What Is a Reverse Mortgage?

Mortgage loans are used by millions of Americans to afford their residence without having to put down the full value of a house. The idea of a traditional mortgage is that a bank is willing to loan money to a potential homeowner to allow them to afford a home without having the assists required to do so. Although a mortgage recipient may not have the means to buy the property outright, over time, the goal is to own the property at some point. However, a reverse mortgage is a different entirely.

What Is a Reverse Mortgage?

A reverse mortgage is a loan that allows senior citizens to liquidate their assets in preparation for a move from a home to a new living situation. A reverse mortgage is a scenario where a bank gives money to a senior citizen while they live in a home, and once the citizen moves out of the home, the bank will take the home and sell it as payment of the loan. During the years that the citizen resides in the home, he or she will still have to pay property taxes and for home insurance. However, the resident will not have to pay a mortgage, and in fact, he or she will be given money to pay for expenses like property taxes, medical needs, and other scenarios.

Some of the details of a reverse mortgage:

• ·         The collateral of the loan is the home’s equity.
• ·         Homes on a reverse mortgage need to maintain FHA guidelines.
• ·         The funds of a reverse mortgage may be restricted for the first 12 months after loan closing.
• ·         The owner typically sells the house to repay a reverse mortgage.
• ·         The owner is not liable for any debt the home’s sale does not cover.

As you can see, reverse mortgages can be extremely helpful for senior citizens who want to live in their home but have other expenses that need to be taken care of. If you have any questions regarding reverse mortgages, reach out to American Investment Planners to get the answers you need!

Why Are There Different Retirement Accounts?

Planning for the future starts today, which is why investing in a retirement fund is often the healthiest long term financial choice a person can make. Although retirement funds are incredibly beneficial, the reality is that many of these funds have different mechanics, some options are better than others depending on your work and financial situation. To help you understand the various types of retirement funds, here are our thoughts.

Roth IRA

A Roth IRA is similar to a traditional IRA with one main difference, the owner of the account pays taxes on the money before they invest it. Traditional IRAs tax the money you initially invested and the interest that your account accrues overtime. However, Roth IRAs do not tax earnings from your investments, nor do they typically tax the withdrawals that someone makes. Therefore, Roth IRAs help people keep their investments safe from taxes in exchange for taking an immediate hit on their tax breaks.

Traditional IRA

A traditional IRA is an account where money goes directly into a retirement account without getting taxed. While you are saving yourself from being taxed on that money now, the reality is that the money your investments make in the future will be taxed along with the money you withdrawal. Traditional IRAs are good for folks who are currently in a high seated tax bracket, but will retire in a lower tax bracket.

SEP IRA

A SEP IRA is fairly similar to a traditional IRA, but it is specifically for self-employed workers or small business owners. Contributions to these accounts earn tax breaks for the self-employed, but money that is withdrawn from an IRA will be taxed on withdrawal. Additionally, earnings made form SEP IRA’s will also be taxed, just like a traditional IRA.

If you are interested in starting a retirement account, you should talk to the professionals before making a decision. Reach out to American Investment Planners to get the answers you need about retirement investing!

Benefits of a Money Market Account

What if your savings account had better interest rates? What if you could make more money with a checking account? This is where a money market account can help you make money on your savings!

A money market account is an account that grows interest at a faster rate than a generic savings account while additionally allowing the owner to have limited check-writing abilities. Therefore, a money market account offers the owner benefits from both a savings and a checking account! A money market account typically requires a higher starting balance than a savings account and is Federal Deposit Insurance Corporation (FDIC) insured.

Deciphering Money Market Account Mechanics

Money market accounts offer higher annual percentage yields than the average savings account because the vehicles can invest in numerous higher-profit options from which traditional passbook accounts are restricted. As a result, banking institutions are the ones who provide access to insured money market deposit accounts (MMDA). These accounts offer FDIC backing and the portfolios are made up of short-term, liquid securities. The reason banks can offer a higher interest rate through MMDA’s is that they require a higher minimum balance. Additionally, these accounts have restrictions on the rate of how fast an owner can take out his or her money.

The withdrawal restrictions make MMDAs less liquid than checking accounts, but more liquid than bonds. Financial institutions use money market accounts to pursue investments through vehicles like certificates of deposit, government securities, and commercial paper. These investments offer better yields than those of a general savings account.  The minimum a person is required to deposit funds for an MMDA is dependent on the financial institution he or she is investing with.

Warning: An MMDA is a higher risk investment than a savings account. Due to the nature of the securities that MMDAs use as vehicles, it is possible to lose part of your principal balance in the event of a financial crisis.

If you want to discuss more pros and cons of money market accounts, reach out American Investment Planners today!

