The bank offers a higher interest rate in return for being able to keep the money for a specific time period. It gives them more flexibility in their own investing to help them make more money as well.  But, they share in that increase by the higher rates of interest.  Fixed rates of interest are the most common, but there are some institutions that offer a variable rate.  The best rates can be found on deposits of $95,000.00.

You might find these features being offered: a higher interest rate on a higher balance.  A longer term offers a higher interest rate.  Smaller financial institutions offer higher rates than do the larger ones.  Personal CD accounts offer better rates that do business accounts.  Higher interest rates can be found at banks and credit unions that are not insured by the FDIC or the NCUA.

Payout of Interest. The CD owner can choose to have the interest mailed in the form of a check or deposited to a checking or savings account.  Sometimes you are required to make this choice at the time that the account is opened.

Close Out Penalty. If you close the CD or make withdrawals before the maturity date, there are substantial penalties.  Also, you are notified shortly before the CD matures and are given a window in which you can take the desired action of pulling out the money and interest that it earned, or leaving it to roll over into another CD account.

Callable CDs. Some banks may state in their terms that they can close the CD account before the term ends.

CDs are a great way to realize a higher interest rate.  But the caveat here is to make sure that you  only deposit money that you are certain will not be needed immediately or you will pay dearly for early withdrawal.  While not every life situation can be anticipated, it does make sense to only open this type of account after you have already fully funded standard savings and money market accounts that give you a buffer.

You have several options, and you should pick one based on your unique situation and financial goals.

Stay The Course: 401k Is a Long Term Investment

Your first option is to do nothing at all when your 401K is losing money! There are many people who are of the belief that a 401K plan is there for long term investing. If you decide to move your money to another account because you see it lose money, you aren’t following long term investment strategies. The idea of a 401K retirement account is that it provides you with a consistent investment plan that does not depend on what the market is doing. You are sometimes investing when the market is down and sometimes you invest when the market is up- which means your contributions are averaged out and you will eventually see gains even if you’re currently experiencing losses in your 401K plan.

Roll it Over

If you aren’t satisfied to ride out the wave of 401K losses, you could always consider moving your retirement account into another savings vehicle. If your company writes a check for the funds in your 401K and makes it out to you – you will be subject to a 20% early withdrawal fee (not to mention a penalty on your income taxes). This is not the way to roll over a 401K.

If you decide to change how you save your money for retirement, you can roll a 401k into an approved IRA. The company handling your existing 401K would write the check to the trustee handling the IRA you are about to open, and you avoid any fees since the money is going into an approved retirement.

Stop Contributing Temporarily and Pay off Debt

Another option when your 401K plan starts losing money is to stop your contributions temporarily, and apply the money you WOULD have been investing in your retirement account to debt. This will help you pay down debt faster, and you aren’t adding money to an account that is losing money.

When circumstances change, you can begin your 401K contributions again, and with any luck, you’ll have a lot less debt by then!

Retirement planning is a small part of an over financial plan which will help a person maintain an income level or provide for the necessary funds for creating an environment in which one can cease income activities (jobs and careers).  It is not a difficult activity, but it can be complex in its makeup.

Regulation. Provide for handling cessation of income activities – government regulations thereof.  There are regulations which must be followed in order for retirement assets to remain in an untaxed state in order for the retirees to be able to use them to establish their plan and execute it with the maximum amount of impact with their resources.  These must be taken into account before reaching retirement age.

Provide for Income. If one has enough resources financially, those resources can be put to work in a financial portfolio with will provide income from interest generation and asset growth.  This income can be used by retirees for their expenses.

Provide Money for Living. The sum of accounts at retirement can provide money for the purchase of property for living arrangements.  Also, if one finds that constant medical attention is needed, these monies can provide for those arrangements as well.

Provide Money for Estate Wills and Trusts. A will should be made out long before retirement.  However, now might be a good time to review that will in order to make any changes which are precipitated by changes in living status of family members, etc.  One of the goals for retirement planning must be the preparations of passing on any wealth realized to descendents.

