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One money move at a time, short enough to read in two minutes. Pick one and act on it today.
For parents, a will is less about money than about people. It’s where you name who would raise your children and who would manage anything they inherit. If anyone depends on you, write a will this month, however little you own.
For most families, life insurance does one job, replacing your income while others depend on it. Term life covers those years for a small fraction of what whole life charges for the same death benefit. Buy a term policy that runs until your kids are grown or the mortgage is paid, and invest what you save.
Selling an investment that’s down in a taxable account turns a paper loss into a tax break. The loss cancels gains you’ve taken, and up to $3,000 a year beyond that comes off your ordinary income. Reinvest in something similar but not substantially identical, and wait 31 days before buying back what you sold.
Claiming Social Security at 70 instead of 62 makes your monthly check about 77% larger if your full retirement age is 67. If you’re healthy and can cover the gap from savings, delay your claim. The larger checks make up for the missed years by about age 80, and they rise with inflation for life.
Required minimum distributions (RMDs) stack on top of Social Security and any pension. The share you must withdraw rises every year, so a big traditional IRA or 401(k) can move you up a tax bracket in your 70s. Use the lower-income years before your first RMD to draw it down at lower rates.
A health savings account lets your money go in untaxed, grow untaxed, and come out untaxed when you spend it on medical care. If your health plan qualifies, fund it every year, invest the balance, and pay small medical bills out of pocket so the account keeps compounding.
A traditional IRA can cut your taxes now and taxes withdrawals later. A Roth taxes the money going in, and qualified withdrawals come out tax-free. Choose the Roth if you expect a higher tax rate in retirement than today, and the traditional IRA if you expect a lower one.
Once you’re self-employed, you owe a 15.3% self-employment tax for Social Security and Medicare in addition to income tax, and no employer withholds it for you. Set aside part of every payment the day it arrives and send it to the IRS each quarter, so April never brings a bill you can’t cover.
Open a second checking account just for bills, and move each paycheck’s share of your fixed costs into it on payday. Send every autopay there and keep your everyday debit card on the other account, so the spending account’s balance tells you exactly what you can spend.
If picking investments is what’s kept you from starting, open a robo-advisor account. You answer a few questions about your goal and timeline, and it builds a diversified portfolio of index funds, then rebalances it for you. Schedule an automatic deposit for the day after payday, and investing happens without another decision.
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