How to Conduct Salary Negotiations

Performing salary negotiations can be one of the hardest things about accepting a new job. Maybe you landed your dream job, and you don’t want to complicate things with negotiations. While that might be the case, your starting salary is a significant number because every bonus or pay raise you make after the fact will be based on that starting salary number. Therefore, making a case for a higher starting rate can be crucial in getting better pay raises in the future:

Push the Boundaries Based on Situation

Your ability to negotiate well is often dependent on your overall job situation. If you need the job you received an agreement letter for, you have less wiggle room to negotiate since losing the job position is more important than making some extra cash per year. However, if you have received job offers from competing jobs, you now have the freedom to ask your second choice how much they are willing to pay you when you start. The idea behind this conversation is that you have a preferred working environment already secured, and so you now have the ability to ask your second best option what they are willing to increase your salary to. The worst case scenario is that they get offended and rescind your offer, which doesn’t matter because you have another offer on the table that you are happy with. The best case scenario is that they offer you a better starting salary than your other offer, which now makes this your best offer. The cool thing about this kind of negotiation tactic is that you can then use this salary offer to ask your first choice if they are willing to increase their offer to match the now better second offer.

Research Job Salaries for a Specific Job in that Area

Knowing what a standard salary for a job in a specific area is before you go into negotiations is super important. While you may think that the job offer is small for the work you will be doing, comparing this salary offer with similar positions online lets you know the truth about the health of your offer. Maybe your offer is better than you thought, or perhaps your proposal is worse than you could have imagined. Either way, knowing how your offer compares to similar job titles gives you the knowledge you need to make wise negotiation tactics.

Although salary negotiations are necessary, how you invest the money you make is often more crucial than any bonus you will get. Therefore, make sure you have the investment help you need by reaching out to American Investment Planners!

When You Need Life Insurance

When we think of life insurance, we typically think of policies that senior citizens have to give their grandchildren some money should they suffer an untimely death. However, for many people who are much younger than senior citizens, holding life insurance should be non-negotiable.

When People Need Life Insurance

When Dependents Become a Part of the Picture

People with a spouse or children should undoubtedly have life insurance policies. Although your spouse may have a job and earn a decent salary, holding life insurance can guarantee that your spouse will be able to deal with bills and debts should anything happen to you. While a spouse can use life insurance money for some debts, a person with children should undoubtedly carry life insurance. Children are expensive, and being a single parent can be a nightmare, especially when the situation stems from an unexpected death. Providing for your family is your number one priority, but if you are gone, who is going to take care of them? A life insurance policy that covers you and your spouse will guarantee that your children will be financially sound despite your absence.

When People Are Traveling Overseas

Although traveling is not inherently dangerous, many people engage in new activities and adventures when they are abroad. Snorkeling, driving off-road vehicles, parasailing, and other activities are generally safe, but when inexperienced people are trying to enjoy these various activities, fatality is a real plausibility. Therefore, when people travel and vacation in unknown areas, life insurance can help loved ones rest easy should something go wrong.

Life insurance is a helpful tool for families who want to ensure their children are taken care of no matter the circumstances. If you need help finding the best life insurance policies for your needs, American Investment Planners has your back! Reach out to us with any questions you may have about coverage!

Why You Should Avoid Store Credit Cards

It is near impossible to leave a department store without hearing the phrase, “would you like to sign up for our membership program?” While some store employees are talking about a traditional no-obligation membership card that earns points, others are talking about a full blown store credit card. Unfortunately, store credit cards are typically pitfalls for anyone who struggles to manage their money well.

Store Credit Cards Have High Interest Rates

While store credit cards offer users some rewards after purchasing a certain amount of goods while using the card, they also contain higher than usual interest rates for those who fail to pay off their debt in a timely manner. In fact, many store credit cards charge an interest rate of more than 25% per year. This means a credit card charge of $1,000 will accumulate a $250 interest fee if it goes unpaid for a year. To put this in perspective, a typical student loan interest rate is near 5%. Therefore, store credit cards can cost users more despite the given awards.

Store Credit Cards Payments Are Easy to Forget

Making payments on a car, house, utilities, and credit cards are easy because these payments are typically synced up to a main banking account. However, store credit cards have their own websites that users need to visit to pay off their debts. Although the extra step of going to an outside website to pay off a debt may seem like a small inconvenience, just think of all the times you forget to buy an essential item at the grocery store. It only takes on regretful car ride home to realize how easy it is to forget something important. Unfortunately, this means taking an extra step to pay off a debt may result in forgetting about the debt in the first place.

