After moving from Nashville, Tennessee to Portland, Oregon, Branden Harvey shares his experience of moving from one side of the country to the other. From talking about the good, the bad, and the ugly of moving and how Homes.com can help you, Branden gives you advice for making the leap.
For first-time home buyers, finding the perfect place to settle down is hard enough. But then to have the offer youâve made on it rejected? You might be tempted to start reconsidering this whole homeownership thing altogether.
But hold on! Having your home offer rejected doesn’t have to mean it’s back to renting. In fact, if you play your cards right, you might just be able to turn that rejection aroundâor at least learn from the experience and come back a stronger candidate the next time.
The most important aspect of a rejected offer is understanding why it was rejected, and for that we turned to the experts. Here are a few common reasons your home offer might have been rejected, and a few helpful tips on what you can do about it.
3 common reasons sellers reject home offers
Home offers are rejected for myriad reasons. Here are some of the most common ones, as explained by the experts.
1. Your offer was too low
The first and most obvious reason your home offer could have been rejected is if the dollar amount didnât meet the sellerâs expectations. This might mean your offer was insultingly low, or that it was just low compared with other offers.
Often, buyers “believe the best way to start a negotiation is with an offer thatâs lower than what theyâre willing to pay,” says Colby Hager, owner of CapstoneHomebuyers. “This can work, but it can also backfire. When a seller is considering multiple offers, the low offer seems less serious and could indicate further negotiating headaches down the road.â
Keep in mind that sellers are looking for a good deal just as much as you are, and you should plan on working with your real estate agent to make sure the sellers at least feelÂ like theyâre getting one.
2. Your earnest money deposit was too ‘cheap’
If thereâs one part of the offer you shouldnât cheap out on, itâs the earnest money deposit. This deposit (also called an EMD or âgood faithâ deposit) basically signifies how interested you are in the home and that you plan on moving forward with the deal, all the way to its closing.
âBelieve it or not, there are buyers who get cold feet and walk away from a transaction days before closing,â says Shannon Hall, broker and owner of Dwellings by Rudy & Hall. âThe EMD should be enough to let a seller know you’re very interested, and also uncomfortable with the idea of leaving it on the table.â
Since many contracts stipulate that a seller can keep the earnest money deposit when a buyer walks at the last minute, you should feel certain about the houseâand then convey this certainty by leaving a significant deposit.
Hager recommends putting down at least 1% of the purchase price to show sellers you mean business.
3. You asked for too many contingencies
Sellers donât just want the best price for their home; they also want the easiest dealâwhich means no complications.
âSellers like the least number of contingencies,” stresses Hall.
“But thatâs not to say that a buyer should waive the due diligence period,â she adds. âMake it shorter, but donât waive it. And if you need multiple contingencies, that’s fine; but look for a home thatâs been on the market for at least 30 days.â
Since sellers are generally more willing to make concessions on a home theyâve been trying to sell for several weeks, this is a good approach to take if youâre a picky buyer with multiple contingencies.
âSellers also don’t like to give away their money to help someone get into a home,â says Hall.
Make your deal an easier and more appealing one for sellers by sticking to the fewest number of contingencies possible, getting due diligence done quickly, or targeting homes that have been on the market for longer.
Watch: 5 Things You Should Never Do When Buying a Home
What to do if your home offer is rejected
The first step is understanding why the offer was rejected in the first place.
âIf an offer was rejected, a buyer can try again, depending on the reason it was rejected,â explains Karen Parnes, broker and owner of NextHome Your Way.
âIf you need a certain home sale contingency, for instance, and can’t remove it, then move on,” Parnes says. “But if you can pay more and the market warrants it, resubmit a better offer.â
How to avoid future home offer rejections
Although rejection is sometimes unavoidable, there are things you can do to increase your chances of making a successful home offer.
For instance, âa buyer should come into the market already aware that he or she will have competition,â Hall says.
In addition to putting your best foot forward, you should be sure youâre working with an agent who has the skills to close the deal.
