What to Do If Your Company Doesn’t Offer a Retirement Plan

Working for a company with no retirement plans doesn't mean you can't create your own.

The ability to divert part of your paycheck to an investment account and build a nest egg is a huge advantage in the grand scheme of life. In fact, much of the American workforce relies on employer-sponsored retirement plans to do so.

But while we think of retirement accounts as part of a standard workplace benefits package, the reality is that not every employer offers a tax-advantaged retirement plan. The good news is that it’s possible to save for retirement on your own. Here’s how:

Start with an Individual Retirement Account (IRA)

If you have earned income, you are eligible to open an IRA. It’s possible to contribute up to $5,500 to an IRA in 2017. Individuals over the age of 50 can contribute an extra $1,000 each year to “catch up” on their retirement savings. There are two main types of IRAs to choose from:

Traditional IRA

When you contribute to a traditional IRA, you receive a tax deduction. Your investment broker will send you a statement at the end of the year so you know how much to deduct.

Because you receive a tax deduction now, you will have to pay taxes later when you withdraw money from your retirement account. You can start withdrawing money at age 59 and a half, and pay taxes on it at your marginal rate.

Note that if you or your spouse has a retirement plan through work, or if you have a higher income, your deduction eligibility phases out with a traditional IRA.

Roth IRA

With a Roth IRA, you make contributions with after-tax money, and the investments grow tax-free. So, you don’t get a tax advantage today, but you don’t have to worry about paying taxes on your future withdrawals.

Although this sounds pretty great, it’s important to note the income restrictions on the Roth IRA. Your ability to contribute phases out starting at $118,000 a year as a single filer in 2017. Once you reach $133,000 in income for the year, you can’t contribute to a Roth IRA at all. Instead, you might need to switch to a traditional IRA.

Choosing Between a Traditional & Roth IRA

Making this decision mainly focuses on your expected tax situation. If you think your taxes will be higher in the future, you can save money by paying taxes now at a lower rate and using a Roth IRA. However, if you think your tax bill will decrease later, try to avoid paying taxes today with the help of a traditional IRA contribution tax deduction.

Other IRA Options

Do you have a side gig on top of your full-time job? If so, use that as a reason to access some of the self-employed IRA options, such as SIMPLE IRA and SEP IRA accounts.

These IRA accounts often allow a higher yearly contribution than a traditional or Roth IRA. For 2017, the SIMPLE allows up to $12,500 in contributions each year with a $3,000 potential catch-up contribution. The SEP IRA has a limit of the lesser of 25 percent of your compensation or $54,000 for 2017.

Open Your IRA

Opening an IRA is relatively simple. You can open an IRA account with most online brokers and investors. Some even allow you to open an account with no minimum or opening balance. Other brokers might require a regular monthly contribution of $100 to create an account.

Many brokers offer access to low-cost index funds and ETFs for instant diversity and a reduction in fees. Set up an automatic transfer from your checking account into your investment account.

Consider talking to your human resources department to see if you can have part of your paycheck diverted to your IRA. Even if you don’t have an employee retirement plan, you can still passively generate savings for your future self.

See how debt affects your ability to save with a free credit report snapshot on Credit.com.

Consider the myRA

A few years ago, the government started an IRA alternative called the myRA. If you have a small amount to contribute, this can be ideal. You contribute as little as $5 per paycheck. Your tax-deductible contribution is invested in the Government Securities Fund. Your annual contribution limit and tax benefit is in line with a traditional IRA.

Once your account balance reaches $15,000, or after 30 years, you have to move the money into a private IRA. Plus, you don’t have as many choices for investing with the myRA. Your money has to go into the specified fund. Because the barrier to entry is so low, it’s a good starter retirement account as long as you plan to upgrade later.

Open a Health Savings Account (HSA)

Health care costs can present a challenge during retirement. One way to address this issue, especially if your employer doesn’t offer a retirement plan, is with the HSA.

Not only do you receive a tax deduction for your contributions, but also the money grows tax-free as long as you use it for qualified health-related costs. While you can use the money now, it’s a good strategy to let the money grow. Plan to use the HSA for health care costs during retirement to capitalize on long-term, tax-free growth.

Once you reach 65, you can treat your HSA like a traditional IRA (with most of the same rules). However, integrating the HSA into your overall plan by using it in conjunction with an IRA can help you maximize your assets during retirement.

Are You Eligible for a Solo 401(k)?

Another option for those with side gigs is the solo 401(k). If you have a side business on top of your work, and you don’t have any employees, you can take advantage of higher 401(k) limits by opening a solo 401(k). One advantage to the Roth solo 401(k) is that it doesn’t come with the income restrictions you see with a Roth.

A solo 401(k) comes with a very generous contribution limit. On the employee side, you can contribute up to $18,000 for 2017. Your business can also contribute a percentage of income (20% or 25%, depending on your type of business). For those 50 and over, contributions to a participant’s account, not counting catch-up contributions, can’t exceed $54,000

These accounts are harder to find than IRAs. You might need to speak with a specialty brokerage or your bank to open a solo 401(k).

Taxable Investment Accounts

Finally, you don’t have to limit yourself to tax-advantaged retirement accounts. Any regular brokerage account can help you save for retirement. Brokers such as Acorns and Robinhood can help you invest pocket change for the future.

