What Is a Signing Bonus

You are looking at multiple job offers, and under one of the perks of one of them you see the phrase “signing bonus.” Although you know that a bonus is good, you may not understand what word “signing” means in this context. If that’s the case, then we have got you covered!

What Is a Signing Bonus?

A signing bonus is an award amount that goes directly to a worker who signs on to a new job. A signing bonus is typically a one-time incentive that companies use to make their job offer more attractive. A signing bonus assists a company in some ways:

·         May make their offer more attractive than another company’s offer

·         Is only a one-time bonus rather than a permanent salary bonus

·         Can be a bonus that only takes effect after a certain amount of time

Is a Signing Bonus Immediate?

Although all signing bonuses are given to the candidate immediately after they sign on to the job, when it is actually the employee’s bonus is entirely dependent on the contract that someone signs. In some cases, the bonus is immediately gifted to the new employee at the time of their taking the offer. However, other companies may set up a bonus that goes with the first paycheck that the employee earns. Yet, some signing bonuses can be taken back by a company if the person leaves or is fired before their probationary period. Therefore, a signing bonus may not stay in the candidate possession if they leave the company before a certain date.

Although signing bonuses are a perk, creating an investment plan can lead to a much bigger payday. If you are interested in investing but don’t know where to start, check out our website for more information!

Loan Tips for Recent Graduates

Your college career has ended, and you probably had some great times. However, now that you are done with school, it is time to think about next steps—one of them being your repayment plan for your school loan. Although your loan principal may be high, some tips can help you out.

Loans Are Typically in Deferment Until Six Months After Graduation

Many students worry that their loans will go into repayment immediately after graduation; however, that is not the case. For almost all of your school loans, private and government funded, there will probably be a time of deferment. This deferment period is a time after graduation where your loans are not yet in repayment, which means you don’t have to rush to find a job due to repaying your loans. Typically speaking, loans will stay in deferment status for six months after graduation, and after that, the status will go into repayment.

Doing More School? Your Loans May Stay in Deferment

If you are going to graduate school or some other form of secondary education, your loans may stay in deferment and never go into repayment until after you finish your master’s degree. This may be true as long as you are enrolled in a program within six months of your graduation date from your undergraduate degree.

Some Loans Take Accrued Interest and Add it to the Principal Once the Loan Goes into Repayment

Depending on the loan, the accrued interest attached to it may be added to the principal once the loan goes from a “deferred” to “repayment” status. Therefore, the interest from your loan from your freshmen year of college may move from the “accrued interest status” to add to the “principal.” This means the accrued interest will become part of the loan that grows interest, causing your loan total to increase. Therefore, it may be wise to pay off interest amounts of certain loans so that it doesn’t compound with the principal.

If you need other loan tips, or have questions about your financial future, contact American Investment Planners now!

Which Loan Should I Pay off First?

Sometimes people have to have things they can’t immediately afford in life. For example, high school students who go off to college rarely have the money they need to pay off school; families who are buying homes rarely have the means to purchase a house outright; and therefore, loans are a necessary part of life! However, repaying loans is never an easy feat, but deciding which loan to repay first can put you in the right direction.

Principal Is Key

Almost all loans gain interest overtime, but the amount of interest that a loan gains is entirely dependent on the principal (the amount the lender gives to the recipient.) For example, a credit card loan may have an insane interest rate (some cards have over a 20% yearly interest rate), but other loans can have an insanely high principal. For example, say someone has a credit card that has a 20% interest rate and a $300. When calculating for the year, the total interest for this card would be $60.

However, a loan from the government for a school bill may have an annual interest rate of 4.25%, which seems small in comparison to the interest rate of the credit card, but the loan principal is $20,000! Therefore, after a year of no repayments, the loan would garner $850.

As you can see, bigger principal loans typically garner more interest than bigger interest rate loans with small principals. However, a medium sized credit card debt can quickly take over other loans as the first repayment target. A credit card debt of $5,000 can gain interest at a rate of $1,000 a year! So despite the principal of the credit card debt being a fourth of the loan debt, the interest would be higher than the school’s.

As a general rule of thumb, any loan that has a medium-high amount of principal is probably the loan that needs to be repaid the soonest.

If you need help with planning out your financial future, contact us now for a free quote!

How a Traditional IRA Works

Millions of Americans work hard to ensure that they and their families are financially taken care of. While immediate needs are important, the reality is that future financial needs must be handled alongside immediate needs. For this reason, people take a portion of their pay and place it into traditional IRAs. Although hundreds of thousands of Americans have traditional IRAs, not everyone understands how they work.

What Is a Traditional IRA?

Traditional IRAs are a reliable form of retirement, but understanding how they function is vital to financial planning. Traditional IRA’s are retirement funds that are tax deductible when contributions are made. Therefore, investing for retirement is one way to receive significant tax breaks, but the government will come back for that money at a later date.

Let’s say someone invests $1,000 into a traditional IRA. This $1,000 would add to their tax breaks for the year that they invested. Once the money is invested, people typically choose investment plans that match their age till retirement. Younger people are encouraged to invest in riskier bids to make money faster; older people are encouraged to invest in safe proposals to keep their money safe. Essentially, the amount of risk someone should take when investing scales down the older someone gets. Once the investor reaches retirement age, they are now able to withdraw money from their account, but it comes at a price.

