the average cost is. Budgets may need to be tweaked during months when utility bills peak.
Don’t discount the importance of things you want. It’s important when building a budget that money is left for more than just bills. Things you want to do like dine out, travel or additional expenses like entertainment should be built into your budget so you can still enjoy yourself and your budget is not blown up when opportunities to have fun inevitably arise.
Track and tweak. Progress can be tracked and the budget can be tweaked if you’re still having trouble saving or your efforts to save are causing issues. Tracking progress allows you to see what is and isn’t working, while tweaking affords room to compromise if the budget is proving too restrictive or not allowing you to meet your goals.
A conventional approach to budgeting can help people achieve their financial goals and feel better about their futures.
because manufacturers don’t have to offset the cost of advertising. Many generic brands are made in the same facilities that produce name brand items.
check out and then do a curbside pickup.
Consumers might not think it, but eggs are an expensive commodity.
As of August 2022, the U.S. Bureau of Labor Statistics reported the average price of a dozen Grade A, large eggs was $3.12.
Eggs are just one example of foods that have become significantly more costly over the last year or more. Flour, butter/ margarine and dairy products also have become more expensive. According to CNBC, food prepared at home now costs
10 percent more than it did a year ago.
Comparatively speaking, restaurant prices have risen by 6.9 percent, making it more affordable for some people to eat out than prepare meals at home.
Despite rising food costs, it is possible to save money by cooking at home.
Switching to generic brands can immediately bring about savings over “premium” counterparts. Generics cost less
Take a few moments to jot down meal ideas for the week. This can streamline the process of buying meals and help a person use fewer ingredients. Plus, meal plans can be based around which items are on sale. One can meal plan from scratch, or utilize a meal plan from a website that helps utilize all ingredients in various ways, such as turning leftover meatloaf from one night into sloppy Joes on another.
When meal planning, check out the pantry first to see what’s on hand, and then mark down the items needed. Buy only what is listed, resisting the urge to make impulse purchases. For those who can’t avoid throwing a few extra items in the wagon, utilize stores’ shop from home services, where it’s possible to keep track of what’s being spent in real time. Simply
When comparing prices, be sure to check out the net item, net pound or net ounce price. This enables shoppers to see if a sale is really a value, including whether it’s best to buy pre-packaged products or individual items.
Make the bulk of meals with less expensive ingredients, such as beans, whole grains and vegetables. Chicken drumsticks or thighs are generally cheaper than steaks or even chicken breasts and cutlets.
Opt for water at home rather than bottled, if possible. Purchase iced tea powder or tea bags and whip up brews. Water with lemon juice can replace lemonade.
These are just a few ways to save money on groceries as prices continue to rise.
Much like the cost of a loaf of bread or a carton of eggs now costs consumers considerably more than it did a couple of years ago, the price to heat and cool a home has risen considerably. Various factors, from climate-related events to supply chain issues to the Russian invasion of Ukraine, have been cited as contributors to the rise in utility costs, which is not just a North American problem.
Following pandemic-induced lows in 2020, natural gas prices have risen consistently, even during off-peak months, over the last year-plus. The cost of natural gas that’s delivered through pipes was up 24 percent in February from the year prior. Electricity has gone up as well.
According to Choose Energy, an energy reporting resource, electricity rates have risen across the 50 states in 2022 by anywhere from 1.7 percent over 2021 (Alaska) to 46.1 percent (Maine). The national average increase is 11.3 percent. CBS News reported in 2019 that Americans are paying up to 30 percent more on water and wastewater bills in less than a decade. Water and sewer bills are rising faster than inflation rates, having increased for an eighth consecutive year in a study of the country’s 50 largest metropolitan regions. People concerned with the rising costs of utilities may have to be creative. Running appliances during offpeak hours; turning off lights and unplugging devices when not in use; investigating solar power; and investing in water-saving faucets, shower heads and toilets can help individuals curtail their energy consumption.
