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Yahoo
2 days ago
- Business
- Yahoo
7 Common Tax Planning Mistakes To Fix Before 2026, According to a CFP
Let's be honest: Tax planning isn't exactly fun (nor is paying taxes). But ignoring it could mean parting with money you didn't have to. Find Out: Read Next: If you're making one of these seven common tax planning mistakes — and many people are — you could face higher tax bills or missed opportunities come 2026. Christopher Stroup, a CFP and founder of Silicon Beach Financial, explained what to watch out for and how to get ahead of the curve. Tax planning should be 'proactive, not reactive,' Stroup insisted. 'When you wait until March, most of the best opportunities are already gone.' In fact, even sooner than that, as by year-end many strategies are off the table, especially for equity compensation (non-cash pay, such as stock), retirement savings and charitable giving, Stroup said. 'Last-minute tax planning tends to be reactive, rushed and sloppy. Real tax savings require time to coordinate across your income, goals and entity structure.' By waiting until the end of the year, you could be failing to coordinate with your financial goals at best or missing important deadlines and subjecting yourself to higher tax or penalty fees. Learn More: Another common mistake is neglecting to track your cost basis, especially for stocks, crypto or equity compensation, Stroup said. Your cost basis is essentially what you originally paid for an investment, including commissions or fees. It's easy to lose records over time he said, but if you don't have documentation to prove it, you could be taxed as if the entire sale was profit — even if you only made a modest gain or none at all. If you experienced a job change during the year but fail to account for it in your withholding — the amount of taxes you pay — this could cause problems, Stroup said. 'A second job or dual-income household might bump you into a higher bracket. If you don't update your W-4 or check your withholding early, you might face an unexpected tax bill and possibly a penalty.' If you earn income that must be reported on a 1099, either as a business owner or freelancer/contractor, you're expected to pay estimated quarterly taxes. 'Many freelancers forget to account for self-employment tax, which can add 15.3% to their liability,' Stroup said. Unfortunately, if you underpay your estimated taxes, the IRS may charge penalties, even if you're due a refund later, Stroup warned. 'Accurate quarterly payments protect cash flow and avoid year-end sticker shock,' he said. For eligible taxpayers, some credits can reduce your tax bill 'dollar for dollar,' Stroup said, but many people assume they don't qualify without even checking. A few of these credits include: Saver's credit (for low- to moderate-income retirement savers) QBI deduction (for self-employed and pass-through business owners) Health savings account contributions Education credits like the lifetime learning credit Recently President Donald Trump signed the 'One Big Beautiful Bill' (BBB) into law, which maintains many of the tax cuts from the Tax Cuts and Jobs Act of 2017 and adds other tax changes. It's important to plan for how this will impact next year's taxes, especially as some of the provisions are retroactive to 2025. 'Start modeling different scenarios now. Look at whether Roth conversions, income acceleration or trust updates make sense under current rules,' Stroup said. The 2026 sunset could bring higher income, estate and capital gains taxes. Early action lets you use today's lower rates strategically. When your financial life gets more complex than a W-2 and a 1099-INT, it's time to bring in the professionals, Stroup said. If you're dealing with equity comp, restricted stock units (RSUs), multiple income streams, business ownership and/or changing tax law, these all signal it's time to partner with someone who can go beyond filing and focus on building after-tax wealth. More From GOBankingRates Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy This article originally appeared on 7 Common Tax Planning Mistakes To Fix Before 2026, According to a CFP
CBS News
07-07-2025
- Business
- CBS News