Plan for the Unexpected. Another concern for retirement planners is what to do about eventual medical bills and costs?  While medicare provides assistance for those who are unable to pay, it is an eventuality that even the most modest of medical expenses will begin to eat away at a retirement portfolio.

Proper planning and possible insurance vehicles can be employed which can help mitigate the negative impact of the medical occurrences.  One must consider supplemental insurance as an alternative.

Retirement planning is a broad subject and must be tailored to meet the needs and expectations of those whom it is intended to serve.

If you are new to personal banking, you might need a primer to help you make the right selection to fit your needs because there are differences between accounts.  Here are the basics you need to know about a checking account.

Initial Deposit Amount. How much does the financial institution require as an initial deposit to get your account opened?  Some have differing minimums.

Free From Fees. Find out if the account is free from monthly service fees and charges.  Most banks have free checking, but you might find an asterisk after the word ‘free.’  This is because they might charge you a monthly fee if your balance goes below a certain dollar amount.  Others might take the aggregate amount of all of your accounts and keep your checking truly free as long as you have balances opened in other accounts.  If the bank you are interested in has these fees, find out how much they are.

Interest Bearing Account. Does the checking account have an interesting bearing feature?  In other words, will they pay you to keep your money in that account?  If so, how much.

Online Banking Access. Do they offer access to your account via the Internet?  Can you make payments from this Internet access?  Most banks provide for this type of activity, because it reduces the amount of in person handling of your money and thereby keeps their expenses lower.

Statements by Email. Do they offer sending of your monthly statements via email as opposed to postal service?  Again very important to them as they try to reduce the costs of sending out paper statements.  The benefit here is convenience to you.

Customer Service. What is there customer service like?  You most likely will not find this out by contacting the bank.  You will get better answers to this from customers.  Find out who some of their customers are by asking around.  Their answers may surprise you.  Keep in mind that sometimes when a customer has a bad experience, it stays with them a lot longer than good ones.  Get two or three good recommendations to help balance out any overly negative opinions that you hear.

Armed with this information, you should be able to make a wise choice about where to place your money into a checking account.

Pitfalls often come in the form of the owner of the account adjusting the account in order to try to increase the returns.  This often invites disaster.  It is difficult for the plan owner to maintain a level of objectivity about their account and how it is being handled.  That is why it is a good idea to allow professionals direct the plan and account activities.

Therefore some guidelines in handling a retirement account are in order.

No Loans. Do not take out loans against the account balance.  While this is a tempting way to realize an instant cash infusion, it also places your account at a disadvantage in that you will have to allocate a regular payment to the account to pay it back for the loan.  Once the use of the loan funds is over, and you are left with paying back the loan, it becomes easy to question the wisdom in withdrawing the funds in the first place.

Diversify. Do not try to “out-smart” the market by moving all of your money into one asset group.  Even the best investment professionals make unwise choices in the market that adversely affects returns on accounts.  To think that you can outperform them in this capacity is not wise.  One small move in the wrong direction can cause large losses in your account that will take a very long time from which to recover.  The philosophy of not “placing all of your eggs in one basket” applies.  It is good advice.

Even It Out. Balance risk with reward.  Even though a more conservative approach to investing may run contrary to your philosophy, a retirement account is not the place to take on huge amounts of risk.  Long term strategies must be dominant in order for the returns to be there when retirement arrives.  If you find it necessary to “play” the investment market in a risky fashion, it would be wise to set up a separate account just for that purpose.  That way, your retirement funds will not suffer if you make a mistake.

Recognize that gains and losses are a part of the process.  Ignore the knee jerk reactions to sudden or drastic market fluctuations.  The ebb and flow of market movements is normal.  Just recognizing this fact alone will help one to understand that a view to the long-term is the way to regard your retirement account.