Strategic use of appliances in a home can help consumers reduce their energy bills by a significant amount.
note that after 9 p.m. and before 9 a.m. are generally the off-peak hours in most areas.
Arapid rise in the cost of living will undoubtedly prove to be one of the major stories of 2022. According to the U.S. Bureau of Labor Statistics, energy prices rose by 41.6 percent in the 12-month period that ended in June 2022, marking the highest 12-month increase since April 1980.
The significant spike in energy costs is somewhat misleading, as the BLS considers motor fuel prices, which rose more than 60 percent in the 12month period ending in June 2022, part of the energy category.
However, during that same period, electricity prices rose by nearly 14 percent while natural gas prices increased by 38 percent. Both of those increases were more significant than the more publicized rise in food prices, which rose by right around 10 percent.
Families need to eat and many professionals now must return to inperson work after years of pandemicrelated remote working, which means they must confront higher fuel costs. That leaves little room to save money in those areas. However, there are ways for families to reduce home energy costs without adversely affecting their quality of life.
Run appliances during off-peak hours. According to the United States Department of Energy and the U.S. Environmental Protection Agency, the best time to use appliances in a home is when overall electricity use is low. Though this time changes depending on the season and can vary based on geography, the DOE and the EPA both
Strategically use your shades and blinds. The energy providers at ConEd estimate that about 40 percent of unwanted heat comes through windows. Strategic use of curtains, shades and blinds can keep heat out on hot days, thus allowing homeowners to turn the thermostat up on their air conditioning units in summer. Opening curtains, blinds and shades on winter mornings and afternoons will allow more sunlight in, allowing homeowners to control heating costs more effectively.
Reorganize your refrigerator. There are plenty of contradictory strategies regarding how best to store foods in a refrigerator so the unit consumes as little energy as possible while still keeping foods fresh and chilled. But various energy providers, including ConEd, recommend that consumers avoid packing a fridge too tightly. By allowing cold air to circulate within the refrigerator, the refrigerator won’t need to work as hard, and thus consume as much energy, to keep foods cool. It’s important to note that the opposite should govern how the freezer is packed. Packing frozen items tightly in the freezer will help the refrigerator work a little less hard.
Turn off the lights. Estimates from the U.S. Energy Information Administration indicate that electricity for lighting accounts for around 10 percent of electricity consumption in homes. A concerted effort to turn off lights in rooms that aren’t being used can help consumers save money.
Rising utility bills are compelling millions of people to seek ways to trim their energy consumption. Thankfully, there are many ways to do that without upsetting daily routines.
Most U.S. workers spend 15 to 25 minutes of their workday thinking about their finances, according to a September 2022 survey commissioned by the National Association of Personal Financial Advisors (NAPFA), with 63% indicating that they are somewhat or extremely stressed about their financial situations.
The number of respondents feeling somewhat or slightly stressed was greater than those feeling only slightly stressed or no stress regardless of categories, including gender or gender identification, type of career or work status (such as “white collar” or service industry) or generational group, with Generation Z, 18 to 24-yearolds) to Baby Boomers (57 to 65-year-olds) participating as respondents.
The online survey of 2,005 working adults in the United States by Atomik Research occurred Sept. 16-28, with the research agency indicating that responses were judged to have error margins of minus or positive two points.
The groups with the highest number of respondents feeling “no stress at all” about their finances, were Baby Boom -
ers (17%), white-collar employees (15%) and men (15%). Groups with the highest number of respondents feeling extremely stressed were millennials, or 25 to 40-year-olds, (35%); service industry employees (30%); and women (28%).
Overall about 63% of survey participants felt that financial stress caused them to have lower work productivity. For Generation Z and Millennials, the rates were especially high, with 71% and 70%, respectively, saying they agreed or strongly agreed with that statement.
The association conducted the survey to highlight some of the ways people can improve their financial wellness, which the group thinks can be done best by seeking the help of a professional financial planner.
“We hope that these results provide insight into the importance of expanding one’s financial planning knowledge, taking steps to improve financial wellness and understanding the significance of the quality of financial benefits that employers offer, which can all be addressed through the expert guidance of a financial planner,” the association stated.
