Insights + Resources

Building a Healthy Financial Foundation

Dec 11, 2020

When you read about money matters, you will sometimes see the phrase, “getting your financial house in order.” What exactly does that mean?  When your financial “house is in order,” it means it is built on a solid foundation. It means that you have six fundamental “pillars” in place that are either crucial for sustaining your financial well-being or creating wealth.

#1: A savings account.

This is your Fort Knox: the place where you store and build the cash you may someday use for your biggest purchases. Savings accounts pay a modest interest rate. You should still consider having a savings account, even in today’s low-interest rate environment.

#2: A checking account.

This is your go-to account for everyday expenses, whether you pay your bills digitally or the old-fashioned way. Checking accounts pay a modest interest rate. Some accounts may have minimum balance requirements, so it’s best to read the new account information. Also, opening a checking account may lead to opening a credit card account at the same financial institution.

#3: An emergency fund. This bank account helps you deal with the unexpected. You know that label you see on fire extinguisher boxes – “break glass in case of emergency?” Only in a financial emergency should you “break into” this account. What is a financial emergency? Everyone’s definition varies, but they can be hospital bills, major car repairs, and unemployment.

#4: A workplace retirement plan account.

Some want to start saving for retirement as soon as possible. Workplace retirement plans offer an easy way to get started. In most plans, your contribution is made with pre-tax dollars.1

Money saved and invested in these accounts can grow. Over time, the compounding may become greater. Adding money each month is the “fuel” for your account.

Regular monthly investing does not protect against a loss in a declining market or guarantee a profit in a rising market. Individuals should judge their financial ability to continue making purchases through periods of declining and rising prices. The return and principal value of stock prices will change as markets change. Shares, when sold, may be worth more or less than their original cost.

#5: An Individual Retirement Arrangement (IRA).

This is a tax-advantaged retirement savings account that you own. Traditional IRAs have retirement withdrawals taxed, but not up-front contributions. Roth IRAs tax up-front contributions are taxed while retirement withdrawals are not.2

Traditional IRAs require mandatory annual withdrawals starting at age 72 and is taxed as ordinary income. Distributions taken before age 59½ are hit with a 10% federal income tax penalty. No mandatory annual withdrawals are required from Roth IRAs while the original owner lives. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawal can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Thanks to the SECURE Act, you may add to Roth and traditional IRAs all your life, as long as you meet the earned-income requirement for account contributions.2

#6: A taxable investing account.

This is also popularly called an investment account or brokerage account.  The invested assets are taxed each year. In an IRA or workplace retirement plan they are not. A taxable investing account gives you access to a wide range of investment products, which can help complement the other accounts in your financial foundation.

For additional insights and resources, be sure to sign up for our Weekly Market Commentary. Follow our YouTube channel where we regularly post our Epic Market Minute videos, follow us on LinkedIn, or like us on Facebook. And as always, please don’t hesitate to reach out to a dedicated service professional at Epic Capital.

Tags: , , , , , , ,

More Insights

Jan 15, 2021

When you lose a spouse, partner, or parent, the grief can be overwhelming. In the midst of that grief, life goes on. There are arrangements to be made, things to be taken care of – and in recognition of this reality, here is a checklist that you may find useful at such a time. If … Continue reading “Estate Planning Checklist for When a Spouse or Parent Passes”

Jan 11, 2021

The first week of 2021 has already had many ups and downs. Just because it’s a new year doesn’t mean that the 2020 issues go away, and so far, 2021 has been no exception to this rule. The markets opened on January 4 and traded lower out of the gate, with the S&P 500 dropping … Continue reading “2021 Opens With a Bang”

Jan 8, 2021

A new year offers a welcomed turn of the calendar and a fresh start. However, it’s difficult to put 2020 completely behind us just yet because the COVID-19 pandemic still presents a significant threat. Healthcare workers continue to perform heroically, while the rest of us must continue to make sacrifices until vaccines are widely distributed. … Continue reading “Market Update: 2021 Brings a Fresh Start”

Jan 6, 2021

After a bit of political posturing on stimulus details in December, the $900 billion Consolidated Appropriations Act of 2021 (2021 CAA) was signed into law by President Trump as the COVID-19 pandemic continues to impact employers and employees. Here’s a quick recap of five key highlights providing stimulus to those that need it:

Jan 4, 2021

Financially, many of us associate April with taxes – but we should also associate April with important IRA deadlines. From current and previous IRA contribution deadlines, to RMD deadlines, keep an eye on the calendar. April 15, 2021 is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts. Keep in … Continue reading “IRA Contribution Deadlines are Approaching”

Insights + Resources >