When investing through taxable investment accounts, though, you need the discipline to avoid withdrawing the money before you retire. Taxable investment accounts don’t restrict your access in the same way, so it can be tempting to raid your retirement fund for today’s expenses.

Get Started Now

Regardless of your employer’s involvement, you need to make room in your budget for retirement savings. No matter how you go about it, the important thing is to start investing with retirement in mind. The earlier you start, the more time your money has to grow.

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How to Set Up Your First 401K

There's a lot to consider when saving for retirement. Here's what you need to know to get started with a 401K.

So you’ve decided to save for your retirement using your company’s 401K plan. Congratulations! It’s a great way to save. But now what? Which funds do you choose? How much should you contribute? Are there limits? How do your employer’s matching funds actually work? Can you access the money if you need it before retirement?

Obviously, there are a lot of questions that can arise when it comes time to set up your retirement savings, but we’re here to help. Here’s what you need to know to set up your 401K.

What Is a 401K?

The section of the U.S. tax code that describes these retirement savings plans is Section 401(k), thus the name. These plans let you invest pre-tax dollars directly from your salary, along with any additional investment made by your employer. Unlike an Investment Retirement Account (IRA), 401Ks are sponsored by employers, and, if offered at all, they must be made available to all employees of the company sponsoring the 401K.

Your employer does have the right to impose a couple of restrictions, however. 1. They can require that you work full-time for a period of time before eligibility, and 2., can also stipulate that you be at least 21 years old before enrolling. That’s why it’s always good to ask about eligibility when interviewing for a new job.

You Choose Your Investments

Most 401Ks are self-directed. That means you choose where to put your money from a list of funds made available through your 401K plan provider (Vanguard and Fidelity are two of the larger firms providing 401K funds). This can get tricky. Do you choose the safest investments that offer little risk but less reward? Do you opt for high growth? Targeted funds? Emerging market funds? What about bonds?

Obviously, you’re going to want to do some research, perhaps even talk to someone with some expertise. Most plan providers share details about the individual funds they offer on their websites, or at least have links to more details. Some even offer tools to help you choose which funds fit your needs, while others make real live people available for limited consultations. Seek out the assistance you need to fully understand what you’re doing with your savings.

You Also Choose How Much to Save …

There’s really no correct answer when it comes to how much to save, but certainly, saving as much as you can for retirement is a good idea. And if your employer offers matching funds (free money!) for your investments, you’ll at least want to invest the full amount they match. So, for example, if your employer matches up to 3% of your salary, you’ll want to invest at least 3%, though certainly you can invest more. Here are some tips on how to maximize your 401K.

… But There Are Limits

Federal law allows investors to put up to $18,000 into a 401K each year unless you’re over age 50, when you’re allowed to make an additional $6,000 in “catch-up” contributions.

If you’re in the lucky position of being able to save more than these limits, there are investing alternatives to your 401K that you may want to consider. These include IRAs, certificates of deposit (CDs) and even individual stocks if you’re familiar enough with the markets.

You Can’t Use Your Money …

Keep in mind that a 401K isn’t like a savings account. But for a few exceptions, you can’t withdraw your money before age 59½ without paying early withdrawal penalties and taxes. You can take a loan against your 401K if your employer’s plan allows for that, but only for specific purposes like education, medical reasons or first-time home purchases. Your repayments will come right out of your paycheck, making the process simple, but there are some dangers you’ll want to consider before borrowing against your 401K.

If you’re just starting out in the investing/saving world, you may want to consider putting a portion of your income toward an emergency fund that is easily accessed, carries no penalties and can get you out of a jam, like a giant car repair bill, when you need it.

… But You Can Take It With You

To another job, that is. When you leave, you won’t lose your investments, though you could lose contributions made by your employer. That’s because some employers require a “vesting period” for their contributions to your 401K. Essentially, it means you have to work for the company for a predetermined period of time before you can claim what they’ve given you.

When you leave, you simply set up a rollover IRA with your plan provider. Those funds can then either stay put in the IRA or be rolled over to your 401K with your new employer. You’ll want to compare the income history for the funds before deciding where the money will best serve you.

Retirement may feel eons away, but it pays (quite literally) to start early. Fortunately, we’ve got a full list of 50 things millennials can do now to retire at 65.  

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6 Tips for Gen-Xers Who Haven’t Prepared for Retirement

Here's how you can start saving for your future today.

An actor in New York City for most of his 20s, Aaron Norris got a late start on saving for retirement. It wasn’t until he became a 30-something that Norris finally began setting aside money, and he has spent the past decade playing catch up.

“I wasn’t even really cognizant of retirement,” said Norris of his thinking in his 20s. “I was just trying to make it work, and live, and stay out of debt.”

Norris’ story is not unique.

A study from the Transamerica Center for Retirement Studies found the median household retirement savings for Generation X (those born between 1965 and 1978) is $69,000. The same study found 40% of Generation X agrees with the statement: “I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date.”

But that attitude could have serious consequences.