One insight into why so many might delay retirement planning, for example,
is that 69% of respondents indicated that they somewhat or strongly agree that they need to pay off all debt before they start saving for retirement. Strongly agreeing with that idea were 35.5% of all respondents. And 52% strongly or somewhat agreed with the statement that everything they know about retirement planning comes from employer-sponsored financial benefit programs.
That U.S. workers understand that lack of financial and retirement planning is a significant issue for many was seen in the survey responses to a question asking how many personally knew of people delaying retirement because they don’t have enough savings. Overall about 64% of respondents did, with most respondents in all categories saying that was the case.
Stephen Fletcher of Blue Sky Wealth Advisors LLC said in a recorded interview posted on the NAPFA website that the current need for a comfortable retirement is now “several million dollars,” no longer the $1 million to $2 million that many have for decades considered adequate.
He said that millennials and others need to start now to use their earnings for retirement savings or investments and that taking the first step to seek advice or
make a plan is the best option.
Other findings of the recent NAFPA survey include that 66 percent would like to see employers offer more financial wellness programs, including personal financial advising, while 62.5% said they would consider an employer that offers student-debt solutions a more attractive job option.
NAFPA recommends using a fee-only financial advisor for planning, but other options do exist, including some planning and financial apps. For those wanting professional advice but feeling as if they cannot afford it, the nonprofit group Advisers Give Back (advisersgiveback.org) offers free financial counseling from professionals, although donations are encouraged. Other programs for pro-bono professional assistance exist for disabled veterans and their families (Building Homes for Heroes) and women (savvyladies.org), as well as other categories of workers.
Young adults are tied to their digital devices. Why not make them work for you? Free cash back apps give you money back for various purchases. Ibotta and Dosh are just two cashback apps available. Some can be linked directly to a credit or debit card to have passive income deposited directly. With others, you can cash out as a direct deposit or via a payment app like PayPal.
Make it a point to put away $1 for every $3 earned into a savings account, advises U.S. News & World Report. That is a good measure for establishing a rainy day fund. If you don’t trust yourself to transfer the money, have a set amount automatically deposited from your paycheck into a designated savings account.
Young adults should establish healthy spending habits as soon as possible.
When a person is young, saving money may be the furthest thing from his or her mind. After all, this may be a time to enroll in college or trade school, make a first big purchase, such as a car, or even get married. Thinking about establishing a solid financial footing for the future can take a back seat when life is filled with so many significant events.
But it’s never too early to start saving — even when saving seems to be an impossible task. Young adults should keep saving in mind and look to various strategies that can set them up for longterm financial security.
It’s easier to save when saving is attached to specific goals. While some may aspire to retire early, establish an
emergency fund or to purchase a home, others may want to save for an overseas vacation. Motivation to save can make it that much easier to do so.
Saving money on smaller purchases will add up over time, but to really build a robust savings, figure out your biggest expenditures and how you can cut back to pad your savings. The Logic of Money reports that the average American spends more than 60 percent of their income on housing and transportation. Figuring out how to cut costs in these categories can be a great way to save.
The “buy now, pay later” option is an attractive trap to fall into. Using credit cards often is a safer way to pay merchants, because you’re risking others’ money rather than your own with a debit card. However, using credit can make it challenging to visualize what you’re actually spending. Do not purchase more than you can pay off within each billing cycle. Set account alerts on your phone to let you know when you’ve hit your budgeted credit card spending limit. Resist the urge to open and use too many cards.
Young adults can begin saving early with some conventional and highly effective strategies.
The importance of investing is undeniable. That value was especially apparent throughout 2022, when inflation took center stage. As the cost of living rises, investors can more capably handle that spike because they’ve been growing their money through various investment vehicles all along. With so much to gain from successful investing, novices may benefit from a rundown of common investment terms.
