Saturday, June 25, 2022
HomeBusinessPersonal finance3 Smart Money Moves for New Employees | Smart Change: Personal...

3 Smart Money Moves for New Employees | Smart Change: Personal Finance

(Stefon Walters)

If you’ve recently landed a job – your first post-grad job or a new job – one of the things you should start doing is fulfilling your financial plan.

Your goal should be to secure your future, and there are some things you can do now to make sure that happens. Here are three smart money moves for those recently employed.

Image source: Getty Images

1. Let your employer base your 401(k) match

The 401(k) plan is one of the greatest tools for saving and investing for retirement. Apart from making a pre-tax contribution and lowering your taxable income, one of the biggest benefits you can have is, employer match. Oftentimes, employers will match up to a certain percentage of your contributions. Whatever your employer is willing to match, your contribution should be minimal.

People also read…

If your employer matches 3%, your minimum minimum must be 3%; if it is 5%, it must be a minimum of 5%; Whatever the case, you should never contribute less than your employer is willing to match. Otherwise, you’re essentially leaving free money on the table because an employer match is a guaranteed way to get 100% returns no matter the amount.

If you’re making $100,000 annually and your employer is covering 5% of your contributions, that’s an extra $5,000 a year if you contribute at least that much. this 401(k) contribution limit $20,500 ($27,000 if you’re 50 or older), so it’s unlikely you’ll be able to meet that amount unless you’re close to the top 1% of winners, but an employer match can generate a lot of money in your account.

2. Use a Roth IRA if eligible

One of the main disadvantages of a product Roth IRA is the income limit for the right to contribute. If you’re single and earning less than $129,000, you can contribute the full $6,000 ($7,000 if you’re 50 or older). If you are married and jointly applying, you can contribute the full amount if your income is less than $204,000. If your income is $144,000 or higher ($214,000 or higher if you are married and applying together), you are not eligible to contribute at all.

It cannot be overstated how beneficial it is to have your investments exempt from compound tax. If you put in $6,000 S&P 500 A Roth IRA fund with a 10% annual return for 30 years would have you over $104,000 without contributing another cent. If this was in a regular brokerage account, you would owe taxes on this amount when you sell your stocks. But because it’s in a Roth IRA, the full amount will be yours. Take advantage of the benefits while you can.

3. Set up automatic transfers

You can never go wrong doing things that make your life easier. One of the ways to lighten your load when investing is to take some of the work off you. Therefore, it helps to automatically transfer money to your investment account, whether it is a brokerage firm or an IRA.

If you have an automatic transfer setup, this is not only a step up for you, but it also makes it easier for you to get used to living without that money as it doesn’t stay in your bank account for long.

If you can, you should at least aim to maximize allowable IRA contributions. For example, if your plan is to maximize your Roth IRA, you may have set it up to automatically transfer $250 from your paychecks every other week. Or, if you’re paid once a month, you may have set it up to transfer $500 each time. It doesn’t matter how often you do it; What matters is that you are investing and working for your future financial security.

10 stocks we love better than Walmart

Once our award-winning team of analysts has an investment tip, it can pay to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Stock Advisortripled the market*

They just declared that they believed top ten stocks for investors to buy now… and Walmart wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Stock Advisor is returned from 14.02.21

A Motley Fool disclosure policy.

Do NOT follow this link or you will be banned from the site!