From Yahoo Finance

There’s a reason 20-somethings dread their 30s — it’s the decade when everything seems to finally get real. Careers are established (or at least that’s the plan), homes are purchased, bills stack up, and wedding invitations flood mailboxes. Friends you once saw dancing on bar tops abruptly decide to “settle down” and all of the sudden, you realize there are fewer excuses for not having your own financial house in order.

Many of the choices you make in your 30s will determine what kind of life you’ll be living when you hit your 60s. To help you along, here are a few common money mistakes you should try to avoid:

1. Getting married before you talk about the “F” word — finances.

Forget about the fact that an American wedding costs an average $30,000 today. The most expensive mistake you could make before walking down the aisle is not being open and honest with your partner about your financial affairs beforehand. Money is one of the most common causes of friction in marriages — for good reason. By not making full disclosure about your debts or that impulsive shopping habit you picked up after college, you’re asking for trouble.

If you’re nervous about bringing up the “F” word with your partner, seek help from an objective mediator — someone like a relationship counselor, financial planner, or even a representative from your church who can referee. Prenuptial agreements aren’t just for the wealthy, either. Many attorneys recommend couples consider a prenup, especially if they are carrying assets that might be put at risk in the event of a divorce (for example, property in their name, ownership in a business, an inheritance, or children from a previous marriage).

2. Letting your student debt take care of itself.

A record 40 million Americans have student loan debt today, with the average college graduate carrying more than $29,000. It can be shocking how quickly that six-month “grace period” ends after graduation and those bills start coming due. There’s no running away from it either. It’s nearly impossible to discharge student loan debt in bankruptcy. Even after you’ve retired, the government can still garnish your Social Security income to pay off past due student loans. But you have options to lighten your burden if need be — federal loan borrowers can apply for income-based repayment or loan forbearance. Private loan borrowers can have their debts consolidated or petition their lenders for lower interest rates. The longer you let unpaid loans linger, the worse it will be for your credit, not to mention your job prospects. Employers have been known to run background checks on job candidates and turn down applicants who appear to be fiscally challenged.

3. Not saving for retirement.

Your 20s are over. If you haven’t started thinking about retirement yet, then you’re already behind. Saving enough money to sustain you through retirement seems daunting, but it’s not rocket science. If you have a job, put 10% (or more, if you can) into to a 401(k). Don’t ignore your company match. If your job doesn’t offer a retirement plan, then open a low-cost IRA through an investment firm like Vanguard or Charles Schwab (minimum deposits are as low as $1,000 and it takes all of 10 minutes to open one) and set up automatic contributions of at least 10% of each paycheck. Trust us, you won’t even notice that missing cash after a while. And don’t forget to ratchet up your contributions when you get a raise.

4. Using graduate school as an excuse to avoid the job markets.

Yes, the economy is still struggling to bounce back from the recession and the job market for young adults isn’t all that great. But taking out another chunk of student loans so you can hide out in grad school while you wait for the dust to settle and jobs to grow on trees is probably not the best way to handle it. Unless that Master’s will help you get a job faster or qualify for a higher salary, it’s hard to justify the cost. A recent report found that simply staying in college an extra year or two can cost students tens of thousands of dollars of future earning potential. Consider your area of study and consult with people in your desired field before you decide that adding another degree to your resume will be worthwhile.

5. Buying a house you can’t afford.

Ignore those people bemoaning the rise of renters in the U.S. and wagging their fingers at young adults too wary (or too broke) to get in the housing market. Buying a home is probably the biggest financial transaction you’ll ever make — don’t let anyone pressure you into moving too quickly. Real estate experts recommend buying a home only if you’re willing to commit to living in it for seven to 10 years. If your credit is poor, you might benefit by waiting until it’s improved before applying for a mortgage. A lower mortgage rate can save you thousands of dollars in interest payments over the life of the loan. Take this questionnaire on Bankrate to help figure out whether you’re ready to buy or should keep renting. And if you’re not sure how much you can afford to spend on a home, check out this tool from Zillow.

6. Neglecting your children’s education.

Congrats on the new baby! Time to open a 529 plan. College costs have risen more than 1,000% in the last three decades alone. You can start by opening a 529 college savings plan on your child’s behalf or simply opening a Roth IRA (there are pros and cons to both options) in your child’s name. The point is to put your savings in a place where that money will grow — and you can be sure your teen doesn’t blow it all at the mall.

7. Ignoring your will.

It’s hard to imagine your death bed when you barely have wrinkles, but your estate plan should be on the top of your to-do list in your 30s. And you don’t need to be Bill Gates-rich to plan for what happens when you pass. If you die without a will, the state decides who gets what regardless of your wishes or your family’s needs. In addition to a basic last will and testament, be sure you have a durable power of attorney (someone you trust to make legal decisions on your behalf if you become incapacitated), a health care power of attorney (someone you trust to handle you’re medical decisions if you’re unable to), and even a document specifying how you want your digital assets (social media profiles, digital photos, all that stuff floating in “the cloud”) to be handled. If you’re married, have children, a home, or other sizable assets in your name, it’s even more important to be sure your estate plan is kept up to date.