Credit Cards from Your Bank Typically Offer Better Deals Overall

Although owning a credit card connected to a department store may earn you extra money for purchases from that store, the reality is that your rewards are set in stone at one retailor. Bank credit cards typically offer rewards that apply to multiple retailors. Although owning a credit card may be a bad investment in the first place, if someone wants to own a credit card, it is typically better to run a credit card through your banking institution for more versatile deals.

Financially staying above water can be difficult, but with American Investment Planners at your side, creating a financial portfolio has never been easier. If you want more pros and cons concerning store-related credit cards, contact us with your questions!

College Financial Aid Letters Explained

After weeks of anticipating their response, your dream college finally got back to you about your financial aid request. When you open up the envelope, the first thing you read is “Congratulations, you have qualified for an award!” However, before you start your victory dance, it’s imperative you understand exactly what this letter is offering!

What Is a Financial Award?

A financial award is a sum of money either gifted or loaned to a student to help them pay for their future schooling. As previously stated, some of these awards are gifts which the student is not expected to pay back.

Gift awards include the following

• ·         School Scholarships
• ·         Federal Grants
• ·         Non-federal Grants (from businesses and other entities)

While some of the awards are gifts, other awards are loans with different perks. Loans are sums of money that the students must pay back, usually accruing interest throughout a student’s college career.

Loan awards include the following

• ·          Federally subsidized loans (the government takes care of the interest of the loan while the student is in school)
• ·         Federally unsubsidized loans (the government does not pay for the interest on the loan, but the interest amount is usually lower than private loans)
• ·         School repayment options (the school allows a student to repay their semester’s cost throughout the semester)
• ·         Private loans (the school offers a loan from a specific lender such as a bank or other financial institution)

Unfortunately, many financial aid letters are unclear about an award type. Some of the listed awards may be grants; other awards may be loans that the student has no information on. Therefore, researching these awards is the first step to understanding financial aid letters.

Schools Are Not Forthcoming About True Cost

Many schools do not list the cost of obtaining a 4-year education in their financial aid letter; other schools list a “tuition cost,” but purposefully leave out room and board and other expenses. Therefore, it is up to you to figure out the actual cost of a 4-year education at a specific school by researching the school’s charges and comparing them to your grants. You should view loans as costs since you will have to pay them back. Once you count up your expenses and subtract your grants, you will find the true cost of your school.

Get the Help You Need

If you need help calculating your student tuition and determining your next steps, American Investment Planners is here to help.  Our intuition’s goal is to help people stay financially sound, even when they go into debt from tuition payments. We believe financial planning is the answer to almost every financial issue! Contact us now for a free quote!

Financial Mistakes New Graduates Need to Avoid

Many people say that graduating from college is the beginning of the rest of your life. You are no longer in school, you have no more classes, you have no more teachers, and you are just starting your job hunt to launch your career! While graduating from college is a fantastic accomplishment, many students get an F when it comes to financial planning for the future. Therefore, we at American Investment Planners want to give you a few tips to dodge some financial pitfalls of recently graduated students.

Don’t Move for a Job Unless You Sign a Contract

When you graduate, it may be the first time in your life you have the freedom to move anywhere in the world. This is an exciting prospect for many young workers, but securing a job before you move is crucial to your financial success. Although you may not have much, getting your things from point A to point B costs money, and attempting to go across the United States (or overseas) without a guaranteed job can land you in the fast food industry. Before you move, find a job, if you land the job, make sure to sign a contract before you move. Without a signed contract, a “you got the job” over the phone means nothing. Don’t spend the money till you sign the deal!

Pay Off Your School Debt as Soon as Possible

For government loans, you have six months of deferment from the last day of your enrollment. Therefore, you do not have to pay back a penny of your loans until six months after your graduation date. Deferment is the government’s way of letting you settle your accounts and find a job before forcing you to pay back your loans. While this is an excellent perk for you, if you land a job and start to make a stable income, you should start to attack your loans as soon as possible! Waiting for deferment to kick in to pay off your loans often means that your accrued interest will be added to your loan’s principal. This means you will have a more significant lump sum to pay off, which then accrues interest at a faster rate. It is likely that you won’t have the money to squash your loans entirely, but if you can pay off the interest that your loan has accrued before your loan goes off of deferment, you will stop your loan from compounding.

Refrain from Credit Card Use for Anything Other than Necessary Purchases

Although a credit card is a handy tool that can help you in sticky situations when money is tight, you should never use a credit card for unnecessary purchases when you can’t pay off those purchases within a month. You probably have thousands of dollars of debt due to school loans, and using a credit card for superfluous purchases can send your money (and your credit) down the drain. Focus on purchasing what you can afford, and only use a credit card for unavoidable emergencies. The last thing you need is more loans you can’t repay!

We hope this list is helpful for you as you start your new journey! If anything on this list confuses you or you need clarification, reach out to us here!