Seek Advice. Consult the services of a professional for advice when it becomes necessary to move your funds due to job changes.  You will not want to place your account balance at risk by not handling these changes incorrectly.

Make it a normal part of your routine to watch your account with the understanding that it is working for you and will be there when you are ready to retire.

Most everyone who has a solid job has the availability to place money which is often matched, into an account with the specific purpose of preparing for retirement.  Even the very young should choose to participate.  The more participation at a younger age, the more will be there for them when the time comes to retire.  And, it can make a significant difference in quality of living arrangements.  Especially if one finds themselves in the need of constant medical care.

401k. The most common of these vehicles is the 401k plan.  This company sponsored plan gives you access to a high yielding account that is managed by an outside firm that specializes in these types of accounts.  While options for input by you as the owner of the account are there, the actual fund purchases and management are by the outside firm.  In addition, if your company matches money that goes into the account, then you are doubling your contributions up to the amount specified.  Also, you get the benefit of deferred taxation on a this money until it is withdrawn for use by the owner.

IRA. The 401k is the largest and most popular of retirement accounts.  However, there are other excellent options available.  The IRA in its various forms provide great returns and are easy to manage.  There are five types of IRA accounts.  These are:

• Traditional IRA.  This is a ‘pre-tax’ account which delays the payment of taxes on the amount until retirement.  If early withdrawal of funds is necessary, there is a significant penalty in doing so.
• Roth IRA.  This account is ‘post tax’ in nature.  You will NOT have to pay taxes at retirement when you begin to use the money to fund your retirement.
• SEP IRA.  This IRA is specifically for a small business in order to allow them to make contributions to an individual’s IRA account for retirement purposes if there is no pension fund into which they can contribute.
• Simple IRA.  Both an employer and an individual can make contributions into this account.  It is similar to a 401k, but with lower contribution limits and easier administration.
• Self-directed IRA.  This account permits the account holder to make investments on behalf of the retirement plan.

All IRA plans use the age of 59 ½ as the official retirement age. This means that any taxation takes place after this age and the date upon the withdrawal of the funds begins.

All workers should consider the merits of an IRA and use them in addition to any existing accounts to help bolster their retirement funding.  The benefits are worth the time and effort.

Mortgage rewards credit cards allow cardholders to earn money that will be applied to their mortgage principle – or saved for a future home purchase. As with any rewards program, the more you spend, the more you earn back in rewards.

Bank of America Home Advante reward credit card, you earn points for purchases. As you accumulate 5,000 points, you can redeem your rewards as a payment sent to your mortgage principle.

Citi Home Rebate Platlinum Select MasterCard

With this mortgage reward credit card, you can receive 6% cash back for using the card to pay for utility costs or for purchases for home improvement. The cash is applied to your mortgage, or if you don’t have a mortgage yet, it is credited to your statemetn and can be used later when you make a home purchase.

How Small Payments from Rewards Programs Pay Off Mortgage Faster

You might be wondering how small rewards from a credit card could actually help pay off a mortgage faster. If you look at most mortage amortization schedules, you’ll see that the first several years of mortgage payments are almost entirely applied to the interest of the loan. If you were to send even a few dollars more per month at this stage of the mortgage, you would actually start seeing the difference in the principle balance of your mortgage reducing, and the number of months remaining on the loan shrinking.

On average, a credit card rewards program may be able to send an extra $50 or so on a quarterly basis to your mortgage principle. Doing this would save you about four months on your loan term and well over $3,000 in interest.

As with any rewards program, you absolutely must stay on top of your payments to make the rewards worth it. Paying the balance in full each month within the grace period means you aren’t paying interest on your purchases and the rewards are not costing you anything. As soon as you spend more than you can afford to pay in full – you start losing out on the benefits of the rewards.

An increasing amount of financial products are being offered online, in order to give consumers the flexibility of handling their banking needs twenty four hours a day, seven days a week.  Online banking wasn’t meant to change people’s money habits, but instead, is there to give you the option of bypassing the constraints of local bank hours, helping you save on fees,  and skipping much of the paper based record keeping of traditional banking.