401(k): A popular way to save for retirement, a 401(k) is an employer-sponsored retirement plan. Individuals with a 401(k) make pre-tax contributions during each pay period and some employers match these contributions up to a certain percentage. Money in a 401(k) can be withdrawn at any time, but there is a penalty on withdrawals made prior to the account holder reaching 591⁄2 years of age.
Bear market: A bear market is a market in which stock prices sharply decline over a prolonged period of time. Bear markets may be inspired by an array of factors, including rising unemployment.
Bonds: Bonds are a low-risk investment that attract novices who are not yet certain of their risk tolerance. Bonds are loans to governments and even corporations that pay interest to the individuals who invest in them.
Bull market: The opposite of a bear market, a bull market refers to a market in which stock prices are rising.
Diversification: Diversification is a savvy investment strategy in which investors spread out their investments so their portfolio is as diverse as possible. When diversifying, investors may invest in stocks, bonds, IRAs, a 401(k), and other vehicles.
Dividend: A dividend is a payment
made to a shareholder in a company.
Individual retirement account (IRA): An IRA is a retirement account individuals open on their own. There are various types of IRAs, and contributions to these accounts are post-tax.
Market index: The Dow Jones Industrial Average (DJIA) is perhaps the most recognizable market index, though it’s not the only one. A market index such as the DJIA tracks the financial market by analyzing data from various companies.
Mutual funds: Mutual funds are a popular way to invest. According to the investment experts at J.P. Morgan Asset Management, with a mutual fund, money is raised by an investment company and is then invested in a portfolio that includes stocks, bonds, options, commodities, or money market securities.
Share : The online financial resource Mint notes that a share is a unit of ownership in a company or in an asset. Shareholders are eligible for benefits, including payouts, when a company makes money.
Stock: Stocks are long-term investments that represent an ownership stake in a company. Most investors invest in common stocks, which are not subject to the same conditions as preferred stocks. Preferred stocks tend to be less volatile than common stocks, though that security also makes them less profitable when the stock performs well.
Knowledge of these basic investment terms can serve as a good foundation for novices who want to begin investing. As investors become more comfortable, they can expand their knowledge even further.
Arecent report from the Center on Education and the Workforce at Georgetown University revealed just how valuable a college degree continues to be. As tuition costs at many colleges and universities rise and families wonder if investing in a college degree is as wise as it once was, the CEW report can reassure parents and their children that a college degree remains a valuable asset that pays significant financial dividends over the long haul.
According to the CEW report, adults with a bachelor’s degree earn an average of $2.8 million during their careers. By contrast, adults with a high school diploma earn an average of $1.6 million over the course of their careers, while those without a diploma earn $1.2 million in their lifetimes.
One key consideration for individuals concerns when education may not provide the expected financial return. Though people pursue advanced degrees for a variety of reasons, including the potential to earn more money over the course of their careers, the CEW study found that the average person with a master’s degree earns $3.2 million in their careers, or just $400,000 more
than someone with a bachelor’s degree. Though $400,000 is a significant sum of money, given the cost to obtain a master’s degree and the work required to earn it, some individuals, particularly those who would pursue such a degree solely to improve their earning potential, may not deem the investment worth their time or money. That’s a consideration for people given the average cost of a master’s degree, which the Education Data Initiative reports is slightly more than $66,000.
Field of study is another consideration for individuals curious about the return to expect when investing in education. The CEW report found that the median career earnings among individuals with a bachelor’s degree in architecture and engineering is $3.8 million, while individuals with a bachelor’s in education earn slightly more than half that amount ($2 million).
As the cost of higher education continues to rise, parents and students about to enter college should know that obtaining a college degree remains a worthy pathway to earning more money over the course of one’s life.
Owning a home is a dream shared by millions of people. Investing in property that can be owned within 15 to 30 years of closing on the home makes more financial sense to many than continuing to rent and having little to show for it over time.
The first step to take when planning to enter the real estate market is to ensure that your finances are in order. Various factors will influence individuals’ ability to secure a mortgage, and these are some ways to make yourself more attractive to prospective lenders.