Those who wait until they’re around 45 years old to begin saving for retirement are likely to end up with a retirement portfolio at age 65 of about $285,000, according to a report from Edward Jones. But those who start around age 30 and save about $550 per month while realizing a 7% average return will end up with about $990,000 — which let’s face it, would make many people feel a whole lot more confident about sailing off into their golden years.

The question then becomes what to do if you’ve started late. What’s the best approach for gaining ground as quickly as possible? Here are tips from experts.

1. Don’t Delay Any Further

This may sound like obvious advice, but start saving now.

“Don’t view it as ‘I’m so far behind what’s the point?’ or ‘I have to save so much it’s unrealistic to even bother,’” said Scott Thoma, principal and investment strategist for Edward Jones.

Starting now is the most important thing you can do and the obvious first step.

2. Get Financial Therapy (i.e. Develop a Strategy)

Generation X, Generation Y and Millennials start building wealth later in life. Often that’s because they opt for experiences over settling down and accumulating money, said Norris, now a California-based real estate investor.

“We don’t buy houses so that we have the freedom to move,” said Norris. “But we certainly don’t have access to the same golden parachute retirement plans our parents enjoyed. So sit down with a good CPA and look at what you want your financials to look like when you retire…Some good financial therapy will go a long way toward helping set goals and priorities.”

Thoma, from Edward Jones agrees. He refers to it as “developing a strategy.”

People often settle on a random number they think is a good amount of money to have for retirement, without any idea how they’ll reach that number or how long that money will last.

Pro tip: You’ll be able to save more for retirement if you’re not paying a lot in interest on auto loans, mortgages or credit cards. You can get the lowest interest rates possible by having solid credit scores. (Want to check your scores? You can view two free, updated every 14 days, on Credit.com.) If you don’t, here are some tips for getting your credit back on track.

3. Max Out Your 401K Contributions

Contributing large sums to a retirement account can often be a challenge for a generation whose members face both raising children and caring for aging parents, but here are some basic rules of thumb to keep in mind.

If your employer offers a match for your 401K contributions, contribute at least up to the match amount. If you don’t, you’re leaving free money on the table.

If you’re in your 40s and have zero saved for retirement, and you’re aiming to replace 80% of a $60,000 annual salary upon retirement, it will require setting aside 25% of your pay right now, said Thoma. This scenario assumes retirement at 65 years old.

While 25% may seem like a lot, this percentage includes any employer contributions to retirement, said Thoma. It’s also based on the assumption that the individual is not supplementing their income in retirement with other sources of income, like working part-time.

Keep in mind: If you make more than $72,000 you won’t be able to put that total 25% into your 401K because annual contributions are capped at $18,000. If that’s your situation, you need to look into other investment vehicles like individual retirement accounts, certificates of deposit or buying shares directly. Talk to a financial professional to help decide the best option.

4. Consider Switching Jobs

Generation X is famous for living in the “now.” That approach to life even impacts the job choices, says Norris.

The gig economy, which provides the freedom to work from anywhere in the world, and work only when you want to, has become a popular option among this generation. But when it comes to preparing for retirement, the gig economy is probably not the best career choice.

Norris advised asking whether taking a more stable job might pay off more in the long run.

Roslyn Lash, a North Carolina-based accredited financial counselor, suggested seeking out companies that offer a pension. Options include government entities and school systems, she said.

5. Move

If you’re spending 50% to 60% of your take-home pay on rent, you’re wasting a lot of money, said Norris.

“You get nothing but the benefit of a roof over your head when you’re renting,” Norris said. “Consider moving to a location that will allow you to save more.”

6. Have a Flexible End Point

Delaying retirement even just a few years could have a considerable impact on your potential income. For instance, every year you continue to work adds 8% to your Social Security income, said Thoma.

“Not only will it provide you with more years to save, it also provides more years to earn Social Security credit,” said Thoma. “Doing this also means you will have fewer years of retirement to provide funding for.”

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Can I Still Contribute to an IRA & Get a Tax Break for 2016?

Can you contribute to your IRA and still get a tax break? Here's what you need to know.

Individual Retirement Accounts (IRAs) are an excellent means to save for retirement. You have until the tax-filing deadline (generally April 15) to make a contribution to your IRA for the previous tax year.

There are two types of IRAs: Traditional IRA and Roth IRA. The maximum contribution is the lesser of $5,500 ($6,500 for those aged 50 and over) or your earned income. This is a combined limit for all IRA contributions in a year (in either or both types). In order to contribute to a Traditional IRA, you must be under age 70½, but you can contribute to a Roth IRA at any age. You can learn more about IRAs here.

Whether you can contribute to an IRA and how much you can contribute depends primarily upon two factors: 1) your Modified Adjusted Gross Income and 2) whether you (or your spouse) participate in an employer-sponsored retirement plan.

Adjusted Gross Income (AGI) is the number listed on line 37 at the bottom of the first page of your Form 1040. In order to determine IRA contribution limits, AGI must be adjusted by adding back certain items that were deducted to arrive at AGI. Items added back to AGI include deductions taken for traditional IRA contributions, student loan interest, college tuition and fees, and some other less common items. The final result is Modified Adjusted Gross Income (MAGI).

Here’s how to know if you can deduct your IRA contributions this year.