1-year vs. 5-year CD: Which CD term do experts recommend now?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. The choice of a 1-year CD or a 5-year CD will come down to a series of personal considerations now. GYRO PHOTOGRAPHY/amanaimagesRF Certificate of deposit (CD) account interest rates remain attractive in mid-2025, with top CDs offering yields between 4.00% and 4.40%. The Federal Reserve kept its benchmark interest rate frozen at its June meeting, keeping it at a range of 4.25% to 4.50%. Fed officials still project two rate cuts by year-end, but uncertainty is high as they weigh a variety of economic concerns against the need for economic growth. This environment has created a dilemma for savers who are torn between locking in today's rates for five years or keeping their options open with shorter one-year terms. To help you navigate this decision, we consulted three financial experts to find out which CD term is smarter now. Below, we'll detail what they want you to know. Start by seeing how high a CD interest rate you could qualify for here. 1-year vs. 5-year CD: Which CD term do experts recommend now? "We're generally leaning toward 1-year CDs right now," says Christopher L. Stroup, a certified financial planner and president of Silicon Beach Financial. "With rate cuts likely in the next 12 to 18 months, shorter terms offer flexibility and let [you] reassess when rates shift," he says. When weighing your options, though, don't focus only on current rates. "Today's shorter-term rates can be higher than longer-term rates … [making them] more tempting," Mark Sanchioni, chief banking officer at Ridgewood Savings Bank, points out. "[But] when that term is over, [you] may be disappointed with [your] renewal rate options." Sometimes, it can work out in your favor to take a slightly lower rate for a longer term. Both experts agree that the right CD choice depends on your timeline, risk tolerance and financial goals. When it would (and wouldn't) make sense to choose a 1-year CD now "A 1-year CD would be appropriate [if you need] access to [your] funds within the next year," says Rick Wilcox, head of retail product management and development at PNC. Industry professionals say that 1-year CDs make sense in these scenarios: You're saving for a house down payment or a wedding in the next 12 to 18 months. You're a business owner building cash reserves for a product launch or equipment purchases. You want to park an emergency fund and earn a predictable return but may need to withdraw soon. Short-term CDs work especially well for entrepreneurs and business owners. Stroup mentions an early-stage founder who had $250,000 in reserve before a funding round. "We chose a 1-year CD to earn interest while keeping cash accessible," he says. A 1-year CD becomes less attractive if you don't need the money for several years, though. "[You'd] risk reinvestment uncertainty when rates drop and miss out on locking in current yields," Stroup explains. Compare your top 1-year CD account offers here now. When it would (and wouldn't) make sense to choose a 5-year CD now "A 5-year CD would be appropriate [if you don't] have an immediate need for the funds, feel interest rates may decline over this period and/or desire safety and security," says Wilcox. Financial advisors say that 5-year CDs make sense if you find yourself in one these scenarios now: You're within 10 years of retirement and want guaranteed income without market risk. You recently received a windfall (e.g., a business sale or inheritance) and want to preserve your capital. You're building a CD ladder A longer-term CD choice often benefits seniors seeking steady income. "[I worked with] a retired aerospace engineer with no near-term liquidity needs," Stroup recalls. "[He] used a 5-year CD ladder to lock in predictable, penalty-free income for the next five years." A 5-year CD may not be the best choice if you anticipate needing funds before maturity. "[Anyone] considering [this] must be certain they will [not] need to access those funds over the next five years," Sanchioni emphasizes. Early withdrawal penalties can amount to two years of interest or more, eroding a substantial portion of your returns. This option also backfires if you expect CD interest rates to climb steadily. You'd miss out on higher yields by staying locked into today's rates for half a decade. The bottom line "A CD should be part of a broader strategy, not a standalone decision," Stroup stresses. Many savers are hedging their bets in today's unpredictable rate environment. Sanchioni notes that more clients are using a "Three Buckets" approach — keeping some money immediately accessible, some in short-term CDs and some locked up long-term. Taking this route can help you come out ahead no matter how rates move. Regardless of the approach you take, though, experts recommend aligning your CD term with your actual cash flow needs rather than timing the market.