What Goes Around Comes Around

Remember how the investor received all those tax breaks when they contributed money to a traditional IRA? Well, the government remembers, and they are sure to remind people of their payments. When someone begins to withdraw money from a traditional IRA, the government requests that the person gets taxed on those withdrawals. This means the initial investment amount (the $1,000 mentioned above) and any earnings the $1,000 makes while in the traditional IRA is taxed by the government. Now you understand why putting money in a traditional IRA is tax-deductible, because the government wants your initial investment as large as possible to receive a bigger payday when a person withdraws money. Although the government makes money on your investment, so do you, so it is a fair trade!

If you are interested in applying for a traditional IRA or another retirement fund, contact us now! At American Investment Planners, our goal is to help people save money today for a brighter future tomorrow!

What Is a Roth IRA?

Many Americans worry about the future, and some people turn this worry into a productive decision to enroll in a retirement plan. A retirement plan ensures that an employee has something to live off one once they reach an age where they can no longer work. Although the goal of every retirement plan is to save money for the future, different plans try to accomplish this process in different ways. For this reason, it is important that one familiarize themselves with each plan in order to make the best retirement plan for their needs. One of these plans, which we will be looking at today, is a Roth IRA.

What Is a Roth IRA?

A Roth IRA is a retirement plan that taxes money differently than traditional IRA plans.

A Roth IRA is different from a traditional IRA in three main ways:

1.       A Roth IRA contribution is not tax deductible when filing taxes.

2.       A Roth IRA contribution is taxed before it is placed into savings.

3.       A Roth IRA’s income growth is not taxed.

Many people look at the first two differences and think that a Roth IRA is a poor choice, however, a Roth IRA has a huge benefit.

Roth IRA Earnings Are Never Taxed

Traditionally, earnings made on investments are taxed by the government, however, a Roth IRA’s earnings are not taxed by the government, which means all of the earnings go directly to the recipient. Let’s put it into perspective; say you want to put $100 dollars into a Roth IRA account. Supposing you make more than $38,700 but less than $82,500 a year, you are taxed 22% of your salary. Therefore, after you pay taxes, your $100 is turned into $78. However, let’s say you have 40 years of work until you retire, which means your $78 dollars has 40 years to grow. Supposing that the investment grows at a rate of 5% every 2 years, the final amount you would have in your Roth IRA would be $156 dollars.  This $156 dollars would be completely tax free, including the earnings! Therefore, your growth stays with you at the sacrifice of having less money to use at the beginning of your life. However, retirement is all about saving a stash of money for the end of your life, so having less money is no big deal!

If you are interested in obtaining a Roth IRA or other retirement fund, look no further than American Investment Planners. Our team can help you invest your money wisely and in through the methods that will be most helpful to you! Contact us now for a free quote.

How the Tax Bill May Affect You

Taxes are not something we think about often, especially when it’s outside of filing season. However, the tax bill does impact us throughout the year, even though we think about it during one particular season. Therefore, American Investment Planners decided to share important tax bill information with readers.

Income Tax Rates Are Lower

As you may have noticed in this year’s filing, the tax rate tiers were lowered in this tax bill. This means less money was taken from those with higher levels of income. For example, for someone who made $45,000, the tax rate was reduced from 25% to 22%. Although this 3% decrease may not seem like much, it comes out to $1,350 for a taxpayer making $45,000.

Standard Deduction Was Practically Doubled

Some taxpayers choose to itemize their taxes, but a vast majority use the standard deduction rate offered by the federal government. The new tax bill doubled the standard deduction rate, allowing single filer’s deductions to increase from $6,350 to $12,000. This deduction will help millions of Americans save thousands of dollars for the length of the bill.

Divorces Will Be More Expensive

In the past, alimony payments were tax deductible. However, under the new bill, alimony payments will be tax deductible for the recipient rather than the provider. This means the alimony money will be taxed on the higher tax payer’s dime rather than the lower tax payer’s dime. This means that overall, alimony payments will be smaller in size and more alimony money will go to taxes.

As you can see, the tax bill affects all Americans, from the poorest of the poor to the richest of the rich. When it comes to being tax savvy, preparation is critical. At American Investment Planners, we can help you prepare for next year’s tax season by helping you invest wisely now and assist you in filing taxes later. If you are interested in our services, reach out to use for a free quote!

Is Investing in Cryptocurrency a Good Idea?

Cryptocurrency has swept the nation, and thousands of Americans have decided to toss their money into the ring. While many have made thousands of dollars off of these investments, others have lost much, much, more. So what is the viability of cryptocurrency investing?

Investing in Cryptocurrency Is Similar to Gambling

Although various cryptocurrency companies have discussed case uses of their “products,” few (if any) have shown how cryptocurrency can be utilized in real life circumstances. Thus far, the hype over cryptocurrency is not backed by actual businesses or individual use cases, therefore, investing in cryptocurrency can be compared to gambling. Although people can (and have) made it big through cryptocurrency investment, it seems that high rollers did so on luck rather than actual fact-based positive business momentum. This can be seen in the chaotic movements of the cryptocurrency market. One day, the market jumps up 10% across the board, the next day, the market is down 30%. These kinds of jumps prove that many investors have no clue what to expect when it comes to cryptocurrency investments.

It’s an Extremely High-Risk Investment

There are high-risk stock investments, but cryptocurrency investing takes the risk to a whole other level. Traditional investing can be risky because new businesses may or may not make it into national or international markets; however, their business plans and goals are transparent to all potential investors. However, cryptocurrency companies are not held to the same standard of transparency, partly because numerous countries have not had a chance to talk about the legality of cryptocurrency trading. Therefore, investing in cryptocurrency is a lot like the Wild West.

At American Investment Planners, we make investing easy with diversified portfolios that can match your desired investment plan. We work with you to get the most out of your investment! If you are interested in investing with us, contact us now for a free quote!