Traditional IRA

While anyone under age 70½ with earned income can make non-deductible contributions to a Traditional IRA, deductible contributions are not as certain. If you are single and not covered by a plan at work or you are married and neither you (nor your spouse) have a plan at work, then your full contribution up to the annual limit is deductible.

However, if either you (or your spouse) participate in an employer retirement plan, your deductible IRA contributions may be limited or even completely eliminated. To determine if you are covered by work, you can look at your W-2. If there is a check next to “Retirement Plan” in Box 13, then you are covered. This chart on the IRS website illustrates deduction limits for both single and married taxpayers covered under an employer’s plan at work.

Roth IRA

While there are no age restrictions on who can contribute to a Roth IRA, there are income constraints that must be observed. Unlike Traditional IRA rules, Roth IRA regulations do not consider whether you have an employer plan. The only factor is your MAGI. Again, you can find the chart showing the income levels that affect Roth IRA contribution limits on the IRS’ website.

Kay Bailey Hutchison Spousal IRA

A Spousal IRA is not a third type of IRA but a provision for spouses without enough earned income to fully fund a Traditional or Roth IRA on their own. Named for the former United States Senator from Texas, the Kay Bailey Hutchison Spousal IRA allows a spouse with little or no earned income to have his or her own IRA account by qualifying with the working spouse’s income.

The Spousal IRA limits are the same as the Traditional and Roth limits ($5,500 or $6,500 if aged 50 or over). So the total combined contributions for both spouses are $11,000 or $13,000, if aged 50 or over. The working spouse must have earned enough money to fund both contributions.

Saving for retirement is more important than ever. (You can see if you have enough shored up here and keep tabs on your finances by viewing two of your credit scores, with updates every two weeks, on Credit.com.) If you don’t have a retirement plan, it’s never too late to start one. But knowing the rules is a critical step for a successful plan. Tax laws are complicated, and penalties for mistakes can be costly. Make sure you seek out the guidance of a tax professional before making important financial decisions.

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Got Extra Cash? Here Are 11 Smart Purchases Under $400

Here's a list of smart purchases you should never feel bad about buying.

There’s always a lot of talk about how to be financially responsible and increase wealth with very little money. Many Americans live paycheck to paycheck. But put some real numbers behind that generic statement. The Bureau of Labor Statistics Consumer Expenditure Survey of 2015 reports an average household income per consumer unit (think entire household of family members or single, financially independent people living alone or with other people) is $69,629. And the consumer’s unit average yearly expenses is $55,978.

Let’s say you dedicate those yearly expenses to standard things, such as food, housing, transportation and insurance. While the actual percentage breakdown per expense differs from household to household, depending on your family picture, you’ll still be dedicating a good chunk of your income to various necessities each month.

If we continue with this logic, the money you have left over — that unreasonably small portion of your salary that remains after paying bills — is what many would dub “play money.” The average consumer unit will have about $13,000 a year to play. (Speaking of “play money,” here’s how to stop buying stuff you can’t afford.)

With all that extra cash, what can we do? Of course, we could blow it on a steak dinner or splurge for the newest tech gadget. But what are a few smart items we should buy when we have the opportunity? We’ve compiled a list of smart purchases you should never feel bad about buying. And the best part? They’re all less than $400.

1. Student Loans

The average recent graduate has about $37,172 in student loan debt and pays about $351 per month toward the loan, according to Student Loan Hero. For those who are super strapped for cash, they might choose to defer their loans to a later date or skate by paying just the minimum. But the interest will kill you. One of the smartest things you can do with extra cash is to pay more into your loans when you can afford to do so. It’s a solid bet that added expenses will pop up eventually, and staying ahead of the curve means one less financial burden down the road. (Check out some tips for paying off your student loans here.)

2. An Interview Suit

Even if you’re not in the job market, investing in an interview suit is a wise decision. You never know when you’ll need a go-to outfit for networking events, conferences or a random “I’ve got someone I want you to connect with” meeting. Shopping for the perfect outfit is a lot more bearable when you’re not under duress or in a time crunch. Instead, you can browse for sales. You’ll find cheaper options in many locations, but a nice suit should put you right around that $400 mark. (What else can you do to get yourself ready for a job interview? Check your credit — many employers look at a version of your credit as part of the application process, so it’s helpful to know where yours stands. You can see two of your credit scores — absolutely free — on Credit.com.)

3. A Durable Mattress

What does anything matter if you don’t get a good night’s sleep? When you have extra cash at the end of the month, put it toward a high-quality mattress that will ensure you wake up ready to tackle each morning with spunk. High-quality mattresses come at a price. But they also last for years. You could spend thousands on a name-brand mattress, but a foam mattress from IKEA could work just as well.

4. Digital File Protection

External hard drives and online storage are perfect for backing up all those vacation shots, your wedding album and imperative side-business files. Hard drives are easy to find online, and they’ll run you about $82 for one with worthwhile storage capacity. Online storage pricing varies when it comes to options and personal preferences, but you can choose between services, such as Mozy, Dropbox or SugarSync. These cloud-storage providers charge a monthly fee but give discounts for yearly subscriptions. Expect to pay between $28.98 and $99.99 per year.