Lenders will check your credit report
before deciding if you are a risk or a safe bet for a mortgage. So it makes sense to check your credit report prior to speaking with a lender. The Federal Trade Commission says everyone can get one free credit report a year from each of the three credit reporting bureaus. If you split it up, you can get a credit report every four months so you are aware of anything that may adversely affect your ability to get a mortgage loan. A credit (FICO) score that’s too low may disqualify you from a mortgage. Each lender sets its own thresholds when they price and approve loans, but the higher your credit score, the better.
One way to improve your status in
the eyes of lenders is to pay down credit card balances to reduce your credit utilization ratio. A high utilization occurs when there is a high balance in relation to the credit limit, says Business Insider. Also, it may be wise to avoid any credit inquiries through new credit card applications for several months before applying for a loan, as these inquiries can affect your score.
Be realistic about what you can afford. Do your homework and determine your target interest rate and monthly payment as well as what down payment you can afford. It will help you research potential lenders and provide an idea of what may be offered to you.
Paying bills promptly not only helps you avoid late fees, but also positively affects your credit. The financial resource The Mortgage Reports urges diligence when paying rent, as late rent payments can bar you from getting a mortgage. Lenders look at rent history as the biggest indicator of whether you’ll make mortgage payments on time.
These are some of the ways to make a
prospective home buyer look better in the eyes of mortgage lenders. Individuals can speak with financial professionals about what else they can do to improve the possibility of securing mortgages at the best rates possible.
Real estate remains an especially lucrative investment vehicle. According to the S&P 500 Index, the median return on investment in the United States property market is 8.6 percent. That’s an important consideration for investors who are considering adding income properties to their portfolios. Though the costs associated with income properties can be substantial, the potential rate of return on those properties is significant. Individuals considering an income property investment are urged to speak with a financial advisor, who can shed light on various factors that must be examined prior to purchasing a property.
For example, individuals counting on rental property income should familiarize themselves with how that income is taxed before investing.
Individuals looking to grow their money have many options at their disposal. For example, real estate is often cited as a wise investment, as the value of property has historically increased by a significant margin over the course of a lifetime, providing a substantial return all the while fulfilling the basic need for housing that everyone has. But buying property is not the only potentially lucrative long-term investment strategy.
A small percentage of investors may have the skill, savvy and iron stomach to excel with short-term investments. But most people feel more comfortable with less risky, long-term investments. For such individuals, one strategy worth considering is passive investing.
Passive investing utilizes a buyand-hold approach to gradually build wealth. Short-term fluctuations in stock prices do not affect passive investors, as one of the principles of passive investing is that markets will post positive results over time. So passive investors do not react with alarm when prices temporarily drop, even if they drop by a considerable margin.
Index funds are one of the most recognizable forms of passive investing. The investment experts at Vanguard, the company that first started offering index funds, note that an index fund contains a preselected collection of hundreds or even thousands of stocks or bonds or a combination of both. The theory behind this is that, even if one stock or bond is performing poorly, another within the portfolio is doing well, thus minimizing losses and saving investors the time and effort of tracking, as well as buying and
selling, individual stocks or bonds.
Diversification and passive investing
Conventional investment wisdom has long touted the benefits of diversification when investing. When investors put all of their eggs in one basket, they could then lose all of their investments if the value of that investment goes south. As previously noted, index funds include a collection of stocks, bonds or both, thus providing investors with sufficient diversification that can serve as something akin to a safety net when the values of certain stocks or bonds within the portfolio dip. Though no investment strategy can claim it is free of risk, passive investing through a vehicle such as an index fund can be a low-risk way to grow wealth over time.
The investment resource Investopedia cites lack of flexibility and smaller potential returns as two significant drawbacks of passive investing. Passive investment funds are limited to a predetermined set of investments that don’t often vary, if at all. That might be not sit well with individuals who prefer a more active and flexible approach to investing.