âA good real estate agent can help by guiding the buyer on the expected norms of offers in their area,â says Hager.Â âA real estate agent will also know the market and help you figure out if starting with a lower offer is advisableâor if a strong offer out of the gate will get the best results.â
One final bit of advice: Work with an agent who understands seller interests.
âThe buyer’s agents who most often win the day are the ones who reach out to sellers before submitting an offer,â says Hager. âThey have the best chance of not being rejected because they took the time to understand the seller’s situation.â
And if your home offer still gets dismissed, donât be too disappointed. In a seller’s market, “buyers are bound to have their offers rejected,â says Parnes. âHomes are coming off the market quickly, and sellers’ expectations are high.â
If your offer gets rejected, work with an agent to fix it or simply move on to the next home. Then make an offer the seller canât resist.
The post 3 Big Reasons Your Home Offer Was Rejectedâand How To Play It Right Next Time appeared first on Real Estate News & Insights | realtor.comÂ®.
These days, things are changing so fast, itâs tough to keep up. Thatâs especially true in the mortgage industry, where interest rates and the overall home loan landscape are shifting with such head-spinning speed, it’s easy for outdated information to circulate, leading home buyers and homeowners astray.
You may have heard, for instance, that everyone can score a record-low interest rate, or that refinancing is a no-brainer, or that mortgage forbearance means you don’t have to pay back your loan, ever. Sorry, but none of these rumors is trueâand falling for them could cost you dearly.
To help home buyers and homeowners separate fact from fiction, we asked experts to highlight some rampant mortgage mistruths out there today. Whether you’re looking to buy or refinance, these are some reality checks you’ll be glad to know.
Myth No. 1: Everyone qualifies for low interest rates
Thereâs a lot of buzz about record-low mortgage interest rates lately. Most recently, a 30-year fixed-rate mortgage dropped to 2.88% for the week of Aug. 6, according to Freddie Mac.
This is great news for borrowers, but here’s the rub: “Not everyone will qualify for the lowest rates,” explains Danielle Hale, chief economist at realtor.comÂ®.
So who stands to get the best rates? Namely, borrowers with a good credit score, Hale says. Most lenders require a minimum credit score of about 620. Some lenders might require an even higher threshold (more on that later).
Your credit score isn’t the only factor affecting what interest rate you get. It also depends on the size of your down payment, type of home, type of loan, and much more. So, keep your expectations in check, and make sure to shop around to increase the odds you’ll get a good rate.
Myth No. 2: Getting a mortgage today is easy
Many assume today’s low interest rates mean that getting a mortgage will be a breeze. On the contrary, these low rates mean just about everyone is trying to get a mortgage, or refinance the one they have. This glut of applicants, combined with the uncertain economy, means some lenders may actually tighten loan requirements.
In fact, a realtor.com analysis found that 5% to 20% of potential borrowers may struggle to get a mortgage because of these stricter standards. And getting a mortgage could become even tougher if the recession gets worse.
For example, some lenders may also require higher minimum credit scores and larger down payments. In April, JPMorgan Chase began requiring a 700 minimum credit score and 20% down payment.
Jason Lee, executive vice president and director of capital markets at Flagstar Bank, says some lenders arenât offering the loans that are considered riskierâsuch as jumbo loans, which exceed the conforming loan limit (for 2020, that max is $510,400).
“There arenât as many loan products available,” Lee says.
And even if you do manage to get a loan,Â it may take longer than you’d typically expect.
âBased on low rates and a high volume of refinances, loans are taking longer to complete from application to closing,â says Staci Titsworth, a regional mortgage manager for PNC Bank.
As such, borrowers should ask their lender how long the process will take to close, and make sure theyâre aware of the expiration date on the interest rate theyâve locked inâsince with rates this low, they could go up.
âMost lenders are locking in the customerâs interest rate so itâs protected from market fluctuations,” Titsworth adds.
