I recently refinanced my loan from 4.25% to 2.875% and lowered my loan time from 29 years to 15 years. While my monthly payment went up a bit, I am saving thousands of dollars in interest over the life of the loan. With such a low interest rate, it makes me wonder if I should try to pay off the loan early or invest my extra funds?
If you still use checks, buying new blanks is a necessary evil. Unless your bank gives you free checks, you have to spend money to be able to spend money. That seems like an archaic concept to me, who pays everything through credit cards and online bill pay. If you still do use checks, though, make sure you spend as little as possible to buy them.
It seems that every few weeks, I get a letter in the mail from one of my credit card companies with convenience checks inside. Those checks are a tool that lets you put a cash advance on your credit line, which is bad news for most of us. When I worked in banking, we would get checks like these every day written to max out a credit line deposited into a checking account. I couldn’t believe people would consider that!
Now that bonus season has passed, my net worth leveled off a bit and I am starting to make future plans for my debt and savings for the rest of 2013.
How quick another month has come and gone. Today I am getting ready to take off on my next international adventure. If you missed the memo, I am on the way to Israel for my cousin’s wedding. The total round-trip airfare cost: $140 each.
If you have any financial accounts anywhere, you have probably read about rolling over you old 401(k) retirement account to a new company that will “charge less” and help you “earn more.” While I am a big fan of moving an old retirement account when you leave an employer, it is important to take your time and make an educated decision.
Your Old 401(k)
First off, you have to look at where you account is today. How much do you have there? Is there a fee for the fund you have your money sitting in? Is there a maintenance fee? What is the total cost per year and cost as a percentage per year?
Using the free 401(k) analyzer at Personal Capital, a free site I use regularly to monitor my investments and investment fees, I found that I pay .67% per year to keep my investment in a variety of funds that meet my goals. That is a great, competitive rate, but it still means I am paying $85 per year to give Wells Fargo the pleasure of managing my retirement funds. That is an estimated 20% of my future earnings! If I were to leave, I could find lower fees managing the funds on my own.
If you are like me and don’t love the fees at your employer, remember to move things right away when you leave. It is worth keeping everything with the employer’s endorsed provider as long as you get a match on your contribution. If you have already found a new employer, it is time to move on and stop letting that bank take fees on your hard earned money.
Reasons to stay with old employer 401(k):
- Low fees/no fees (rare)
- No extra work (lazy person’s excuse)
Reasons to move on from your old employer’s 401(k):
- High fees (likely)
- Little control and few fund options
- No more contact with HR department where you used to work
Most often, the reasons to move outweigh the reasons to stay. If you are going to move, don’t just take the cash out and pay the tax penalty!!!! If you contributed to a retirement account, you got a big tax saving. Taking money out of a retirement fund early comes with hefty IRS penalties in the US, and I am sure similar penalties in Canada and other countries around the world (readers, please verify in the comments if you know). When you take out the funds, they have to go directly into a comparable retirement fund somewhere else or you have to pay up.
Rolling Over Your Old 401(k)
So, you are ready to move? Now it is time to research possible storage for your 401(k) in the future. Note that you can always move your 401(k) or IRA to another bank/broker, you are not limited to when you leave a job.
Googling 401(k) roll over gives you about 495,000 results and countless sponsored options. You see ads from places like TD Ameritrade, Charles Schwab, T. Rowe Price, Vanguard, Edward Jones, Sharebuilder/ING, E-Trade, and many more. You can use virtually any bank (not recommended) or brokerage (recommended). Here is a short list of my favorites:
1. Your Broker – You are probably there for a reason. If you are happy, explore retirement account options. You should be able to talk to an expert a sales person that can help you easily move your old account. Just be sure to ask about fees and investment options before you agree to anything.
2. Charles Schwab- Schwab is my broker, so it is a natural fit for me. I can invest for free in a whole slew of index funds and mutual funds with no trade fees and no maintenance fees. Like with any broker, it is up to me to monitor the fees the funds charge me. I have no reason to go elsewhere based on anything I have read.
3. Vanguard – One of the most popular firms with “low fee fund” options. Many other brokers offer access to invest in Vanguard funds as well. I have a large portion of my retirement funds in Vanugard funds through my Charles Schwab account.
4. Sharebuilder- If you are an investor bent on controlling the details and doing your own research, Sharebuilder offers low cost trades, so you can manage the account with fewer trading fees than other brokers. It is also easily funded through Capital One 360 (formerly ING Direct).
Remember that these are just a few of the many options you have for investing your hard earned retirement funds. Just be sure to do your research on fees and investment options before you sign up. I would love to hear what you use in the comments.
Originally published January 5, 2010. Updated April 29, 2013. Image by zoetnet / flickr
I got rid of my cable in January, 2010. It was a liberating and awesome moment. Cutting the cord is one of the easiest ways to save on home expenses. But when I tell people, they ask, “what about sports, what about new TV shows?” I don’t need sports or new shows, I’m happy with old shows. But if you are interested in keeping sports and new shows without cable at home, read on for a full breakdown.
Common wisdom in the personal finance world is to have an emergency fund. We all explain how important it is to have a fund that is big enough, but we never talk about when your fund may be too big.
I have several admitted weaknesses. I am a sucker for a hoppy craft beer, I can’t turn down a hot, fresh chocolate chip cookie, and I love a hot, fresh slice of pizza. Here are a few ideas to save a few bucks on your next slice.
Those of you who read my free money tips newsletter (which I suggest you do), know that I am about to take a trip to Israel. I spent the last few days working on lodging for the trip, and I want to share a few tips to save money on hotels when traveling.