Money in Your 20s Archives - Page 2 of 4 - Keeping Up With The Bulls

Roth IRA Rules in 2020

11.07.2019 by admin // 4 Comments

Roth IRA Rules- stack of one hundred and fifty dollar bills

A Roth IRA is a great retirement savings vehicle in the United States. There are many benefits to having a Roth IRA including no minimum distribution and no taxes on any gains. However, there are income requirements which limit who can contribute to a Roth IRA and how much they can contribute. By understanding these Roth IRA rules, you will know if you are eligible to contribute to a Roth IRA in 2019.

What Is A Roth IRA

A Roth IRA is a retirement account that offers you a tax benefit when you retire. Unlike traditional IRAs and 401(k) plans Roth IRA contributions are not tax deductible but you also do not pay taxes when you withdraw money at age 59 ½ +.

Roth IRA Contribution Limits 2020

In 2020, you can contribute up to $6,000 a year to a Roth IRA or a Traditional IRA. If you’re 50 or older you can contribute up to $7,000 a year. These contribution limits remain the same as in 2019. So, if you haven’t contributed to your Roth IRA in 2019 yet, you can still contribute up to $6,000 or $7,000 if you’re 50 or older before April 15th. The amount you contribute also cannot exceed what the IRA defines as “earned income” or taxable compensation. This includes wages, salaries, tips, commissions, professional fees and self-employment income. Charles Schwab shares more details here on what’s considered earned income for a Roth IRA.

The amount you contribute to a 401(k) plan does not impact the amount you can contribute to a Roth IRA but the amount you contribute to a Traditional IRA will affect the amount you can contribute to a Roth IRA. If you contribute to both a IRA and Roth IRA in the same year, the total contributions to both of these accounts cannot exceed $6,000 if you’re under 50, or $7,000 if you’re 50 or older.

Setting Up A Roth IRA For A Child

You can also set up a custodial Roth IRA for your child, subject to the same contribution limits outlined above. This means that contributions for your child’s Roth IRA you control cannot exceed what your child earned in 2019.

Roth IRA Income Limits 2020

There are income limits on Roth IRA eligibility which is why it’s important to start your contributions to a Roth IRA the first year you get a W-2. If you are single, and your modified AGI is $124,000 the amount you can contribute to a Roth IRA begins to phase out. If you are married filing jointly and your AGI is $199,000 or above the amount you’re eligible to contribute begins phasing out. These thresholds did change from 2019. In 2019 the amounts you could contribute started phasing out at $122,000 for single filers and $193,000 for married filing jointly filers.

If you are married filing jointly you cannot contribute to a Roth IRA if you make more than $206,000 in 2020. You cannot contribute to a Roth IRA in 2020 as a single filer if you make more than $139,000. Once you exceed this income you will need to explore options to setup a backdoor Roth IRA if you’re interested in having a Roth IRA. To take full advantage of a Roth IRA, set up a Roth IRA when you first start collecting a paycheck. You never know when you may get to the point where your income makes you ineligible to contribute to a Roth IRA.

Here are the contribution limits by income and filing status for a Roth IRA in 2020:

Roth IRA Contribution Limits 2020 table for married filing status, and single filing status — Source: IRS

When Can You Contribute to a Roth IRA

Contributions to a Roth IRA can occur at anytime during the year. You may contribute the full amount all at once or contribute multiple times during the year up to the maximum. Once a new calendar year starts, you can still make contributions for the previous calendar year up until April 15th (when taxes are due). For example, you can make a contribution for 2019 to your Roth IRA until April 15, 2020.

Roth IRA Withdrawals

Since you’ve already paid taxes on your contributions, you can withdraw your contributions at any time with no restrictions. If you withdraw earnings on those contributions though, you may be taxed or penalized on withdrawing this money.

Roth IRA rules dictate that once you’re age 59 ½, as long as you’ve held the account for at least five years, you can take distributions on all money within the account and do not have to pay taxes on that money.

Roth IRA Minimum Required Distribution

With a Roth IRA there is no required minimum distribution. This means that you don’t ever have to withdraw from this account if you don’t need to, and can pass this money onto your heirs.

Sponsorship at Work: The Secret Ingredient To Getting That Promotion

10.26.2019 by admin // 5 Comments

Career sponsorship. A career sponsor meeting with her protege about career advancement. Sponsorship at work. How do you get a sponsor.