Myth No. 3: Everyone should refinance their mortgage
âWith mortgage rates hovering near record lows, a refinance can make sense and can help free up monthly cash flow,â Hale says.
Still, not everyone should refinance. Homeowners should make sure to take a good hard look at their situation to see whether it makes sense for them.
For one, it will depend on your current interest rate. If it’s low already, it may not be worth the troubleâparticularly since refinancing comes with fees amounting to around 2% to 6% of your loan amount.
Given these upfront costs, refinancing often makes sense only if you plan to remain in your house for a while.
In general, ârefinancing is a good idea for homeowners who plan to live in the same home for several years, because they will reap the monthly savings over a longer time period,” Hale explains.
Myth No. 4: You can apply for a mortgage after you’ve found a home
Many people assume that you can find your dream home first, then apply for the mortgage. But that’s backwardânow more than ever. Today, your first stop when shopping for a house should be a mortgage lender or broker, who can get you pre-approved for a home loan.
For âa buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home,â Hale says.
Mortgage pre-approval is all the more essential in the era of the coronavirus pandemic. Why? Because many home sellers, leery of letting just anyone tour their home, want to know a buyer is seriousâand has the cash and financing to make a firm offer. As such, some real estate agents and sellers require a pre-approval letter before a potential buyer can view a home in person.
Nonetheless, according to a realtor.com survey conducted in June of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.
Aside from getting their foot in the door of homes they want to see, home buyers benefit from pre-approval in other ways. Since pre-approval lets you know exactly how much money a lender will loan you, it also helps you target the right homes within your budget.
After all, as Lee points out, âYou donât want to get your heart set on a home only to find out you canât afford it.â
Myth No. 5: Mortgage forbearance means you don’t have to pay back your loan
The record unemployment caused by the COVID-19 pandemic means millions of Americans have struggled to pay their mortgages. To get some relief, many have been granted mortgage forbearance.
Nearly 8% of mortgages, or 3.8 million homeowners, were in forbearance as of July 26, according to the Mortgage Bankers Association.
The problem? Many mistakenly assume that mortgage forbearance means you won’t have to pay your loan, period. But forbearance means different things for different homeowners, depending on the terms of the mortgage and what type of arrangement was worked out with the lender.
âForbearance is not forgiveness,â Lee says. âRather, itâs a timeout from having to make a mortgage payment where your servicerâthe company you send your mortgage payments toâwill ensure that negative impacts to your credit report and late fees will not occur. However, because forbearance is not forgiveness, you will need to reach some sort of resolution with your loan servicer about the missed payments.â
The paused payments may be added to the back end of the loan or repaid over time.
âIt does not forgive the payments, meaning the borrower still owes the money,â Hale says. âThe specifics of when payments need to be made up will vary from borrower to borrower.â
The post 5 Rampant Mortgage Myths You’ll Hear These DaysâCompletely Debunked appeared first on Real Estate News & Insights | realtor.comÂ®.
Purchasing a home is both exciting and a major milestone in your life, so you’ll want to be prepared for what to expect to avoid a stressful process. Having an in-depth look at the buyer’s journey can help you make informed and confident decisions.
From finding a real estate agent, negotiating offers to getting your keys on closing day, we’ve outlined all the steps of a home buyer’s journey in our free Buyer’s Guide, which you can download here.
The Buyer’s Guide will cover the buyer’s timeline from meeting an agent to preparing for closing day. We’ve outlined the 8 steps in a home buyer’s journey below.
1. Working With An Agent
Every city is filled with thousands of agents, but not all are equal. We believe it is important to choose an agent that you feel confident with. Before you commit to working with an agent, make sure you have a good understanding of the knowledge and experience they offer. It’s important that you ask your questions before making the decision to work with them.
