Protecting a nest egg is tough enough. Don’t make the situation far worse. amenic181 / Shutterstock.com
Building and living off a nest egg is tough, but you can make the situation even more difficult if you run afoul of some key laws governing retirement accounts. Make one wrong move, and the long arm of Uncle Sam may soon tap you on the shoulder, demanding a few explanations. Following are penalties to avoid at all costs when contributing to or withdrawing from retirement accounts.
Keep these in mind before you make your decision.
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If it seems like 55 and over communities are popping up all across the U.S., well, it’s because they are. Grand View Research reports that as of 2021, the 55 and over community market size was valued at over $565 billion. And it’s expected to keep growing.
If you’re eligible to live in a 55 and over community, you may be contemplating a move. To be clear, these communities are not assisted living facilities. You generally won’t have access to onsite medical care or assistance with daily living tasks in a 55 and over community. Rather, these communities are meant to cater to homeowners of a certain age who want to enjoy different amenities and minimize the amount of maintenance work they have to do themselves.
In some cases, moving to a 55 and over community will mean saving money on a home purchase and mortgage loan. But that really varies based on location and the specific community you end up looking at.
Meanwhile, there are different benefits to moving to a 55 and over community. But there are also some drawbacks you should know about before making your choice.
Many 55 and over communities are loaded with onsite amenities like tennis courts, swimming pools, and fitness centers. These can be nice perks to have in general. But they can be especially important for early retirees who need to find ways to fill their days in the absence of going to work.
There’s no rule stating that someone aged 55 or older can’t befriend a couple in their mid-30s or early 40s who lives down the block. But realistically, you’re more likely to have more in common with people who are similar in age to you. And so moving to a 55 and over community gives you a chance to meet people and expand your social circle.
You may be responsible for interior maintenance when you move to a 55 and over community. But your exterior maintenance will generally be covered by your community’s homeowners association (HOA). Some people find home upkeep to be physically taxing as they age. Others just don’t want to deal with it. If you move to one of these housing communities, you may find that you don’t have to spend nearly as much time on maintenance.
The typical 55 and over community requires you to join an HOA. And that could mean paying a lot of money each month in the form of dues. If you’re trying to cut back on housing expenses, whether due to being retired or approaching that milestone, you may find that your HOA fees make it harder to manage your finances and meet your personal goals.
Not only do HOAs charge dues, but they also tend to impose rules that have the potential to be rather strict. If you’re moving from a standalone home to a 55 and over community that’s governed by an HOA, you may not be used to having to follow somebody else’s rules, so that could end up being a problem.
In many cases, moving to a 55 and over community will mean being limited to buying a townhouse or condo. Now it’s often the case that homeowners want to downsize once they’re a bit older and their children have grown up and left the nest. But if having more room to spread out is important to you, then you may not be as happy in a 55 and over community.
All told, there are benefits and disadvantages to buying a home in a 55 and over community. Consider all of these carefully before making your choice. And also, talk to any people you know who live in these communities so you can gather their feedback and take it into account.
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It’s a good way to pay off debt, but there may be an even better and faster option available.
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When you have several debts to deal with, it can feel overwhelming. You might not be sure about the best way to divvy up your money among your credit card and loan balances. And you could find yourself wondering just how long it’s going to take until you’re free of debt.
For consumers in this situation, finance guru Dave Ramsey recommends the debt snowball method, which he says is the fastest option. He also recently shared that it takes most people two years to get out of debt with this plan, which is nice to hear if you’re dealing with a large amount of debt.
The debt snowball method is effective. However, despite what Ramsey says, it’s not the fastest option. Before you decide how to pay off your debt, read on to learn about the debt snowball and some alternatives.
The debt snowball is when you prioritize paying off your smallest debt. Here’s exactly how you do it:
Make minimum payments on every debt except the one with the smallest balance.Pay as much as you can on the smallest debt.Once that debt is paid off, repeat the process with the new smallest debt.Keep doing this until all your debts are paid off.