Having a career sponsor is critical if you want to advance your career. It’s not just about what you know but who you know. Many decisions will be made about your career when you aren’t in the room. Sponsorship at work will enable you to have people who are in that room that will advocate on your behalf. That room may be at your current company or at an external company. To advance your career faster, have sponsors at your company and other companies in the industry.

What Is A Sponsor For Career Development

A Sponsor is a person who will advocate for you. They are usually more senior in the organization and have an interest in helping you advance your career. Sponsors take a direct role in advocating for their protege and putting their reputation on the line. This includes making introductions to key connections and open doors that otherwise would not be open. Sponsors will recommend you for job openings. See a job you’re interested in? Learn how to ask your sponsor to refer you to a job.

Sponsorship at work is important for everyone, but especially important for women and minorities to advance their careers. Barriers to advancement for women and minorities tend to be structural and rooted in unconscious bias. Career sponsorship can help break down these barriers. Sponsors do not need to be the same race or gender. Do look for ways to relate to a potential sponsor though. Is there anyone high up in the organization that graduated from the same college, from the same hometown or share similar hobbies? If not, no fear. Identifying how you can help your boss, peers or cross functional team succeed will also put you on the path to getting sponsors.

Sometimes mentor and sponsor are used interchangeably, but are they the same? No. Sponsors and mentors play key but different roles when it comes to advancing your career.

How Do You Get a Sponsor For Career Development At Your Current Company

Sponsor relationships are almost always informal and the relationship takes time to form. Be patient. There are certain steps you can take to fast track sponsorship at work.

One advantage of working for a large corporation as a young professional is leadership development programs. Leadership development programs will give you more visibility to senior leadership in a shorter time period. These leadership development programs tend to be for recent graduates or MBA students. Showing your ability to execute and responsiveness to feedback is critical. This will open the door for receiving advice from leaders in the organization. Continued interactions and continuing to provide value to the business will help turn these relationships into sponsorships.

Another step you can take is asking your manager for visibility to your skip level manager (your manager’s manager). This can include asking for a quarterly or semi- annual 1×1 with your skip level manager and being put on a high visibility project. Your skip level manager has greater responsibility and greater visibility to where the company and organization are going. If you show that you are a strong team member within the organization and share your career aspirations they are more likely to know if there will be an opportunity within the organization that meets your aspirations. They can also give you advice on what areas you should focus on to advance your career.

How Do You Get a Sponsor For Career Development At Another Company

Finding a sponsor at another company doesn’t have to be difficult. If one of your sponsors leaves your current company and moves to another company all you need to do is maintain contact. You can periodically send them articles you think they’d be interested in, or if you know they have a certain milestone they’ve reached like a child graduating high school reach out to congratulate them. Know their birthday and text them happy birthday every year. This holds true for anyone you consider a sponsor.

Other ways to find a sponsor at another company include networking at conferences, staying in touch with college professors, connecting with the alumni career center at your college and volunteering.

Sponsors at other companies are important as you may get to a point where your current company doesn’t offer opportunities that align to your career aspirations. Employee referrals are the easiest way to get your foot in the door at another company. If you don’t think this is relevant to you now because you’re perfectly happy ask yourself what you’d do if you get passed over for a promotion you deserve?

How Do You Know if Someone is Your Sponsor

A career sponsor is a bit more tricky to identify than a mentor as there are few or no formal programs for sponsorship in the workplace. Sponsorship happens more organically and is sometimes easier to spot after the fact. The first sign to look for is if they are introducing you to key contacts in the organization that aren’t directly linked to the work you’re doing.

You’ll also know someone is your sponsor if they advocate for your career when you’re not in the room and you find out after the fact the reason you got a job or project is because X person advocated for you. Another clue is if they reach out to you about an open position on their team or another team they think you’d be a good fit for and are reaching out to identify interest.

If you think someone may be your sponsor, or you would like someone to be your sponsor is to ask if they would advocate for you should a specific opportunity arise in the organization.

How to Ensure A Sponsorship At Work Is Successful

Your career sponsor must know your career goals to advocate for you. In addition, they must also know your limits. For example, are you willing to move for a job? Do you have limitations to how much you can travel? Having limitations is fine but it’s important to be specific with your career goals and limitations so your sponsor can best advocate on your behalf.

There will be many times in your career where there are potential discussions around advancing your career that are happening that you aren’t a part of. Perhaps a reorganization will occur, a new business unit is starting up or someone is leaving the company and none of these situations are announced yet. This is where it’s a must to have a sponsor in the room. They can advocate for you on your behalf.