2. Financing Your Purchase
Before you set a budget and start looking for a home, you’ll have to understand what costs to expect when purchasing a home. Here are some of the major costs involved:
You’ll also want to calculate a rough estimate of the down payment that you will be expected to pay. Depending on the price of your home, your minimum down payment can range from 5% to 20%. If you’re interested in learning more about how to finance your home, you can get our free Financing Your Purchase guide here.
3. Searching For A Home
An important part of searching for a home is understanding how the home will fit with your needs and your lifestyle. You’ll want to consider home ownership as well as different types of properties and features.
Types of Home Ownership
You purchase the home and directly own the lot of land it sits on
For condos, you own specific parts of one building: titled ownership of your unit, along with shared ownership in the condo corporation that owns the common spaces and amenities
You own an exact portion of the building as a whole and also have exclusive use of your unit
Types of Properties
Condos and apartments
Tip: Depending on your budget and desired location, you may need to be flexible to find a home that meets your needs. By being willing to trade some features for others, you’ll have more options to choose from.
4. Negotiating An Offer
When you are making an offer to purchase a home, the purchase agreement should include the essential components listed below. Your agent can help put together an offer that is compelling, while safeguarding your interests and puts you in a competitive position to secure your new home.
You’ll also have the opportunity to choose the conditions that you’ll want in your offer. Some of these may include a home inspection or a status certificate review.
5. Financial Due Diligence
Whenever you make an offer on a house, you need to provide a deposit to secure the offer. The deposit is in the form of a certified cheque, bank draft, or wire transfer; it’s held in trust by the selling brokerage and is applied towards your down payment if your offer is successful.
There are two types of deposits:
The deposit is provided within 24 hours of the seller choosing your offer
The deposit is provided when the offer is made
6. Property Due Diligence
To firm up a deal or educate yourself more on the state of the property, you’ll likely want to have a home inspection if you’re purchasing a house. If you’re purchasing a condo, then your lawyer will review the building’s status certificate.
A home inspector will assess elements of the home such as the walls, windows, plumbing, heating and roof to judge the condition of the home. This process is non-invasive and is essential to help provide buyers with a good idea of the home’s current condition and the confidence of putting in an offer.
Tip: The home inspector will provide a summary of suggested work along with a minimum budget estimate for the repairs needed.
If you’re purchasing a condominium, you’ll need to obtain a status certificate from the condo board or management for your lawyer’s review. This document will include valuable information about the condo’s budget, legal issues, reserve fund, maintenance fees and future fees increases – and the lawyer can help identify potential red flags
7. Preparing For Closing
Before the big day, you’ll want to keep a checklist of what to do ahead of time. Some of these include:
Review your contract
Complete a final walkthrough of the home
Purchase home insurance
Meet with your lawyer
Know how much cash you’ll need
Secure cash required for closing
8. Closing Day
Closing Day is when you’ll finally get the keys to your new home! In addition to bringing the cash required for closing, you’ll have to sign a few more documents which will include:
Statement of adjustments
For the full details on the home buyer’s journey including examples, advice, pictures and sample calculations, download a copy of our free Buyer’s Guide here.
The post Home Buyer’s Guide: How to Purchase a Property, From Start to Finish [Free Download] appeared first on Zoocasa Blog.
Buying a second home is a major expense. You might have several reasons for wanting to buy a second house. Perhaps, you’re buying a second home for vacations or weekend getaways. Or, it might be that you want to use it as a rental property for rental income. However, there are things to consider before buying a second home.
The benefits of buying a second home
If you’re buying a second home for rental income, you’ll benefit from many perks, especially tax advantages.
For example, you will be able to deduct interest, property taxes, homeowners insurance and other expenses against the property’s income.
Even if the value of the property declines, you will still be able to deduct depreciation from your taxes.
While these benefits are great, the mortgage requirements for a second home are much stricter than for a mortgage on your primary residence. So, make sure you can afford it.
8 Things To Consider WhenBuying A Second Home
1. Financing options: When you bought your first home, you had available to you what’s called an FHA loan – a government loan program.
FHA loans are an appealing and favorite choice among first time home buyers due to their relatively low down payment requirement.