Big returns also are less likely with passive investment funds, as these funds are designed to track the market, not beat it by a wide margin. Individuals with long-term investment strategies likely won’t be turned off by this, though those looking for bigger rewards (which, notably, carry bigger risk) may be underwhelmed by the returns on= passive funds.
Passive investing is a sound investment strategy for individuals who want to grow their wealth over the long haul.
Though it’s best to avoid making assumptions about why day trading appeals to so many people, the chance to make a substantial amount of money in such a short period of time undoubtedly contributes to its appeal. However, the SEC notes that the risks associated with day trading are substantially higher than long-term investment strategies. Much can happen over the course of a single market day, and that can leave day traders exposed to heavy losses.
The thrilling nature of day trading makes it appealing to investors at all levels of investing, whether it’s novices or seasoned investment professionals. However, the SEC notes that professional day traders typically are highly experienced individuals with extensive knowledge of markets, products and strategies. Such individuals are also well-versed in risk.
Investing is a great way for people to secure their financial futures and ensure they have enough money to live full and happy lives, including during retirement. There’s no shortage of ways for individuals to invest, but one lesser known investment strategy could pique the interest of individuals who enjoy the thrill of investing.
Day trading is more exciting, and potentially nerve-wracking, than more traditional investment strategies that focus on long-term gains. According to the U.S. Securities and Exchange Commission, day trading involves actively buying and selling securities within the same day. That could excite individuals who may find it thrilling to be such an active investor, but it’s best that anyone considering day trading first understand why some people do it and the risk it involves.
It’s also important to note that the very name of day trading can be misleading. Though day trading is defined as buying and selling securities within a single day, the knowledge necessary to research markets, analyze products and monitor the news is not acquired overnight. Despite its perception as a great way to get rich quick, day trading actually involves considerable effort on the part of traders before the market opens. Thorough research is a hallmark of successful investing, and that applies to day trading as well.
The temptation to engage in day trading can be significant. However, the SEC urges individuals with little investment experience to embrace a more longterm investment strategy as they look to secure their financial futures.
Traders use various tactics to analyze markets. Candlesticks are a chart that help traders predict market movements. Depending on the price chart, a candlestick can show an asset’s price movement over a set amount of time, whether that’s a minute or a day. According to Investopedia, the candlestick originated from 18th century Japanese rice merchants and traders before becoming popular in the United States and elsewhere. The candlestick will display the high, low, opening, and closing prices of the security. It resembles a rectangle or square “body” with lines above and below the body called “shadows.” The top or bottom of the body refers to the opening and closing prices. The upper shadow reflects the high price, and the lower shadow the low price. If the stock closed lower, the body of the candlestick will be red or black. If the stock closed higher, it will be green or white. Analysts use various candlestick indicators and patterns to predict pricing actions. According to Wall Street Mojo, there are around 35 to 45 candlestick patterns. However, only 25 are actively used by traders.
People need to be aware of the potential costs of medical care in retirement and plan ahead so they can meet those obligations if and when the need arises.
Individuals need to be proactive and plan for medical expenses in retirement. After housing, healthcare is the most significant expense for retirees. Health spending accounts and long-term health insurance are two options for people looking for ways to cover their health care costs in retirement.
When individuals retire, they not only walk away from work, but also relinquish thier steady paychecks. For many, retirement can be a potentially risky financial endeavor. Saving for retirement is a great way to mitigate such risk, but unforeseen expenses, such as medical bills, can quickly derail a retirement plan.
Many people have a greater need for medical care as they get older. The Fidelity Investments Retiree Health Care Cost Estimate indicates health care can be one of the biggest expenses a person will take on in retirement. The average 65-year-old couple who retired in 2021 in the United States can expect to spend $300,000 on health care and medical expenses during retirement. The financial resource The Street says other studies suggest it’s wise for retirees to plan to spend between $3,000 and $7,700 per year on health care.
