Why You Have to Pay More Social Security Tax if You Run Your Own Business

Should You Break an Old CD Contract to Get a New CD at Today’s High Rates?

If you locked into a certificate of deposit (CD) last year, you may be looking at today’s rates through watery eyes. Not only have CD rates exploded to levels we haven’t seen in decades, the Federal Reserve’s rate hiking campaign may push them even higher. That raises a compelling question for previous CD owners: Should you break a CD contract to lock into today’s jaw-dropping rates? Let’s take a look. Yes, if the interest you would earn is greater than the penalty you would pay Unless you have a no-penalty CD, your CD contract likely has a clause stipulating early withdrawal penalties. Often, the penalty for withdrawing early means forfeiting a portion of the interest you’ve earned, along with the closure of your CD account. In general, the longer your CD term, the more hefty the penalty. And yes, the penalty can exceed the amount of interest you’ve accumulated.That said, if the interest you forfeit is less than the interest to be gained on a new CD contract, it might be worthwhile to break your contract. Let’s look at an example. Let’s say you’ve deposited $5,000 into a 2-year CD with a rate of 2.50% and the penalty for withdrawing early is six months of forfeited interest, which would be $62.50. You’ve earned 13 months of interest, which is about $135.42. If you were to walk away now, you would be left with $72.92 after the penalty is deducted. You weren’t thinking about walking away, until you saw a 5.51% rate on a 12-month CD. At that rate, you would earn $275.50 after 12 months. That seems like a pretty good deal, but is it worth breaking up with your old CD? In this case, it would be worth breaking the old CD contract. If you keep your money in the old CD, you’d be left with $250 in interest after the CD term ended in 11 months. The new CD would earn you about $275, a difference of only $25. But if we add in the $72.92 from the old CD, you’d have $347.92, almost $100 more than if you had kept your old CD.  Do the math for yourself Take a look at your CD contract and figure out if you’ll come out on top by closing a CD and opening a new one at today’s rates. If the difference between the forfeited interest and the interest you would earn is positive, then nine times out of 10 you’ll likely fare well breaking up with your old CD. The best CD rates right now come with short terms, such as 6 months or 1 year. But you might find a compelling rate on a long-term CD, such as: 3 years4 years5 years One thing to consider is that CD rates may or may not have peaked. The Fed is watching the economy carefully and isn’t afraid to raise rates if it thinks it will help it achieve its inflation goals. If the Fed raises rates again, CD rates would likely get a tiny bump. That’s not to suggest you should try to time the CD market and open one when rates hit their peak (whenever that is). But you may have some time to let your current CD accumulate interest — or perhaps even mature — before you close your account and pay the penalty. Either way, closing an old CD for a new one is certainly worth considering, especially if your old CD has a rock-bottom rate (like 1% or lower). Take a peek at today’s top-paying CDs and see if it’s worth breaking your contract for one. 

This Is How Much You Should Have in Savings by 50. How Do You Compare?

You should have five to six times your annual income saved by age 50, according to most financial planners. So, if you earn $75,000 per year, this means you should ideally have $375,000 to $450,000 set aside in savings accounts, retirement accounts, brokerage accounts, and other liquid assets.Of course, like most topics in personal finance, there’s not a perfect rule for everyone. However, this is a good starting point to help you determine whether you’re on track for a financially secure retirement or not. Let’s take a look at why you might need more or less than this guideline, and what you can do if you’ve fallen behind.This isn’t a perfect rule for everyoneAs I mentioned, the “five to six times your income” rule isn’t perfect for every 50-year-old. You might need more or less in savings than the average American for numerous reasons.One major factor is your retirement goals. If you want to retire at age 55, you should probably have more than five times your salary saved before you’re 50, especially if you have ambitious plans to travel after you retire.Other streams of income can also play a big role. For example, if your job has a pension plan, and you’ll get monthly payments equal to a substantial portion of your income after you retire, your savings needs will naturally be lower than someone planning to rely exclusively on retirement savings.If you own many assets other than a savings account, it can also play a role. As a personal example, I own investment properties and have substantial equity in them, so this is a factor when determining how much I’ll need to retire comfortably.What should you do if you haven’t saved enough?The good news is that most people who are turning 50 are still 10-20 years away from retiring, so there’s time to have a big impact.The obvious answer is that if you don’t have enough in savings at 50, it’s time to start prioritizing retirement savings. The best places to set aside money are tax-advantaged retirement accounts such as IRAs, or employer-sponsored retirement plans like 401(k)s, where your money is free to grow and compound on a tax-deferred basis. All retirement accounts have special rules (known as catch-up contributions) that allow account owners 50 and older to set aside more money each year than younger savers.If you’re having a tough time finding enough money to contribute to your savings, it might be a smart idea to take a closer look at your budget and try to identify opportunities to cut expenses. One of my favorite exercises is going through the last couple of bank and credit card statements and highlighting any purchase you didn’t need to make. The point isn’t to shame you for spending money you didn’t need to spend, or even to get you to stop all unnecessary spending, but you might be surprised where you could cut back. As a personal example, a few years ago I did this and couldn’t believe how much my family spent on dining out. I even identified a couple of costly subscriptions I wasn’t using.The bottom line is that you still have time to get back on track by making budgeting, saving, and investing priorities. Seemingly small amounts of additional savings now could make a big difference in your quality of life after you retire.

This Is How Much You Should Have in Savings by 65. How Do You Compare?