Why Women Need a Sponsor At Work To Advance Their Careers

Women especially need sponsorship at work to help advance their careers. A Catalyst survey in 2008 found that women were being mentored at a higher rate than the men in their survey yet they were being promoted at a slower pace. They found that high potential women were over mentored and under sponsored relative to their male peers.

The Wall Street Journal recently wrote about women falling behind at work at the first step into management. Getting that first step into management is a huge barrier but you can’t move into upper management without that experience. You need sponsorship at work to help break this barrier. When you have no management experience, someone trusted and higher up needs to advocate that you should either be considered for a manager job, identify people to move underneath you already in the organization or give you reqs to open for new headcount. The more sponsors you have in the room advocating on your behalf, the easier it is to get past this barrier.

How have you leveraged sponsors to advance your career? How did you form your first sponsor relationship?

10 Financial Tips for Living On Your Own

09.02.2019 by admin // 6 Comments

Living on your own, living on your own tips, financial tips for living on your own.

You’ve decided to live on your own for the first time, congratulations! Maybe you’re moving out of your parents house, or moving out of living with roommates. Now, you get to decorate your new place exactly how you want and have everything match. The room is a bit bright so you’ll get some curtains and… oh wait, curtains are over $1,000 for the room?! Welcome to the joys of furnishing your own place. No matter the situation, living on your own requires getting a lot of stuff. This doesn’t even include the mortgage / down payment / deposit! Here are 10 financial tips for living on your own for the first time.

Don’t Buy Too Much House

Top living on your own tip: don’t buy too much house. Whether you are renting or buying, it’s important not to buy too much house. If you spend too much money on rent or a mortgage you will not be able to cut back on this expense if money gets tight. What does this mean? It means that your housing costs should be no more than 30% of your gross income (pre-tax income). This includes rent, mortgage, taxes, bills like electricity, water and wifi and any repairs you may have to make.

Even though the rule of thumb is no more than 30% of your gross income the lower this percentage is, the more money you’ll be able to spend actually furnishing your place and more money you’ll be able to save.

See Also: How to Save Money in Your 20s

Organize Your Move

Being organized about your move will help save you money. Start by creating a few lists, including a to do list and everything your new place needs. In the “everything you need list” identify what you already have, what is needed, what is needed but can be purchased later and what is nice to have. For example, you’ll need a lot of kitchen items but you’ll absolutely need to have pots and pans to start if you plan to cook. While a good knife set is also needed if you’re not a big cook this is an example of a purchase you can delay.

Also create a list of general household items (paper towels, cleaning supplies, spices) that you often don’t think about because you’ve acquired a collection from living with your parents or living with other roommates over the years. You’ll avoid a lot of repeat trips to the grocery store, Costco or Target by creating a list of what you need here before you go shopping.

Now that you know what you need immediately and what purchases you can delay match this to your budget. Likely, this is more expensive than you anticipated but see how far you can get. There are tricks you can use to lower these costs and make your money stretch further.

Spend As Little As Possible Moving

Moving from one place to the next is always a pain and spending money on the move itself is unavoidable. There are ways to minimize this expense; however, moving expenses and effort tend to be inversely related. The less you spend, the more effort you will have to put into the actual move. The least effort will be to hire movers that pack everything for you and unpack everything for you. On the flip side, the most effort but least expensive option is for you to move yourself in your own car. In the middle, there are options to rent a uHaul, ask for friends help and offer to buy them food, etc.

When you’re moving to your own place for the first time it should be easy to minimize this expense as you have less stuff to begin with. At the same time, you will be spending money on moving after the initial move too as you begin buying more furniture for your place. Some of these purchases may require having to rent a truck or spending money on delivery fees.

Set A Budget For Furnishing Your Own Place

Living on your own can get expensive quickly. It’s important to set a budget. Remember, you don’t need to have everything day one. You need wifi, a place to sleep and a few household items like toilet paper and some food. It’s ok if you don’t have a kitchen table or look settled for a couple of months. You’ve just paid the big expenses of first month, last month and security deposit or perhaps the closing costs and downpayment on your first home / condo. You’ll also have to start paying the monthly bills of living in your own place.

How much should you budget? That varies by person, and is really more about what you can afford and personal preferences. It’s more important avoid going into debt than being settled day 1.