Financial advisors warn that relying exclusively on Medicare to cover health care costs isn’t going to cut it. Benefits under the Medicare program often aren’t enough to pay for all of a retiree’s needs. There may be gaps for chronic treatment of illnesses and specialty treatment for certain conditions. Long-term care services also typically are not covered. It’s important to note that Medicare will cover general doctor’s visits, but it does not cover the cost of deductibles or copays.
As of 2022, people can contribute up to $3,650 for an individual or $7,300 for a family per year into a health savings account. After age 55, an additional $1,000 per year is allowed. Money in an HSA grows tax-free and it can be spent tax-free on qualified medical expenses. Once a person has Medicare, he or she no longer is eligible to contribute to the HSA, but can use money already in the account to pay for qualified medical expenses that are not covered by Medicare.
Long-term care insurance is another option, and many people invest in such an account during their 50s or 60s. The earlier an individual enrolls in a program, the lower the premium. According to Personal Capital, most policies will not start until a patient has needed assistance for 90 days and other qualifying guidelines are met. Generally speaking, long-term care insurance also is use-or-lose. If there’s never a need to use the insurance, it will not be refunded. This is a risk that certain people are willing to take.
In addition to these options, people may consider gap insurance programs. When putting together a retirement plan, it can be wise to speak with financial advisors who can customize products based on
For example, Standard & Poor’s 500® (S&P 500) reports that individual retirement accounts (IRAs) grew by an average of 10.8 percent between 1971 and 2020.
Individuals need not look very far to be reminded of the importance of planning for retirement. Television ad campaigns touting the need to plan for retirement have been front and center for many years. Banks also heavily promote their retirement planning services to account holders. The emphasis financial firms and banks place on retirement planning underscores just how important it is for individuals from all walks of life to prioritize securing their financial futures.
Ad campaigns can make saving for retirement seem simple, but plenty of people may have questions about how to save for the days when they are no longer working.
It’s never too early to start saving for retirement. Young professionals may not be anywhere close to retirement, but that doesn’t mean they can afford to put off saving for the day when they call it a career. Much of that has to do with inflation. The rate of inflation varies, but it’s fair to assume that your cost of living will rise dramatically between your twenty-third birthday and your seventieth birthday. If you choose to simply save as opposed to investing that money, your money will not grow at a rate necessary to overcome inflation. Though there’s no guarantees with investing, traditional retirement investment vehicles have a proven track record of outpacing inflation. For example, Standard & Poor’s 500® (S&P 500) reports that individual retirement accounts (IRAs) grew by an average of 10.8 percent between 1971 and 2020. Over that same period, the U.S. Bureau of Labor Statistics indicates that the dollar had an average rate of inflation of 3.99 percent.
Various investment vehicles can help people save for retirement. Many people utilize employer-sponsored 401(k) retirement plans. These allow individuals to
deposit money via pre-tax contributions deducted from their paycheck. For young people, enrolling in these plans as soon as they’re eligible can be a great way to begin building their retirement savings, and since many people contribute between 6 and 10 percent of their pre-tax earnings, their take-home pay will not be significantly different once they enroll. IRAs, pension plans, certain life insurance policies, and regular contributions to personal savings accounts are some additional aways to save for retirement.
No two people are the same, so there’s no simple answer to this question. Estimates about how much people will need in retirement range from 60 to 80 percent of their yearly income the year they stopped working full-time. A financial advisor can be a useful ally as people try to calculate how much they will need to save for retirement. However, the simplest answer to this common question is that there’s no such thing as saving too much money for retirement so long as saving does not adversely affect other areas of your life.
No law prohibits people from withdrawing funds from designated retirement accounts before they retire. However, there may be significant financial penalties and tax consequences if you do so. For example, the Internal Revenue Service allows penalty-free withdrawals from a 401(k) after an account holder turns 591⁄2. Withdrawals made before then could be subject to federal and state income tax and a 10 percent penalty of withdrawn funds. Individuals are urged to speak with a financial advisor about withdrawal guidelines and penalties prior to opening a retirement account.
Saving for retirement is vital and it’s never too early to begin investing in your financial future.