The other popular way to pay off multiple debts is called the debt avalanche. With that method, you focus on your debt with the highest interest rate.
Ramsey’s recommendation is a bit unorthodox, at least from a mathematical standpoint. If you do the math, you’ll find that the debt avalanche will save you more money and also normally speed up your repayment timeline. That’s the advantage of going after high-interest debt first. By paying more toward the debt that’s costing you the most in interest, you save the most money overall, making it the optimal choice for your personal finance.
Ramsey recommends the debt snowball because he believes that debt is a behavioral issue, and what people really need to fix it is motivation. With the debt snowball, you see the plan working when you pay off an account. Each time you do that, it’s a sign of progress, and more incentive to keep going.
This doesn’t mean the debt snowball is better than the debt avalanche. The debt avalanche works, too. For some people, just seeing account balances decrease is motivation enough. But the debt snowball is definitely great for staying motivated. That being said, if you have a good credit score, there’s another option you should consider first.
The best way to pay off multiple debts is debt consolidation. For this method, you start by getting one of the following:
Balance transfer credit card: This type of credit card is designed for paying off debt. Most balance transfer cards offer a 0% intro APR on balance transfers. That means during the intro period, you’re not charged any interest on debt balances you’ve transferred over.Debt consolidation loan: This is a personal loan you use to pay off debt. Personal loans tend to have lower interest rates than credit cards, which means you could save money on interest this way. You’ll also have a fixed payment amount and timeline to pay off your loan.
Then, you use that new account you’ve opened to pay off all your existing debts. If you got a balance transfer card, you’d transfer all your balances to it. If you got a loan, you’d use those funds to pay off your debt accounts.
There are two big advantages of debt consolidation over any other debt repayment plan:
You’ll only need to make one monthly payment after consolidating your debt.You’ll most likely save money on interest.
The drawback of debt consolidation is that it normally takes a high credit score to qualify for balance transfer cards and low-interest loans. A FICO® Score of about 670 or higher is recommended.
Ramsey doesn’t recommend debt consolidation, saying that it’s just a way of shuffling problems around, not fixing them. Although it’s true you still need to do the work to pay off your debt, consolidating it can help you get rid of it more efficiently. Just make sure you don’t start spending more or paying less toward your debt after consolidating it. The key is to continue paying as much as you can to get debt-free as fast as possible.
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It’s definitely advice worth following.
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Saving for retirement is something that should be a key focus of yours. Without a solid nest egg, you might struggle to cover your living expenses once you stop working.
Another thing it pays to focus on? Eliminating credit card debt. But if you ask financial guru Ramit Sethi, it could pay to knock out that debt before pumping money into your retirement savings.
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The problem with credit card debt is that the longer you carry it, the more money it costs you. That’s why Sethi says that you may want to knock out your credit card balances before focusing on funding your nest egg.
Since a high interest rate on your credit cards can tack on hundreds, if not thousands, of dollars to your existing debt, it’s almost always worth it to put extra money toward paying off that debt before investing, Sethi told Business Insider. And so while putting money to work in your retirement plan is a smart move, remember that the interest rate charged by your credit cards might well exceed the return you get in your IRA account or 401(k). That’s why it pays to put paying off debt first.
Sethi has a couple of good suggestions for paying off credit card debt. One is the snowball method, which has you paying off your balances in order of smallest to largest. The second is the avalanche method, which has you paying off your balances in order of highest interest rate to lowest.
You can feel free to choose whichever method works best for you. The debt avalanche method could end up saving you money on interest. But the debt snowball method might be more rewarding, so to speak, because it might lead to results you can see more quickly (for example, making an entire $500 credit card balance disappear as you move on to tackle your remaining balances). It’s important to manage and pay off your debt in a manner that works well for you mentally, which is why so many people have more success with the snowball method — they get to celebrate little wins along the way.
Of course, if you’re going to be paying off debt, you’ll need money to do so. To that end, put together a budget that maps out your essential bills, and make sure you have room for some money to go toward your credit cards.