Accept Furniture and Household Item Donations from Family Members

Your first place doesn’t have to look all put together – that can come with time. Forget what you see on Instagram, House Hunters and what your friends that don’t have their own place suggest when they come to visit. Earmuffs and blinders are key here! When you move into your own place for the first time without any roommates it is expensive. Even getting curtains for one room can be hundreds of dollars, if not over $1,000.

Understandably not everyone has the option to get used items from family. But, if your parents or your aunts, uncles, grandparents, etc, have things you need, accept them. Even if they don’t match or will need to be replaced soon it’s better than nothing. You don’t need to have these items forever, but moving into your own place requires a lot of things all at once and the fewer things you have to buy the easier it will be.

Are any of your friends moving? Or, are you living with roommates now and is there anything your roommates are trying to get rid of? Any time someone moves there are always items – big or small – that they won’t want in their new place. It works out for both of you if you can take something off your friends hands they don’t want anymore.

For the items that won’t last long, add them to your list of things to buy in the future. Prioritize this list and throughout the year look for sales. Always set aside some money in your budget to purchase items for your house in future years.

Scour Local Estate Sales For Furniture and Household Item Deals

Finding deals on household items and furniture at estate sales is one of the best kept secrets. An estate sale usually happens when there is a death and the family is trying to sell almost everything in the house before putting the house on the market. You’re able to get multiple things from one place at a steal and if you do need to rent movers or a uHaul, you can do it once. One friend ended up getting a $8,000 large dining room set in excellent condition for under $1,000. When she moved out (it didn’t fit in her next place) she ended up selling it and made a profit!

You may end up spending the same money you would have for something brand new at Ikea but there are two benefits to buying furniture / household items second hand. First, the quality of what you’re buying is much higher and you’ll be able to command a higher value should you ever try to resell the same piece a few years later. Second, you don’t have to self-assemble.

To find local estate sales, enter the town + estate sale into Google. If you live in a city, you may have more success looking at close suburbs.

Buy Second Hand Household Furnishings On Craigslist / LetGo

Craigslist and LetGo are also good to search for specific things you need to furnish your new place. I really wanted a wine rack from Crate and Barrel and didn’t want to spend $400 for it new when I first moved into my own place. After regularly searching for a few weeks I found one nearby on Craigslist for $125. A few years later when I moved I ended up selling it for $150. Both of these website / apps are best when you know exactly what you’re looking for otherwise you’ll spend a lot of time browsing. The strategy of buying second hand can save you hundreds if not thousands of dollars.

Use Coupons For Household Staples and Decorations

Normally I don’t talk about coupons often as I don’t think it’s worth going out of your way for 20 minutes to save $0.50. But, moving in on your own requires a lot of stuff so it’s worth it to spend a few hours looking around for the best deals and setting alerts. In this case, you’ll end up saving a lot of money by shopping around. Still, it is important to be smart about your time. If you see a good deal for one thing that will take 2 hours out of your day, is the amount you’ve saved worth those 2 hours?

T.J. Maxx and Homegoods generally has good deals and there are extra sales on holiday items after a holiday has passed. Bed, Bath & Beyond always mails 20% off coupons and you can try to split your transactions (or go with a friend) to use multiple coupons during the same trip. Usually, Bed, Bath & Beyond also accepts coupons that have expired. For higher end, Bloomingdales Home has Friend & Family sales (it’s free to become a loyalist) which you can take advantage of for things like bed sheets and towels. Macy’s also frequently has sales and coupons.

Budget Your Time Wisely

Don’t spend so much time on searching for the best deal that you waste all of your time. Everyone only has 24 hours in a day and each hour you spend looking for deals you could have been using to do something else, including doing something that would make you more money. You have a lot to buy when starting your own household and shopping around can take you to many stores and require a lot of repeated trips if you don’t plan correctly. Plan ahead as best as you can with lists and research ahead of time but never waste a couple hours to save only a couple of dollars.

You’ve Now Living On Your Own, Now What?

You’re now officially moved in and living on your own. Now what? It’ll always take some time to get settled and you’ll realize you’ll need things you completely forgot about. Don’t worry about buying everything at once. Continue to keep your lists of prioritized needs, needs and wants. Chip away at these lists over time and take advantage of yearly sales. Do more research on when the best time to buy certain items are, which you can find here, and here.

Once you’re more settled, look for other opportunities to be smart with your spending so you can get back to saving more money or finding ways to fund more of what you need for your home!

What are other ways you’ve found to save money when moving to your own place for the first time?