Safe IRA News
The year 2014 was a mixed picture for investors. Stock market indexes hit record highs, short-term interest rates sat near historical lows and, while the U.S. economy continued to show signs of growth, the broader global economic landscape remained uneven.
At Vanguard, our focus remained squarely on our investors. In the post-great-financial-crisis era, investors have been faced with a crosscurrent of information about the markets, the economy, and the changing regulatory environment.
We’d like to share 5 themes that we believe will be critical to investors’ success in 2015 and beyond.
Traditional and Roth IRAs offer tax advantages that can help you maximize your retirement savings. If you’re age 50 or older, you have an additional opportunity to save more in a tax-advantaged IRA—”catch up” contributions. Catch-ups let you save up to $1,000 more of your earned income in your IRA. For 2014 and 2015 that’s a total of $6,500.
“Anytime you can save more for retirement and get tax advantages, we believe you should jump at the chance,” said Maria Bruno, a senior investment analyst with the Vanguard Investment Strategy Group.
You’ve pictured walking up to your front door, opening it, and stepping across the threshold into a place you own. Now you’re finally ready to make the leap and buy your first home. td ameritrade site down It’s exciting—and probably a little nerve-wracking too.
Here are a few things to keep in mind to help you stress less as you get ready to become a homeowner.
Start a house savings fund
You’ll want to have a decent-sized down payment already set aside before you start house hunting. Aim to have at least 20% of your home’s purchase price saved, so you can avoid the added expense of private mortgage insurance (PMI).
Most lenders require you to pay PMI until you build up the equity—the amount of the home you own as opposed to your mortgage lender—to that percentage.
You’ve paid all your monthly expenses and find you’ve got a surplus that you can use toward your financial goals. Maybe you’ll increase the amount you invest. But then you think paying down your student loan debt faster than your required minimum payments is also a good idea.
Which one makes more sense for you? Ultimately, there’s no right or wrong answer—just the one that best fits your unique circumstances. Here’s how to evaluate each option and determine the steps you feel confident taking.
Where to start: Interest rates versus portfolio returns
When trying to decide whether to invest a sum or use it to pay down student debt, a common starting point is to compare your student loan interest rate with your expected portfolio returns based on your asset allocation.
The Federal Student Aid office of the U.S. Department of Education reported student-loan interest rates ranging from 3.86% to 6.41%. And the chart below provides a range of potential return distributions, generated by the Vanguard Capital Markets Model, for balanced portfolios of varying degrees of risk.