5. Online Classes

The most successful people will tell you learning never stops. As workforce trends continue to change, the need for specialized expertise grows. Devoting a few extra bucks to improving your knowledge is a practical expense. Maybe you want to become a better public speaker. Or pick up a new hobby to clear your head at night. And maybe you’ve heard tech gurus ramble about an increasing demand for coding professionals. Buy books, go online and enroll in a course. Do whatever you can to set yourself up for future success.

6. A Commuter Bike

Why spend what you could save? One of the smartest purchases you can make with $400 or less is a commuter bike. When considering what you’d also pay for gas, maintenance and car insurance, a commuter bike will pay for itself. There are definitely good, better and best when it comes to bikes, but you could find a quality road bike for around $300.

7. An Emergency Fund

It’s never a bad idea to start establishing an emergency fund. Experts say three months’ worth of expenses is a reasonable amount of cash to stash away just in case. A good trick is to make your savings automatic. Once you’re unable to see your money coming in, it’s easier to get by without it and find ways to work with what you have. Then, when you break your arm doing back flips off a boat or blow a radiator in your car, it’s covered.

8. Retirement Savings

Expanding on the previous point, try to accumulate as much wealth as you can for early retirement. Consider creating a moderately aggressive investment plan by opening IRAs, 401K accounts, brokerage accounts, etc. Take advantage of your employer opportunities and set up automatic contributions to your company’s 401K plan. Start at a respectable 3% contribution, and gradually increase it until you get to at least 10%. When in doubt, seek a fiduciary financial planner.

9. Solid Clothing

Some of us find it absolutely insane to buy a pair of jeans that cost more than $39.99. However, quality clothing items, such as boots and winter coats, hold up over time. And the money you shell out is worth it later. Reddit’s Buy It for Life adheres to this philosophy. This subreddit aims to “emphasize products that are durable, practical, proven and made to last.” It might seem insane to pay $219 for insulated L.L. Bean Duck Boots, but you’ll be grateful when they’re still keeping your toes warm and dry 10 years later.

10. A Coffee Maker

Does life really exist without coffee? Another smart purchase is to invest in a solid coffee maker. If you fancy those specialty drinks, you could buy a combination machine from DeLonghi for $162 on Amazon. Considering the price of specialty drinks from coffee shops — and our dependency on caffeine — this is a purchase that will pay for itself in a matter of weeks.

11. Various Fitness Programs

There’s no safer bet than to invest in your health. Health equals wealth, right? Whether you buy a treadmill for $399.99 or invest in various meal prep services popular for those always on the go, they’re all worthwhile expenses.

Depending on your employer, you might also be eligible to receive reimbursements for health-related expenses, such as gym memberships, fitness classes or playing in sports leagues. While you’re at it, look into other reimbursement programs you might be eligible for, such as cellphone plans, moving costs or professional-development classes.

This article originally appeared on The Cheat Sheet.  

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The Credit Card That Can Help You Save for Retirement

If you’re serious about long-term savings — whether for your retirement, your child’s college fund or both — you already know you need to do more than just save your pennies. You need dollars, and lots of them.

So, what if you could put a percentage of every purchase you make on your credit card into one of those investment funds? Would you do it? If your answer is yes, you may want to take a look at the Fidelity Rewards Visa Signature card from Fidelity Investments, because that’s exactly what this credit card does.

What Is the Fidelity Rewards Visa Signature Card?

The Fidelity Rewards card offers cardholders a very straightforward 2% back on all purchases, simple as that. Your reward is then deposited directly into a Fidelity account. For every $2,500 spent, a deposit of $50 is made into the investment account of your choice, and you can choose from a variety of accounts that meet your savings goals. Want your money deposited directly for retirement? Fidelity can put your 2% right into a traditional, Roth, rollover or SEP IRA. (Not sure what an IRA is? No worries: We have a full explainer on individual retirement accounts right here.) You can’t deposit directly into a 401K, however.

Prefer a brokerage account? No problem. For certain cardholders, there’s also the option of depositing your rewards into a 529 college savings account.

Of course, you can choose to spend your rewards instead of investing them, but the redemption value is lower if you choose to redeem your points for other rewards. The exact redemption rate varies, depending on how you cash in, a Fidelity spokesperson said. For instance, if you redeem rewards for retailer gift cards, the rate is .5% (10,000 points for $50 gift card).

No Spending Categories & No Limits

Not only does the Fidelity Rewards card making saving easy, there are no special spending categories and no limits or caps on the amount of rewards you can earn. Plus, the card’s variable 14.99% annual percentage rate means carrying a small balance every now and then won’t necessarily wipe out the rewards you earn. (Friendly reminder: It’s still important when using a rewards credit card to try your very best not to.)