FHA loans require a 3.5% down payment and a relatively low credit score of 580. However, FHA loans are not available to second home buyers.
That is because FHA requires the home to be the borrower’s primary residence. So, if you’re thinking of buying a second home, you will need to either use a conventional loan or financing it with your own cash.
2. A larger down payment: If you’re using a conventional loan for your second home, you will need to come up with a larger down payment.
Lenders for a conventional loan usually requires a 20% down payment of the home purchase price.
But for a second home which will be used as a rental property or vacation home, expect lenders to ask for 30% or even 35%.
3. A higher credit score. For an FHA loan, you only need a credit score of 580 to qualify. But for a conventional loan on a second home, you will need much higher credit score — usually 750 or higher.
4. Expect a Higher Interest Rate: Lenders will likely charge you a higher interest rate on your second home than your primary residence.
The reason is because they see a second home — be it a vacation home or a rental property — as riskier. They feel that you are more likely to default on a mortgage on your second home than on your primary residence.
5. Do your research: Just as you did your homework when you bought your place to live in, buying a second home is no different.
In fact, you’ll need to spend more time researching rental property. That means researching the neighborhood you will want to invest in, knowing the zoning laws for a particular area, the sales price for the homes in the area.
You will need to know if the area has adequate public transportation, schools, grocery shopping, etc,– things that potential tenants will need.
6. Be prepared to be a landlord: if you’re buying a second home to rent, be prepared to be a landlord.
And be prepared to deal with all of the headaches that come with being a landlord. Do you have sufficient time? Can you deal with problems?
Owning a rental property and being a landlord is time consuming. It is also hard hard work and you have to do your due diligence.
You can hire a property manager to run the property for you. But if that is not feasible, you’ll have to do it yourself.
That means, screening new tenants, collecting rent, dealing with delinquent tenants, fixing problems in the property, such as a broken pipe.
So before buying a second home, make sure you have sufficient time and make sure you can deal with the day-to-day headaches that come with being a landlord.
7. Do you have a stable income? Dealing with a second mortgage on your second home is doable.
While you may be able to afford upfront costs, if you don’t have a stable income, you may have to think twice about whether it is a good idea.
Plus, you still have to consider the additional expenses of owning a second home such as insurance, property taxes, maintenance, repairs, property management fees, etc.
8. Are you out of credit card debt? If you have paid off outstanding and high interest credit card debts, then purchasing a second home may make sense.
But if you’re still struggling to pay your debt, you may need to put buying a second home on hold.Â
The bottom line
If you’re thinking about buying a second home, whether it is for investment or vacation, be prepared to save some money, budget for expenses, and come up with a bigger down payment.
More importantly, spend as much time, if not more, researching for the home just as you did when your purchased your primary home.
Speak with the Right Financial Advisor
If you have questions about your finances, you can talk to aÂ financial advisorÂ who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs withÂ SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals,Â get started now.
The post Buying A Second Home? 8 Things To Consider appeared first on GrowthRapidly.
You probably donât need us to tell you that the earlier you start saving for retirement, the better. But letâs face it: For a lot of people, the problem isnât that they donât understand how compounding works. They start saving late because their paychecks will only stretch so far.
Whether youâre in your 20s or your golden years are fast-approaching, saving and investing whatever you can will help make your retirement more comfortable. Weâll discuss how to save for retirement during each decade, along with the hurdles you may face at different stages of life.
How Much Should You Save for Retirement?
A good rule of thumb is to save between 10% and 20% of pre-tax income for retirement. But the truth is, the actual amount you need to save for retirement depends on a lot of factors, including:
Your age. If you get a late start, youâll need to save more.
Whether your employer matches contributions. The 10% to 20% guideline includes your employerâs match. So if your employer matches your contributions dollar-for-dollar, you may be able to get away with less.
How aggressively you invest. Taking more risk usually leads to larger returns, but your losses will be steeper if the stock market tanks.