Yahoo
16-06-2025
- Business
- Yahoo
Want To Retire in Your 50s? 9 Ugly Truths You Need To Know
You may already know that planning to retire early can mean putting aside lots of money. According to Fidelity, if you plan to retire before 62, you should aim to save 33 times your expenses. If you're 45 with annual expenses of $75,000, that amounts to $2.475 million. Find Out: Explore More: But it's not just money and savings you need to consider if you want to retire in your 50s. Some financial experts shared with GOBankingRates a few ugly truths to consider now. Retiring at 50 means planning for more years without a paycheck. 'That requires a deeply strategic investment approach, not just a big nest egg,' according to Christopher Stroup, founder and president of Silicon Beach Financial. 'Inflation, health care costs and market downturns will all take their toll. Your money needs to outlive you, and that requires a plan that adjusts as life does.' Be Aware: If you retire before Medicare eligibility at 65, expect to shoulder thousands in annual premiums through the open market. Per Stroup, for self-employed professionals or those selling a business, early retiree coverage should be a line item in your exit plan. According to Empower, a few health insurance options for early retirees are the health insurance marketplace, health share plans and private health insurance. Stroup likes to remind clients that many accounts, such as traditional IRAs and 401(k)s, penalize early withdrawals before age 59 1/2. He said strategic tax planning, like leveraging Roth IRAs, 72(t) distributions or taxable brokerage accounts, can help bridge the gap. According to Stroup, with the right mix of account types, you can retire early and avoid triggering unnecessary tax or penalty landmines. Plenty of early retirees pivot to passion projects, consulting or part-time work. The key, per Stroup, is designing financial flexibility into your plan before you need it. Whether you're stepping back or stepping sideways, a proactive strategy ensures your money keeps pace with the life you want to live and not just the one you're leaving. It's also important to factor in family members or other dependents when planning an early retirement. 'Supporting a loved one can either force an employee out of or back into the workforce. Consider who else might depend on your income,' according to Kevin Estes, financial planner and founder of Scaled Finance. Early retirement can leave individuals with a lot of time and years on their hands without work to keep them occupied. While this sounds nice in the beginning, it could end up having negative effects. 'Retiring can limit someone's social network, structure and even purpose,' Estes said. 'Plan how to develop all three.' If you expect to start planning to retire in your 50s when you hit 40, you may be in for an unexpected surprise. It's going to take a lot of planning at that stage. In fact, if you didn't start planning in your 20s, you're likely already behind the ball. 'The truth is that early retirement takes a lot of upfront planning and a significant amount of upfront income and investments,' according to Annie Cole, Ed.D., money coach and founder of Money Essentials for Women. Cole said one ugly truth to consider is that retiring early means more years spent living off your retirement income versus living off work-generated income. While your nest egg may seem big at first, it can quickly dwindle down to nothing if you're not careful. If you already hate inflation, just wait until you retire early. All that planning you did to reach early retirement hopefully included inflation considerations — or else you're likely to find yourself struggling to stay afloat when it comes to money. Inflation can affect your health costs, food bills, living expenses and so much more. More From GOBankingRates 3 Reasons Retired Boomers Shouldn't Give Their Kids a Living Inheritance (And 2 Reasons They Should) This article originally appeared on Want To Retire in Your 50s? 9 Ugly Truths You Need To Know
Yahoo
15-06-2025
- Business
- Yahoo
Want To Retire in Your 50s? 9 Ugly Truths You Need To Know
You may already know that planning to retire early can mean putting aside lots of money. According to Fidelity, if you plan to retire before 62, you should aim to save 33 times your expenses. If you're 45 with annual expenses of $75,000, that amounts to $2.475 million. Find Out: Explore More: But it's not just money and savings you need to consider if you want to retire in your 50s. Some financial experts shared with GOBankingRates a few ugly truths to consider now. Retiring at 50 means planning for more years without a paycheck. 'That requires a deeply strategic investment approach, not just a big nest egg,' according to Christopher Stroup, founder and president of Silicon Beach Financial. 'Inflation, health care costs and market downturns will all take their toll. Your money needs to outlive you, and that requires a plan that adjusts as life does.' Be Aware: If you retire before Medicare eligibility at 65, expect to shoulder thousands in annual premiums through the open market. Per Stroup, for self-employed professionals or those selling a business, early retiree coverage should be a line item in your exit plan. According to Empower, a few health insurance options for early retirees are the health insurance marketplace, health share plans and private health insurance. Stroup likes to remind clients that many accounts, such as traditional IRAs and 401(k)s, penalize early withdrawals before age 59 1/2. He said strategic tax planning, like leveraging Roth IRAs, 72(t) distributions or taxable brokerage accounts, can help bridge the gap. According to Stroup, with the right mix of account types, you can retire early and avoid triggering unnecessary tax or penalty landmines. Plenty of early retirees pivot to passion projects, consulting or part-time work. The key, per Stroup, is designing financial flexibility into your plan before you need it. Whether you're stepping back or stepping sideways, a proactive strategy ensures your money keeps pace with the life you want to live and not just the one you're leaving. It's also important to factor in family members or other dependents when planning an early retirement. 