New cardholders can get a $100 bonus after spending $1,000 in the first 90 days, but the funds must be deposited directly into a qualified Fidelity account. Qualifying accounts for both the regular rewards savings and signup bonus include:

  • Fidelity Cash Management Account
  • Fidelity-managed 529 College Savings plan
  • Retirement account
  • Fidelity Go account 

The Fidelity Rewards card also comes with all the benefits provided through the Visa Signature platform, including:

  • Auto rental collision coverage. Rent your automobile with your Fidelity Rewards card and you can waive the rental agency’s collision coverage.
  • Emergency assistance while traveling. Find the help you need when you’re on the road.
  • Purchase protection. Extra coverage for the things you buy with your card, including reimbursement for damage or theft.
  • Warranty manager service. This service helps you keep track of the warranties on the items you purchase with your card.
  • Lost luggage reimbursement. This service covers lost or stolen baggage.
  • Travel accident insurance. This coverage will help if you’re injured while traveling.
  • Roadside dispatch. Need a tow? Locked yourself out of your car? This pay-per-use service offers many benefits, including emergency roadside assistance.
  • Visa Signature Concierge. Access to 24-hour complimentary assistance with everything from booking travel to getting concert tickets.

Is the Fidelity Rewards Visa Signature Card Right for You?

Even if you like the idea of of a card with no annual fee that lets you earn 2% on every purchase you make and then directly invests that money toward your savings goals, the Fidelity Rewards card isn’t for everyone. Here are a few things to keep in mind as you weigh your decision:

  1. Do you have a Fidelity investment account? If you don’t, you’ll want to keep in mind that you can’t use your rewards as a deposit to establish a new Fidelity account. Rewards can only be deposited into existing accounts.
  2. Do you have excellent credit? To qualify for the Fidelity Rewards card, you’re going to need excellent credit. If you don’t know what your credit score is, you can get your two free credit scores, updated every 14 days, right here on Credit.com using our free credit report snapshot. It provides personalized details on how you can improve your scores, including a timeline of how long it will take to do so, across five key areas affecting your credit scores. It also provides you with a personalized list of some of the credit cards you would qualify for.
  3. Do you prefer investing over perks or cash back? If you travel a lot, whether for work or play, you might prefer some of the benefits that travel rewards cards offer, like free upgrades, free hotel stays, waived baggage fees and other non-monetary perks. Likewise, if you’d like more flexibility in what your rewards can be used for, a cash-back rewards card might be better for you.
  4. Can you get higher rewards with another card? If you want more flexibility than the automated investing inherent with the Fidelity Rewards card allows, there are cards that offer higher rewards (for example, the American Express Blue Cash Preferred gives a whopping 6% cash back on up to $6,000 in purchases per year at U.S. supermarkets), so the automated investing aspect should be particularly important to you.

Remember, whenever you’re shopping for a rewards card, it can really pay to keep your spending habits and rewards goals in mind as you compare cards. To get started, you can check out our list of the best cash back credit cards. And, no matter what type of plastic you’re on the hunt for, you can reference our expert guide to getting the best terms you possibly can on a credit card.

At publishing time, the American Express Blue Cash Preferred credit card is offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment. This content is not provided by the card issuer(s). Any opinions expressed are those of Credit.com alone, and have not been reviewed, approved or otherwise endorsed by the issuer(s).

 

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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How to Protect Your Money Under Trump’s Financial Regulation Changes

An executive memorandum signed by President Donald Trump on Feb. 3 is aimed at consumers’ retirement accounts and will impact a majority of Americans almost immediately. The memo might delay, potentially forever, the so-called “fiduciary rule” that would have legally bound financial advisers to give retirement savers the best advice possible.

Critics lashed out, claiming the memo was a gift to Wall Street, as it threatens to roll back rules designed to protect Americans’ retirement accounts instituted in the wake of the financial crisis, when some savers saw their account balances drop by 25% in a single year, according to an estimate from Hewitt Associates. But supporters say those rules were flawed, and that this cure for the financial crisis was worse than the disease.

Investors’ Best Interests Could Take a Back Seat

If you are looking for a bottom line, here it is: Financial advisers could be let off the hook from higher standards that were about to be placed on the advice they give investors. Those standards would have opened up advisers to lawsuits if they gave advice to clients that put their own commissions above their clients’ best interests.

But at least some of the intended effect of the rule may still happen. Because the rule was years in the making, and just weeks away from taking effect, many brokerages have said they’ve already implemented the changes it required. Some are even using the moment as a marketing opportunity.

In practical terms, the new rules discourage advisers from offering commission-based products to buyers, so some firms, like Merrill Lynch and JP Morgan Chase, were moving away from commission-based IRAs. That change will probably continue.

For now, the memo also means consumers must be vigilant and ask financial advisers, “Are you getting a commission?” when taking their advice.

Consumer advocates spent years working to get the federal government to enact a rule that targets these potential conflicts of interest. They finally made progress in 2010 when the Labor Department, which regulates some retirement accounts, initially proposed a fiduciary rule. After years of bickering with the financial industry, the Labor Department finally settled on the rule in April 2016. It was set to take effect this April.

Only retirement accounts were to be covered by the rule; normally taxed brokerage accounts were not. The rule would have covered certain financial advisers who use titles like wealth manager, investment consultant or broker; certified financial planners are already required to meet the fiduciary standard.

Many consumers don’t realize that current rules mean some advisers can legally steer clients into high-commission products when better, cheaper options exist. The Obama administration, which supported the Labor Department rule, issued a report last year claiming that less-than-best advice to savers costs Americans $17 billion annually in retirement funds.

Undermining Consumer Protections?