How long you plan to spend in retirement. Itâs impossible to predict how long youâll be able to work or how long youâll live. But if you plan to retire early or people in your family often live into their mid-90s, youâll want to save more.
How to Save for Retirement at Every Age
Now that youâre ready to start saving, hereâs a decade-by-decade breakdown of savings strategies and how to make your retirement a priority.
Saving for Retirement in Your 20s
A dollar invested in your 20s is worth more than a dollar invested in your 30s or 40s. The problem: When youâre living on an entry-level salary, you just donât have that many dollars to invest, particularly if you have student loan debt.
Prioritize Your 401(k) Match
If your company offers a 401(k) plan, a 403(b) plan or any retirement account with matching contributions, contribute enough to get the full match â unless of course you wouldnât be able to pay bills as a result. The stock market delivers annual returns of about 8% on average. But if your employer gives you a 50% match, youâre getting a 50% return on your contribution before your money is even invested. Thatâs free money no investor would ever pass up.
Pay off High-Interest Debt
After getting that employer match, focus on tackling any high-interest debt. Those 8% average annual stock market returns pale in comparison to the average 16% interest rate for people who have credit card debt. In a typical year, youâd expect aÂ $100 investment could earn you $8. Put that $100 toward your balance? Youâre guaranteed to save $16.
Take More Risks
Look, weâre not telling you to throw your money into risky investments like bitcoin or the penny stock your cousin wonât shut up about. But when you start investing, youâll probably answer some questions to assess your risk tolerance. Take on as much risk as you can mentally handle, which means youâll invest mostly in stocks with a small percentage in bonds. Donât worry too much about a stock market crash. Missing out on growth is a bigger concern right now.
Build Your Emergency Fund
Building an emergency fund that could cover your expenses for three to six months is a great way to safeguard your retirement savings. That way you wonât need to tap your growing nest egg in a cash crunch. This isnât money you should have invested, though. Keep it in a high-yield savings account, a money market account or a certificate of deposit (CD).
Tame Lifestyle Inflation
We want you to enjoy those much-deserved raises ahead of you â but keep lifestyle inflation in check. Donât spend every dollar each time your paycheck gets higher. Commit to investing a certain percentage of each raise and then use the rest as you please.
Saving for Retirement in Your 30s
If youâre just starting to save in your 30s, the picture isnât too dire. You still have about three decades left until retirement, but itâs essential not to delay any further. Saving may be a challenge now, though, if youâve added kids and homeownership to the mix.
Invest in an IRA
Opening a Roth IRA is a great way to supplement your savings if youâve only been investing in your 401(k) thus far. A Roth IRA is a solid bet because youâll get tax-free money in retirement.
In both 2020 and 2021, you can contribute up to $6,000, or $7,000 if youâre over 50. The deadline to contribute isnât until tax day for any given year, so you can still make 2020 contributions until April 15, 2021. If you earn too much to fund a Roth IRA, or you want the tax break now (even though it means paying taxes in retirement), you can contribute to a traditional IRA.
Your investment options with a 401(k) are limited. But with an IRA, you can invest in whatever stocks, bonds, mutual funds or exchange-traded funds (ETFs) you choose.
If you or your spouse isnât working but you can afford to save for retirement, consider a spousal IRA. Itâs a regular IRA, but the working spouse funds it for the non-earning spouse.Â
Avoid Mixing Retirement Money With Other Savings
Youâre allowed to take a 401(k) loan for a home purchase. The Roth IRA rules give you the flexibility to use your investment money for a first-time home purchase or college tuition. Youâre also allowed to withdraw your contributions whenever you want. Wait, though. That doesnât mean you should.
The obvious drawback is that youâre taking money out of the market before itâs had time to compound. But thereâs another downside. Itâs hard to figure out if youâre on track for your retirement goals when your Roth IRA is doing double duty as a college savings account or down payment fund.