Retirees Mistakes

One of the biggest mistakes retirees make when calculating their living expenses is forgetting how big a bite state and federal taxes can take out of savings. And how you tap your accounts can make a big difference in what you ultimately pay to Uncle Sam.

Here’s how retirement assets are taxed.

Tax-deferred accounts. Prepare to feel pain. Withdrawals from traditional IRAs and your 401(k) will be taxed as ordinary income, which means at your top tax bracket.

Taxable accounts. Profits from the sale of investments, such as stocks, bonds, mutual funds and real estate, are taxed at capital-gains rates, which vary depending on how long you’ve owned the investments. Long-term capital-gains rates, which apply to assets you have held longer than a year, can be quite favorable: If you’re in the 10% or 15% tax bracket, you’ll pay 0% on those gains. Most other taxpayers pay 15% on long-term gains. Short-term capital gains are taxed at your ordinary income tax rate.

Interest on savings accounts and CDs and dividends paid by your money market mutual funds is taxed at your ordinary income rate. Interest from municipal bonds is tax-free at the federal level.

Roth IRAs. Give yourself a high five if your retirement portfolio includes one of these accounts. As long as the Roth has been open for at least five years and you’re 59 1/2 or older, all withdrawals are tax-free. In addition, you don’t have to take RMDs from your Roth when you turn 70 1/2.

Social Security. Many retirees are surprised–and dismayed–to discover that a portion of their Social Security benefits could be taxable. Whether or not you’re taxed depends on what’s known as your provisional income: your adjusted gross income plus any tax-free interest plus 50% of your benefits. If provisional income is between $25,000 and $34,000 if you’re single, or between $32,000 and $44,000 if you’re married, up to 50% of your benefits is taxable. If it exceeds $34,000 if you’re single or $44,000 if you’re married, up to 85% of your benefits is taxable.

Pensions. Payments from private and government pensions are usually taxable at your ordinary income rate, assuming you made no after-tax contributions to the plan.

Annuities. If you purchased an annuity that provides income in retirement, the portion of the payment that represents your principal is tax-free; the rest is taxable. The insurance company that sold you the annuity is required to tell you what is taxable. Different rules apply if you bought the annuity with pretax funds (such as from a traditional IRA). In that case, 100% of your payment will be taxed as ordinary income.

Financial Planning for the 40% Singles in the USA

Singles face different challenges at different ages, though many problems overlap. Here’s a look at some of the biggest financial threats.

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1. The Savings Crunch

Young people are getting married and having kids later. Couples who wait to have kids in their 30s end up with three big burdens all at once: retirement planning, saving for a house and saving for college. The solution is to start saving earlier in their 20s, says Katherine Roy, chief retirement strategist at JPMorgan Asset Management. But it can be tough for young single people to save anything at all, especially while maintaining a household and paying off student debt.

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2. Planning for Long-Term Care

The late 40s are the best time to start thinking about one of the biggest risks facing singles — the likelihood they’ll need long-term care. In most of the U.S., a private room in a nursing home can cost more than $100,000 per year, according to New York Life Insurance. People are less likely to be declined long-term care insurance coverage in their late 40s and early 50s, Roy says. An early start is especially important for women, who tend to live longer and thus pay higher long-term care premiums than men.

Singles — or married couples — who wait to buy until they’re in their 60s may find the insurance prohibitively expensive. In the last decade, premiums have skyrocketed and policies are covering less, warns Timothy McGrath of Riverpoint Wealth Management. Wealthy singles might be better off self-insuring, or exploring alternatives like longevity insurance. Others might be better off planning to go on Medicaid, says David Cutner of elder-care law firm Lamson-Cutner. In that case, trusts can be used to protect some assets, which otherwise must be spent before patients qualify for the federal health plan.

3. Divorcing Well

While the overall divorce rate has dropped, it’s doubled since 1990 for people over age 50. More women than men are initiating late-in-life divorces, an AARP survey suggests. And very often those divorces are destroying their finances. Along with the cost of the divorce, there’s the impact of dividing assets shortly before retirement. Many women make the mistake of bargaining to keep the family house, financial planners say, an asset that can be more of a long-term burden than a benefit.

4. Sharing End-of-Life Plans

Too much time and money is burned in courtrooms figuring out who should be a guardian for sick or disabled single people, Cutner says. That’s why aging single people need to make sure their documents, including power of attorney and health care proxies, are in place. (See The Right Way to Craft a Living Will.) Those who don’t want to rely on friends or family can hire a trustee to take on their finances in case they’re incapacitated.

The idea of dying alone can be terrifying. But many older people enjoy the single life. In interviews with more than 300 people living alone for his 2012 book “Going Solo: The Extraordinary Rise and Surprising Appeal of Living Alone,” sociologist Eric Klinenberg found many older singles, especially women, were just as happy and more social than married peers.

Ava, a retired bookkeeper in her late 70s interviewed for Klinenberg’s book, spends every weekend with a widower named Victor. But she insists she has no intention of marrying him or moving him into her apartment. “I really don’t have much much room here for a man,” she jokes. “I mean, I have no closet space! Where am I going to put him?”

Source: Yahoo Finance

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