A second financial-related executive action signed by Trump last week may have even farther-reaching consequences, but they won’t happen right away. That order called for a review of financial reform legislation known as “Dodd-Frank,” which passed after the housing bubble burst. Its numerous protections included tighter monitoring of the stability of banks and creation of the Consumer Financial Protection Bureau. Trump’s order calls for the Treasury Secretary to review the law and recommend changes within 120 days.

Advocacy groups said that taken together, the two orders threaten to undermine a host of new rules put in place to protect consumers.

“President Trump’s comments and executive order today suggesting rollback of financial regulations would violate his campaign promises to hold Wall Street accountable and to help everyday American families,” said Christine Hines, Legislative Director of the National Association of Advocates, in a statement. “We must never forget that the reckless behavior of big banks and predatory lenders and the lack of safeguards to hold them responsible for their actions caused the Great Recession, leaving millions of Americans without jobs, wiping out their savings, and causing devastating loss of their homes.”

A draft of the fiduciary rule memo called for a 180-day delay of the rule and a review by the Labor Department. The order actually signed by Trump omitted the language calling for immediate delay, but that’s still a likely outcome. Acting U.S. Secretary of Labor Ed Hugler made that clear in a statement:

“The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum,” it read.

The memo was cheered by some on Wall Street. Discouraging commission-based products hurts smaller investors who don’t like paying up-front fees, they argued.

“Americans are going to have better choices and Americans are going to have better products because we’re not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year,” said National Economic Council director Gary Cohn to the Wall Street Journal. “The banks are going to be able to price product more efficiently and more effectively to consumers.”

But consumer advocates were unanimous in their condemnation of the review, saying it could remove a critical tool for protecting unsophisticated retirement savers.

“If the Department of Labor follows through on this threat and delays and repeals the rule, brokers and insurance agents will be free to go back to putting their own financial interests ahead of the interests of their clients, recommending investments that are profitable for the firm but not the customer,” the Consumer Federation of America said in a statement. “And they will be permitted to do all this while claiming to act as trusted advisers.”

Sen. Elizabeth Warren (D-Mass.), said in a statement that the review “will make it easier for investment advisors to cheat you out of your retirement savings.”

“Donald Trump talked a big game about Wall Street during his campaign — but as President, we’re finding out whose side he’s really on,” she said.

Retirement savers should know that the immediate effect of the Trump memo means advisers can continue to give out bad advice that’s compromised by commission structure; the rule that remains in effect now requires only that the investment is “suitable.” That might sound like a small distinction, but John Bogle, the man who popularized low-cost index funds, put it in context in an interview with Business Insider at the end of December:

“Fiduciary means putting the client first, and as I have observed in the past, the only other rule we have is the client comes second,” Bogle said.

The Trump administration did not immediately respond to requests for comment on how the actions would affect consumers.

How You Can Protect Yourself

Before making any investment decision based on an adviser’s recommendation, always ask if he or she will earn a commission. When picking an adviser, ask if their firm accepts fiduciary responsibility. Even if it’s not legally required, advisers can voluntarily accept the fiduciary standard. But make sure you get that in writing.

It’s also wise to monitor your financial goals, like building and maintaining a good credit score, which you can do for free here on Credit.com.

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How to Get the Most From Your 401K

how-to-build-your-401k

Perhaps you’ve heard of 401Ks or already contribute to one, and you’re intrigued about how you can use them to fund your retirement. These employer-sponsored plans are there to help you do just that, so it’s in your best interest to take advantage of one, especially if your company offers saving incentives, like a company match. We asked Robert Dowling, a financial planner with Modera Wealth Management in Westwood, New Jersey, who’s worked with high net worth individuals for 18 years, for tips on getting the most from your 401K. Here’s what he said.

1. Contribute More Than 3%

Most people who sign up for a 401K start out by contributing 3% of their salary, Dowling said. But if your budget can handle it, it wouldn’t hurt to raise that percentage, even just a bit. “Try to participate as much as you can without putting yourself in dire straits,” he said, noting the danger of overspending. Over time, your savings will thank you. (Concerned that your spending is out of control? You can get a sense of where your debts stand by viewing two of your free credit scores on Credit.com.) “We suggest every year to work it into your expectations to increase your contributions by 1%,” Dowling said. Some plans even allow you to fill out paperwork so your contributions rise automatically.

2. Enroll in Your Company’s Match 

“Take advantage of your company match to maximize company contributions,” said Dowling. “It can be quite powerful.” And besides, it’s free money!

3. Know Your Company’s Vesting Schedule 

While taking advantage of your company match can help you boost contributions, you won’t get far if you leave the company before they’ve vested — i.e., the company’s given you ownership. “What a company will say is, We will reward you with matching contributions, however, we want you to work for us for a certain period of time,” Dowling explained. So it’s important to know what that schedule is, especially if you’ve got one foot out the door. With the schedule in mind, you’ll be able to ask yourself if it makes sense to forfeit the company’s share of your savings rather than stick it out.

4. Play Catch-Up With Your Contributions

Those under 50 can contribute a maximum amount of $18,000 to their 401K every year, said Dowling. However, if you’re 50 or older, that maximum jumps to $24,000, meaning you can contribute an extra $6,000. “Sometimes folks aren’t aware of that,” he said, so “we remind clients to start their catch-up contributions,” as the provision is called, “early.”