Start a 529 Plan While Your Kids Are Young
Saving for your own future takes higher priority than saving for your kidsâ college. But if your retirement funds are in shipshape, opening a 529 plan to save for your childrenâs education is a smart move. Not only will you keep the money separate from your nest egg, but by planning for their education early, youâll avoid having to tap your savings for their needs later on.
Keep Investing When the Stock Market Crashes
The stock market has a major meltdown like the March 2020 COVID-19 crash about once a decade. But when a crash happens in your 30s, itâs often the first time you have enough invested to see your net worth take a hit. Donât let panic take over. No cashing out. Commit to dollar-cost averaging and keep investing as usual, even when youâre terrified.
Saving for Retirement in Your 40s
If youâre in your 40s and started saving early, you may have a healthy nest egg by now. But if youâre behind on your retirement goals, now is the time to ramp things up. You still have plenty of time to save, but youâve missed out on those early years of compounding.
Continue Taking Enough Risk
You may feel like you can afford less investment risk in your 40s, but you still realistically have another two decades left until retirement. Your money still has â and needs â plenty of time to grow. Stay invested mostly in stocks, even if itâs more unnerving than ever when you see the stock market tank.
Put Your Retirement Above Your Kidsâ College Fund
You can only afford to pay for your kidsâ college if youâre on track for retirement. Talk to your kids early on about what you can afford, as well their options for avoiding massive student loan debt, including attending a cheaper school, getting financial aid, and working while going to school. Your options for funding your retirement are much more limited.
Keep Your Mortgage
Mortgage rates are historically low â well below 3% as of December 2020. Your potential returns are much higher for investing, so youâre better off putting extra money into your retirement accounts. If you havenât already done so, consider refinancing your mortgage to get the lowest rate.
Invest Even More
Now is the time to invest even more if you can afford to. Keep getting that full employer 401(k) match. Beyond that, try to max out your IRA contributions. If you have extra money to invest on top of that, consider allocating more to your 401(k). Or you could invest in a taxable brokerage account if you want more flexibility on how to invest.
Meet With a Financial Adviser
Youâre about halfway through your working years when youâre in your 40s. Now is a good time to meet with a financial adviser. If you canât afford one, a financial counselor is typically less expensive. Theyâll focus on fundamentals like budgeting and paying off debt, rather than giving investment advice.
Saving for Retirement in Your 50s
By your 50s, those retirement years that once seemed like they were an eternity away are getting closer. Maybe thatâs an exciting prospect â or perhaps it fills you with dread. Whether you want to keep working forever or retirement canât come soon enough, now is the perfect time to start setting goals for when you want to retire and what you want your retirement to look like.
Review Your Asset Allocation
In your 50s, you may want to start shifting more into safe assets, like bonds or CDs. Your money has less time to recover from a stock market crash. Be careful, though. You still want to be invested in stocks so you can earn returns that will keep your money growing. With interest rates likely to stay low through 2023, bonds and CDs probably wonât earn enough to keep pace with inflation.
Take Advantage of Catch-up Contributions
If youâre behind on retirement savings, give your funds a boost using catch-up contributions. In 2020 and 2021, you can contribute:
$1,000 extra to a Roth or traditional IRA (or split the money between the two) once youâre 50
$6,500 extra to your 401(k) once youâre 50
$1,000 extra to a health savings account (HSA) once youâre 55.
Work More if Youâre Behind
Your window for catching up on retirement savings is getting smaller now. So if youâre behind, consider your options for earning extra money to put into your nest egg. You could take on a side hustle, take on freelance work or work overtime if thatâs a possibility to bring in extra cash. Even if you intend to work for another decade or two, many people are forced to retire earlier than they planned. Itâs essential that you earn as much as possible while you can.
Pay off Your Remaining Debt
Since your 50s is often when you start shifting away from high-growth mode and into safer investments, now is a good time to use extra money to pay off lower-interest debt, including your mortgage. Retirement will be much more relaxing if you can enjoy it debt-free.
