Milestone #1 - Search Engines Ranking
Growing Money now appears as the first link when "growing money" is searched. This is a milestone for Growing Money.
Rank #1 on the following search engines:
Being the first link on Google has accomplished my goal. The book, "Growing Money", has always been on the top search results of keywords, "growing money," but the Growing Money blog has finally claimed its place.
Roth IRAs Often Beat 401(k)s
Roth IRAs Often Beat 401(k)s
Tuesday November 15, 8:42 am ET
By Selena Maranjian
Let's face it. Retirement issues can be confusing -- so much so that we often try to avoid thinking about them or doing anything about them. (That's why your friends at the Fool have launched an inexpensive monthly newsletter to help you get your ducks in a row. Easy to read in a single sitting and chock-full of inspiration and practical advice, Rule Your Retirement
is worth trying for free.)
One of the confusing areas of retirement planning is what kind of account to use for your savings. There are traditional and Roth IRAs, 401(k)s, and more. While many people focus mainly on their 401(k) plan, they need to give more consideration to the Roth IRA.
Let's back up a bit, though, and define our terms.
With a 401(k) plan, you invest pre-tax money, which has the effect of decreasing your taxable income. Thus, you get your tax break immediately. Through the plan, you can typically invest in a variety of mutual funds. When you withdraw money, as you must generally do beginning at age 70 1/2, those funds are taxed at your ordinary income rate, which can be high.
With a Roth IRA, you invest post-tax money, and your tax break comes when you withdraw your money -- tax-free (if you've qualified and followed the rules). So if your Roth IRA holdings grow and appreciate for several decades, multiplying in value several times, and you get to keep all of it, paying no taxes. Nice, eh?
Here are some other benefits of the Roth IRA over the 401(k):
- IRAs offer more options. You can open them through your bank or your brokerage (check out our Broker Center for IRA fees for several major brokerages), or through some other financial institution, and you can invest that money in stocks, bonds, CDs, mutual funds, and even real estate. With 401(k)s, you're limited to what your employer offers you. It could be five funds or 100 funds, and many of them might not serve your needs well. If, for example, you (like Rick Munarriz) believe in the future of Steiner Leisure (Nasdaq: STNR - News) because of the solid performance of its cruise ships, and you'd like to invest some of your retirement in it, you can't do so via a 401(k), but you can through a Roth IRA. If you like the long-term prospects of Diamond Offshore Drilling (NYSE: DO - News; read about its recent quarter), you can invest in it, too. And you can sell and buy other stocks, too, along the way. IRA accounts work pretty much like ordinary brokerage accounts in this regard.
- Roth IRAs don't include mandatory withdrawals. So if you don't need the money, you can leave it where it is, growing tax-free, instead of withdrawing it and being taxed on it. 401(k)s are not designed to be left to your loved ones -- but you can do so with a Roth.
- Roth IRAs won't hurt your Social Security situation. As Kathleen Pender explained in the San Francisco Chronicle recently, "When you begin drawing Social Security, you may have to pay tax on some of your benefits if your income is high enough. Money you take out of a 401(k) increases your income and can increase the tax you pay on Social Security benefits."
Are there downsides to Roth IRAs? Of course. While you can contribute up to $14,000 (or $18,000 if you're 50 or older) to a 401(k) plan, you can contribute only $4,000 per year (or $4,500 if you're 50 or beyond) to an IRA. Also, as Pender pointed out, you can often borrow money from your 401(k) plan, while you can't do so with Roth IRAs. And perhaps most importantly, 401(k)s often come with matching funds from your employer, while Roth IRAs don't. If your employer matches any money you plunk into your 401(k), by all means get as much of that matching as possible, because it's free money.
The bottom line is that you should take some time to learn more and assess your situation. You can learn a lot in our IRA Center and our 401(k) nook. Learn about this new beast, too: The Roth 401(k).
The best route might be using both your 401(k) and a Roth IRA, and perhaps some other vehicles, too. Get helpful tips in our Rule Your Retirement
newsletter, and consider trying our TMF Money Advisor financial planning service, too. It's inexpensive, it offers personal, professional advice via phone, and you can try it for free.
Philadelphia Investment Update #8 - Received Money from Tenants
I received a check from my agent this weekend. She forwarded me the money my tenants owed me.
Here's the breakdown:
$555 Rent for November (pro-rated)
$925 One month security deposit
$300 Pet deposit
-$60 Bonus to my agent
$1720 Check amount
Regarding the bonus, there is a funny story to it. I paid my agent $600 to help me find tenants. There was some demand for my house and it was rented out in less than a month. So, my agent called me and asked for a bonus, because she rented out my house in such a short period of time. Many people say that I don't need to pay her any additional money, but since she asked, I thought about it for a day and gave her a 10% bonus, or $60.
All in all, the real estate investment seems to be running smoothly. My tenants called once to ask for permission to repaint the colors of one bedroom. I told them to go ahead.
CKCM to the Nth Power
CKCM has been strongly bullish in the past two weeks. I think the stock was highly undervalued so I bought it at the low points a few times. The last trade was a buy at the low 16's (point A on Chart), and I sold my last batch of shares at $19 (point B on Chart). I made over $2500 on that trade. I was afraid to hold it through earnings so I sold all my shares on Wednesday. On Thursday, the earnings report came out strong and the stock rocketed up over $3 pre-market. I missed out on a huge run up but I'm okay with it since I already made a good profit.
The stock prices are stabilizing in the low 20's now. I'm watching the stock from the sidelines and may buy some shares again if it looks good.
Overall, the market has been picking up again. Look at GOOG run. You would think after the earnings report the stock price would come down a bit, but it's close to $400 a share now.
Quote of the Day
Being rich is having money; being wealthy is having time.
- Stephen Swid