At the same time, consider picking up a side hustle to boost your income and get your hands on more money for debt payoff purposes. This is an especially important thing to do if your regular paycheck doesn’t leave you with much leftover money — something a lot of people are experiencing these days due to inflation.
It’s a great thing to want to put money away for retirement. But if you have an outstanding credit card balance, it’s generally better to knock that out first, and then move on to focus on beefing up your IRA or 401(k).
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There were more strikes than normal last year, and these were the biggest. Ringo Chiu / Shutterstock.com
Each year, the Bureau of Labor Statistics collects data about unions on strike — and last year there were more than usual. Twenty-three major work stoppages began in the year while others continued from before 2022. In the past two decades, there are usually only 16 such stoppages per year. A major work stoppage involves 1,000 or more workers and lasts at least one shift during the work week. Here’…
Big puppies, big problems.
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There are a lot of things you need as a new pet parent. The right toys, a good dog bed, yummy treats. But perhaps the most important thing to pick up when you have a new dog at home is pet insurance.
Similar to human health insurance, pet insurance helps cover costs when your dog needs medical treatment or has a health emergency. Also, like human health insurance, the cost of pet insurance depends a lot on the individual.
When it comes to insuring dogs, breed is one of the most important factors in determining the cost of pet insurance. In general, a mixed-breed dog will be the most affordable, while purebred dogs are more expensive to insure. Of the breeds, these five tend to be some of the most expensive.
These shaggy working dogs are hefty hounds, standing over 27 inches at the shoulder. Due to their large size, they can have a host of medical issues common to large breeds, such as hip and elbow dysplasia. Bernese Mountain Dogs also have a higher incidence of von Willebrand disease, which makes blood clotting more difficult. This can complicate otherwise simple things like recovery from surgery or even general dental work.
The short, flat face of the Bulldog is easily recognizable. But while iconic, the flat face of a Bulldog can cause a variety of problems. Most common is difficulty breathing, which can also make it hard for the short-snouted pups to cool down efficiently. This makes them susceptible to overheating. Additionally, the characteristic folds in their skin can lead to a variety of skin and coat problems.
As with other large breeds, Dalmatians can be vulnerable to a range of problems, including bloat and dysplasia. Dalmatians are also known to develop hearing problems, especially as they age. Plus, the breed has a tendency to acquire high amounts of uric acid, which can lead to bladder stones, a painful condition that requires surgery to rectify.
Not only are Pit Bulls generally expensive for homeowners insurance, but pet insurance can also be pricey. That’s due to a range of conditions, including the general large-breed issues like hip dysplasia. Pit Bulls are also candidates for degenerative myelopathy (think of it like a canine version of Lou Gehrig’s disease). Spinal nerve degradation leads to muscular atrophy in the rear legs and, ultimately, entire loss of use. Late stages of the condition can include a variety of health problems as well as complete loss of mobility.
Some of the largest dogs on the list, these big dogs can have big health problems. Mastiffs can have pretty much all of the health concerns associated with the first four dogs on our list. They’re also prone to allergies, eye disorders, cancer, epilepsy, and a severe form of bloat called gastric dilatation. (Outside insurance, these behemoths are also expensive to care for; food costs alone can cost a small fortune!)
Although larger dogs tend to come with equally large insurance premiums, don’t assume they’ll be more expensive over their lifetime than their smaller counterparts. Big dogs burn bright — and quickly. That is to say, they tend to have shorter lifespans than small breeds. So, while your monthly premium may be higher, the lifetime cost to insure your large friend may even out.
What’s more, there are ways to reduce your pet insurance costs (besides getting a smaller dog). For example, you may save a few bucks by paying your pet’s insurance premium annually instead of monthly. Additionally, pet owners with more than one animal to insure can look for multi-pet discounts.
Regardless of your pet insurance policy, however, be sure you have a dedicated emergency fund for your pet. Most pet insurance policies work on a reimbursement program. So, you’ll need to pay out of pocket for medical services, then submit a claim to get reimbursed after the fact. Ideally, set aside a couple grand in a high-yield savings account to cover any unexpected pet costs.
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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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