FROM THE RETIREMENT FORUM
Military pension & SS 1/5/21 @ 2:55 PM
Re-locating 1/5/21 @ 2:53 PM
TSP and mortgage 12/23/20 @ 2:41 PM
See more in Retirement or ask a money question
Saving for Retirement in Your 60s
Hooray, youâve made it! Hopefully your retirement goals are looking attainable by now after working for decades to get here. But you still have some big decisions to make. Someone in their 60s in 2021 could easily spend another two to three decades in retirement. Your challenge now is to make that hard-earned money last as long as possible.
Make a Retirement Budget
Start planning your retirement budget at least a couple years before you actually retire. Financial planners generally recommend replacing about 70% to 80% of your pre-retirement income. Common income sources for seniors include:
Social Security benefits. Monthly benefits replace about 40% of pre-retirement income for the average senior.
Retirement account withdrawals. Money you take out from your retirement accounts, like your 401(k) and IRA.
Defined-benefit pensions. These are increasingly rare in the private sector, but still somewhat common for those retiring from a career in public service.
Annuities. Though controversial in the personal finance world, an annuity could make sense if youâre worried about outliving your savings.
Other investment income. Some seniors supplement their retirement and Social Security income with earnings from real estate investments or dividend stocks, for example.
Part-time work. A part-time job can help you delay dipping into your retirement savings account, giving your money more time to grow.
You can plan on some expenses going away. You wonât be paying payroll taxes or making retirement contributions, for example, and maybe your mortgage will be paid off. But you generally donât want to plan for any budget cuts that are too drastic.
Even though some of your expenses will decrease, health care costs eat up a large chunk of senior income, even once youâre eligible for Medicare coverage â and they usually increase much faster than inflation.
Develop Your Social Security Strategy
You can take your Social Security benefits as early as 62 or as late as age 70. But the earlier you take benefits, the lower your monthly benefits will be. If your retirement funds are lacking, delaying as long as you can is usually the best solution. Taking your benefit at 70 vs. 62 will result in monthly checks that are about 76% higher. However, if you have significant health problems, taking benefits earlier may pay off.
Use Social Securityâs Retirement Estimator to estimate what your monthly benefit will be.
Figure Out How Much You Can Afford to Withdraw
Once youâve made your retirement budget and estimated how much Social Security youâll receive, you can estimate how much youâll be able to safely withdraw from your retirement accounts. A common retirement planning guideline is the 4% rule: You withdraw no more than 4% of your retirement savings in the first year, then adjust the amount for inflation.
If you have a Roth IRA, you can let that money grow as long as you want and then enjoy it tax-free. But youâll have to take required minimum distributions, or RMDs, beginning at age 72 if you have a 401(k) or a traditional IRA. These are mandatory distributions based on your life expectancy. The penalties for not taking them are stiff: Youâll owe the IRS 50% of the amount you were supposed to withdraw.
Keep Investing While Youâre Working
Avoid taking money out of your retirement accounts while youâre still working. Once youâre over age 59 Â½, you wonât pay an early withdrawal penalty, but you want to avoid touching your retirement funds for as long as possible.
Instead, continue to invest in your retirement plans as long as youâre still earning money. But do so cautiously. Keep money out of the stock market if youâll need it in the next five years or so, since your money doesnât have much time to recover from a stock market crash in your 60s.
A Final Thought: Make Your Retirement About You
Whether youâre still working or youâre already enjoying your golden years, this part is essential: You need to prioritize you. That means your retirement savings goals need to come before bailing out family members, or paying for college for your children and grandchildren. After all, no one else is going to come to the rescue if you get to retirement with no savings.
If youâre like most people, youâll work for decades to get to retirement. The earlier you start planning for it, the more stress-free it will be.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
So it’s the middle of a pandemic and you find yourself having to move soon, how do you do it appropriately and safely? There are a few routes to take, whether it’s professional help or just family and friends, but you still need to practice social distancing. Here’s how.