5. Sock Away Your Bonus  

When someone says “bonus,” we can’t help but think of steak and fancy nights on the town. But the fact is, the more you can contribute to your 401K early on, the better prepared you’ll be for whatever life throws your way later, Dowling said. Also, if you’re having a hard time making those weekly, bi-weekly or monthly contributions, what better way to get a leg up than by throwing your bonus right into retirement savings? Bonus points if you tell HR that’s your plan, Dowling said, since companies tend to view this as a longterm benefit. You can even ask to have the bonus direct deposited into your account.

6. Take Out a Loan 

Though we’d never recommend borrowing money you can’t afford to pay back, it is helpful to know you have the option to borrow against your 401K. According to Dowling, some programs allow this, and you can take out up to $50,000. Rather than pay interest to a creditor, with a 401K you pay it back to yourself by putting the money in the plan, Dowling said. There can be penalties for defaulting on these loans, so make sure to do your research before choosing this option.

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Makers vs. Takers: Is Wall Street Driving Income Inequality?

Rana-Foroohar

Rana Foroohar’s new book, “Makers and Takers,” is a first-class takedown of the ways many American firms make money today. The book’s subtitle, “The Rise of Finance and the Fall of American Business,” argues a sad paradox: Some people make money by making things. Others make money by playing financial tricks with stuff the first group makes.

In the late 20th century, some clever folks on Wall Street realized it was far easier to make gobs of money doing the latter. It wasn’t long ago that Goldman Sachs was accused of boosting Coca-Cola’s profits by hoarding aluminum and forcing its price higher. (Goldman told the New York Times, which reported the news in 2013, it was in compliance with all industry standards.)

A massive system of this kind of speculation was put in place, creating wild profits for “financial innovators” and bubble swings for everyone else. But more fundamentally, the rewards for hard work are arguably steered toward the wrong people — the takers, not the makers — and that has contributed to the growing income inequality problem threatening the American social fabric.

In her book, Foroohar calls this development “financialization.” I asked her to explain what that could mean for consumers and the future of American business.

Bob Sullivan: What is financialization, and what does it mean in the (real or perceived) conflict of Wall Street versus Main Street?

Rana Foroohar: Financialization is the growth in size and power of the financial sector — it creates only 4% of the jobs in this country but takes 25% of all corporate profits, is regularly one of the top three industry lobbying forces in Washington, D.C., and has come to dictate the terms of American business, which results in a corporate focus on short-term profits rather than long-term economic growth.

B.S.: Is there a connection between financialization and what I’ve seen you call the “falling down” problem, where older workers lose their jobs and have to settle for lower salaries in their new jobs or worse?

R.F.: Yes, the neo-liberal philosophy of letting capital go wherever it will — which is usually where labor is cheapest — is a crucial part of how financialization works. Unfortunately, it leads to greater inequality and slower growth as wealth is funneled to the top of the economic pyramid. Over the last 40 years, the rise of finance has correlated with fewer startups, less [Research & Development] spending, flat wages and lower economic growth.

B.S.: A generation or two ago, if you asked parents what they hoped their kids would become, they’d give answers like doctors, pilots or perhaps engineers. Today, that’s a harder question to answer. App developer doesn’t sound as secure or prestigious. How would you respond?

R.F.: Well, today, parents might say they want their kids to be a financier — in fact, it’s the number one job choice for MBA grads, in part because wages in the financial sector have so outpaced those in other fields as a result of the monopoly power of the financial industry.

B.S.: Just what are they teaching in those MBA programs?

R.F.: Balance sheet manipulation. As I explain in chapter 3, (one) of the biggest complaints that business leaders have about MBA education today is that it has become too focused on the short-term engineering of capital rather than innovation, industrial expertise or a real understanding of how to nurture human talent.

B.S.: Uber-rich social commenter Nick Hanauer has famously said, and repeated, that income inequality could eventually lead to an ugly pitchfork scene. Is that where the makers-and-takers world is headed?

R.F.: If we don’t fix things, for sure. I’m a big fan of Thomas Piketty, and as he sketched so clearly and powerfully in his book, greater income inequality eventually leads to political and social instability. It doesn’t have to be that way, though. As I talk about in my book, there are countries and communities that have found better, more sustainable ways to grow. Private companies in the U.S., for example, that aren’t under pressure from the financial markets, invest about twice as much into productive things like factory upgrades, worker training and R&D as similar public companies do.

B.S.: Many Main Street Americans will be hearing these concepts for the first time, and it will make them feel helpless, like a game where the rules are a secret. How can they respond?

R.F.: The most direct way to respond to the problem of financialization is via our retirement savings. Asset management is the fastest growing and one of the most exploitative areas of the financial sector. Actively managed funds that have higher than average fees and lower than average returns can eat up 30 to 60% of our retirement nest egg over our lifetimes. Put your money in an index fund, and forget about it.

[Editor’s Note: If you’re eager to save for retirement, but debt is holding you back, you can see how long it will take to pay it all off with this calculator. And you can monitor your financial goals, like building a good credit score, for free each month on Credit.com.] 

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