When saving for retirement, it can be difficult to know how you compare with others in your age group. There is no hard-and-fast rule for how much is enough, but asking the right questions can help point you in the right direction. So, how much should you have saved by the time you’re 65?How much money is enough?It can be challenging to know whether your savings will last you throughout retirement. Every saver has a unique situation, and some pieces of the puzzle can be very complex. What’s more, the future is frustratingly uncertain — how markets will perform, what tax rates will be, and what unexpected expenses lie in the future are all unknowns that can have a big impact on your retirement.A rule of thumb won’t tell you exactly how much you need to save for retirement, but it can get you in the ballpark. By age 65, most sources recommend having saved between eight and 12 times your annual salary. So, for an earner making $70,000 per year, a good goal would be over $500,000, according to the rule of thumb.You can then adjust the above number based on a handful of factors. If your income sources in retirement, things like Social Security, pensions, and annuities, are greater than your monthly spending, you will likely need to save less. If you or your family have a history of expensive health issues, or above average longevity, it may be wise to save more.Not there? Do thisSaving up over $500,000 is no easy task. Luckily, there are a few ways for those nearing retirement to increase their savings — or do more with less. Let’s focus on two strategies: building wealth and making it go further.There are a few ways Americans can boost their assets in the years before retirement. First, 401(k)s and IRAs allow older Americans to save more each year in the form of catch-up contributions. In 2023, those over the age of 50 can save $7,500 more each year in their 401(k)s, and $1,000 more each year in their IRAs than younger workers. Another option is to delay retirement. Continuing to work for even a few extra years can allow you to continue building your savings, and your Social Security benefits may also increase.It may also be helpful to look at post-retirement expenses, which can whittle away your savings. Reducing monthly expenses, even by a small amount, can compound over many decades spent in retirement. Entering retirement debt-free, if possible, can also help. Even low-rate debt can eat away at retirement balances — and could make you miss out on years of compound growth.What else you should knowEven with a long history of saving and investing wisely, many Americans can’t help but feel uneasy about their retirement. Retirement brings with it many “what-ifs” that can’t be answered with a rule of thumb. If you are uneasy about your financial future, a qualified professional may be able to help.There is no one-size-fits-all when planning for retirement. A qualified fiduciary financial planner can provide an expert opinion and advice unique to your financial situation, and can answer all of your questions along the way. You are the foremost expert on your own personal finances — but seeking a second opinion can go a long way toward achieving peace of mind.How much do you need to have saved by age 65? The answer depends on your personal circumstances, and on factors like longevity, post-retirement income sources, tax rates, and more. Beyond a savings estimate, seeking the advice of a qualified professional can help inspire confidence in your ability to successfully retire.

Keeping an Extra $10K in Your Checking Account? Here’s Where You Should Move It

That’s $1,411.66 earned in three years, assuming the APY doesn’t change. It’s worth mentioning that APYs can change over time, so your APY likely won’t stay the same rate forever. It pays to transfer your emergency fund stash to a high-yield savings account. This one money move can be a massive win for your finances Do you have an extra $10,000 in your checking account? You may want to open a high-yield savings account. You could lose hundreds or even thousands of dollars in interest by keeping your extra money in the wrong bank account. Don’t miss out on free money. 

SNAP Benefits Will Increase in 2024. Here’s How Much a Family of 4 Will Receive

Are SNAP benefits enough?A monthly payment of $973 for a household of four equates to around $8 per person per day. While SNAP benefits aren’t designed to cover everything, it isn’t easy to feed a family on around $2.66 per person per meal. Indeed, research from the Urban Institute showed that the maximum benefits often don’t cover a family’s food costs. “Amid inflation, SNAP benefits did not cover the cost of a meal in 99 percent of counties in 2022,” said the report.The new benefit amount — a monthly increase of $34 for a household of four — is roughly in line with cost-of-living increases measured by the Bureau of Labor Statistics (BLS). Its latest Consumer Price Index figures show that the cost of all items in June, 2023 was up 3% over the year before. However, inflation does not impact all aspects of life equally.The BLS data also shows that food at home increased by 5.7% year over year. The new SNAP benefits do not match this. Hypothetically, a 5.7% increase in benefits for a family of four would mean a new monthly payment of $992, rather than the planned $973.In addition, this year brought the end of the pandemic-era emergency food benefits throughout the country. According to CBPP calculations, this meant the average person received about $90 a month less in SNAP benefits. Even factoring in the increased SNAP benefit amount, many households have seen a significant drop in their food benefit amount, and the revised 2024 payments will do little to close this gap.How to make your SNAP benefits go furtherIt can take time and energy to provide healthy food for your family on a strict budget. The challenge is that in a busy household, time and energy are also limited resources. Even so, if you can carve out some time to plan your grocery-shopping trip, it can make a big difference.Here are some ways you might stretch your SNAP benefits a little:Use cash back apps and coupons: Look for cash back apps that work in stores that take your EBT card. You’ll usually need to download an app and then scan your receipt after you’ve been to the store. Pay attention to coupons, whether in store or online as these can often carry hefty discounts.Always shop with a list: Planning your food shopping is one of the best ways to reduce costs. Even more so if you use a cash back app or coupons. Check what offers are available on items you normally buy before you go shopping. Mark the items that qualify for rewards or discounts on your list, so you don’t miss them when you’re shopping.Look for double up programs: There are Double Up Food Bucks or other programs in various states that essentially give you two for one on all produce at participating farmers markets and stores. It’s a great way to get more fruit and vegetables for your SNAP dollars.Buy in bulk and batch cook: It isn’t always easy to find the extra cash for bulk buying when you’re eking out every cent. However, if you can manage it, you may be able to save both money and time. You might, for example, batch cook a stew and freeze portions for future meals.Unfortunately, food insecurity still impacts many American households. If you don’t have enough money to feed your family this month, look for additional help. Find out what food pantries and soup kitchens are operating in your area on which days, and whether you’ll need to present any documents. Call United Way at 211 for information about assistance programs in your area.