Do you have a few extra minutes in your day and really want to make them count? Consider these 5 simple money moves worth completing today.
1) Open an online bank account
Online bank accounts typically offer higher interest rates than your corner bank, have great service, and charge lower fees to boot. Accounts are FDIC insured and can be linked to an existing account for easy transfer of funds. Check out Bankrate or NerdWallet to compare online bank account offerings. Some online banks that have had consistently good yields and high ratings are American Express, Citizens Bank, and Ally Bank. Several online banks are currently offering savings account rates that exceed the national average by 2% or more. If you keep $25,000 in your savings account, that represents an extra $500 in your pocket at the end of one year.
2) Set up automatic transfers
You have a goal to save $200/month to your savings account (your child’s 529 account, your vacation account, etc.). Three months have gone by and you’ve saved . . .$0. Sound familiar? Turn a once-monthly task into a 5-minute set-it-and-forget-it task by automating your monthly transfer. Log in to your bank account, and with a few mouse clicks you can set up a recurring transfer. Now you are on your way to achieving your savings goals!
3) Maximize your 401k contribution
For 2019, you can contribute up to $19,000 to your 401k plan. If you are over 50, you can set aside an additional $6,000 for a total of $25,000. We recommend that you review your 401k deferrals a couple times during the year to make sure you are on track to maximize. This is one of the reasons why we at Bartley Financial review and annualize pay stubs. If your marginal tax rate is 24% Federal and 5.05% MA and you miss the mark on maximizing your 401k contributions by just $1,000, your 401k will be that much lighter over time and you’ll end up paying almost $300 more in taxes this year than you would if you maximized.
Another important thing that we look for with 401k contributions is not maximizing your contribution too early. The way most payroll systems work, and 401k plans are written, is that if you don’t contribute to your 401k in a given pay period (e.g. maximized the contribution earlier in the year) then your employer won’t provide a matching contribution for that pay period. We have seen the possibility that thousands of dollars of free money (employer match) can be lost by not contributing evenly throughout the year.
What if your cash flow doesn’t allow you to contribute the maximum allowed to your company retirement plan? Challenge yourself to contribute as much as you can. If your company provides a match, you’ll want to contribute at least enough to qualify for the full matching contribution. Say your employer matches 50% of the first 6% you contribute. You will want to contribute at least 6%. Don’t leave free money on the table! As your income increases, consider increasing your contribution rate.
4) Maximize your Health Savings Account (HSA) contributions and invest excess funds
If you have a high-deductible health insurance plan through your employer, chances are you also have a Health Savings Account (HSA) that allows you to set aside pre-tax dollars to cover eligible medical expenses. If your cash flow allows, we recommend that you maximize your contributions for the year. For 2019, contribution limits (employee plus employer) are $3,500 for single coverage and $7,000 for family coverage. If you’re 55 or older, you can contribute an extra $1,000. If you are not on track to maximize, check with your HR department today to see if you can up your contribution now or whether you need to wait until open enrollment season.
An HSA account can be considered an extra retirement vehicle. Over time, the amount contributed may be more than what you anticipate is necessary to cover upcoming medical expenses. Most HSAs allow you to invest those funds. We provide investment allocation guidance on HSA accounts the same way we do for 401k (403b, 457) accounts. In retirement you can withdraw funds from your HSA tax FREE if the money is used for medical related expenses.
5) Initiate that 401k rollover
Like many people, you may have an old retirement plan (or two!) from a prior employer. You may not be actively reviewing investments or fee schedules. You feel vaguely uneasy about this money being “out there” but it’s going to be a hassle to move the funds. Right? You might be surprised. In most cases, all it takes is a phone call to the custodian of your old plan to get the ball rolling. Bartley Financial always takes care of any paperwork and the investment strategy. We make sure that things happen, including consolidation of your accounts!
We hope that you have found one or more of these simple money moves helpful. Sometimes small actions can have big rewards! We are always committed to working with you to achieve your financial goals both large and small. Don’t hesitate to contact any member of the Bartley Financial team for a helping hand.
At Bartley Financial, we care about way more than your finances. We care about the life you’re trying to live, finances are just a piece of that. Call us any time if you need fresh ideas for your finances or help in achieving your goals. We’re happy to help!