'Supporting a loved one can either force an employee out of or back into the workforce. Consider who else might depend on your income,' according to Kevin Estes, financial planner and founder of Scaled Finance. Early retirement can leave individuals with a lot of time and years on their hands without work to keep them occupied. While this sounds nice in the beginning, it could end up having negative effects. 'Retiring can limit someone's social network, structure and even purpose,' Estes said. 'Plan how to develop all three.' If you expect to start planning to retire in your 50s when you hit 40, you may be in for an unexpected surprise. It's going to take a lot of planning at that stage. In fact, if you didn't start planning in your 20s, you're likely already behind the ball. 'The truth is that early retirement takes a lot of upfront planning and a significant amount of upfront income and investments,' according to Annie Cole, Ed.D., money coach and founder of Money Essentials for Women. Cole said one ugly truth to consider is that retiring early means more years spent living off your retirement income versus living off work-generated income. While your nest egg may seem big at first, it can quickly dwindle down to nothing if you're not careful. If you already hate inflation, just wait until you retire early. All that planning you did to reach early retirement hopefully included inflation considerations — or else you're likely to find yourself struggling to stay afloat when it comes to money. Inflation can affect your health costs, food bills, living expenses and so much more. More From GOBankingRates How Much Money Is Needed To Be Considered Middle Class in Every State? This article originally appeared on Want To Retire in Your 50s? 9 Ugly Truths You Need To Know Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
07-06-2025
- Business
- Yahoo
The 3 Best Ways for Boomers To Use Personal Loans To Stretch Their Retirement
Personal loans can serve many functions, from starting a business to buying a new car — even helping in retirement. While it's always important to exhaust other options first that don't require paying interest, there are some situations where a personal loan can make a difference for boomers in retirement. Financial experts offer the best ways for boomers (or any retiree) to use a personal loan to help fund some aspect of their retirement. Find Out: Read Next: One instance when a personal loan can make sense is to bridge a short-term cash need — like delaying Social Security to maximize benefits or covering a one-time emergency without disrupting long-term investments, according to Christopher Stroup, a CFP and owner of Silicon Beach Financial. The key is using it strategically, not as a recurring income source, he said. See More: If you've got debt that's earning very high interest, such as credit cards or high-interest medical debt, a personal loan can offer you 'breathing room,' Stroup said, 'especially when the new loan has a lower fixed rate and shorter term.' It can also simplify payments and reduce interest. However, Stroup said, 'Know that it only works if spending habits also change; otherwise, debt can pile up again.' While personal loans should not be a go-to for most expenses, Stroup said that when the expense is unavoidable and aligns with a broader financial plan, it can be a good idea. 'For example, a medically necessary home renovation or dental procedure may justify a personal loan, especially if it avoids tapping tax-deferred retirement accounts in a high-income year.' Robert Gabriel a financial specialist and creator of Vosita, said these can include things renovations that improve safety or accessibility (like installing grab bars or a stairlift) and allow a retiree to age in place comfortably. 'Similarly, for unexpected but necessary medical expenses that aren't fully covered by insurance, a personal loan could provide a way to manage the cost over time,' Gabriel said. However, in both these scenarios, the retiree needs to be confident in their ability to repay the loan without jeopardizing their essential living expenses. Credit score also plays a huge role in determining personal loan interest rates, regardless of age, Gabriel said. He said that retirees with excellent credit scores (typically 720 and above) will qualify for the most favorable interest rates, which are currently averaging around 13% to 14% according to recent reports. A good credit score (690-719) will still yield reasonable rates, but they'll likely be a bit higher. 'To improve their odds, retirees should ensure they have a good payment history on all their debts, keep their credit utilization low (the amount of credit they're using compared to their credit limit) and avoid opening new credit accounts unnecessarily,' he said. Even small improvements in credit score can lead to significant savings on interest payments. Using loans to cover everyday expenses is a red flag, however, Stroup warned. It often signals that a retiree's spending is outpacing their income plan. 'Over time, this can create a cycle of borrowing that drains savings, increases financial stress and limits future flexibility,' Stroup said. If you're finding yourself turning to loans for repeated borrowing to cover basic expenses, minimum-only payments or juggling multiple loans without a payoff plan, you could have a problem. 'These patterns can signal deeper cash-flow issues and should prompt a review with a financial planner before debt becomes unmanageable,' Stroup advised. More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 7 Things You'll Be Happy You Downsized in Retirement 5 Cities You Need To Consider If You're Retiring in 2025 This article originally appeared on The 3 Best Ways for Boomers To Use Personal Loans To Stretch Their Retirement Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