Online banks are often able to provide higher interest to savings account holders and lower fees to their account holders.  This is due to an online bank having lower operating overhead through operating online rather than in an establishment.

Advantages of Online Banking

The advantages of working with an online bank are numerous, and include:

• High convenience, with unlimited banking hours and your information is only a mouse click away!
• Transactions are processed quicker than a regular ATM transactions
• A variety of banking services and tools that help you manage your assets more effectively, including the ability to download transactions or create reports based on your spending and financial habits.
• Reduction in paperwork since most information you need is viewable from your online account, meaning you don’t have to file statements or other information as often.

Disadvantages of Online Banking

While the advantages of having an online bank are many, there are some disadvantages to consider before making the leap:

• A lack of printed documentation.  While it’s an advantage not to receive and deal with monthly statements, there is some risk to having all financial data saved online.  Banking institutions have back-ups of data, but it may be in your best interest to print statements for your own records just in case.
• Difficulty finding your way around the banking websites.  Due to having so many options and tools available, some people may have trouble finding their way around the bank’s website to find what they’re looking for.
• Security.  Even with top of the line security systems online banks offer, there is of course an increased risk for identity theft or fraud when your personal data is accessible online.

In order to establish credit, you need to open up a line of credit. If you have never had any type of credit before, you may be required to get a cosigner the first few times. This ensures the bank or lender that they will get paid and is also helps to keep your interest rate down. Finding a cosigner is not an easy task for some. It needs to be someone who has complete trust in you and you must do your very best not to miss a payment because you can hurt their credit as well.

Once you have opened a line of credit, it is imperative to never miss a payment. The first few payments are the most crucial. As you continue to make payments on time, your ability to get credit more easily grows.

Even though you may now be getting numerous credit offers, it is important not to open too many accounts. You do not want to end up in a situation where your entire paycheck goes to paying your credit bills. You want to make sure your debt to income ratio stays as low as possible to help establish your credit further. This is a very important factor creditors look at before extending credit and is as simple as how much you make compared to how much you owe per month.

Over time, you will find that with on time payments as well as a low debt to income ratio, getting the credit you need can prove to be very easy. Just remember, the biggest mistake most people make is opening and using too many lines of credit.

The last key factor in maintaining and improving your credit is to pay as much as possible towards your debts each month. Paying an extra 20-30% each month will drastically reduce your payback time. It is also an excellent idea to choose one or two cards and completely pay them off each month. Not only will you not be paying interest, but you will be helping to further establish your credit.

In fact, a 25 year old who manages to save just $5,000 a year and earns 8% interest on those savings will have over $1 million when he or she turns 65.  If the same $5,000 a year is saved at the same 8% interest by someone who is 45 years old – they’ll only have $230,000 saved by the time they turn 65.  See the difference?  Would you rather live out your golden years with over a million to work with or a couple hundred thousand?

Tax Advantaged Accounts for Retirement

Saving for retirement can be done with various tax advantages when you select one of the many tax advantaged options.  If your employer offers retirement options, look into them.  The 401K and 403B savings plans are tax-deferred (like traditional IRAs).  Other options with tax advantages include the Roth IRA and Roth 401K, both are tax-free for qualified distributions.

Contributing to 401K or 403B plans, as well as traditional IRAs are usually made with pre-taxed money.  When you withdraw the money from the accounts, you are taxed at the normal income rates.  For after-tax contributions to Roth IRA and Roth 401K plans, you pay taxes on the money going in and withdraw qualified distributions free of federal income tax.

With any retirement account, if you withdraw before the qualified minimum age limit, you’ll pay 10% penalty tax as well as income tax on the money as additional income.

How to Choose Savings Vehicle

If your employer matches your income to a 401K plan, it makes sense to choose this retirement savings option.  It doesn’t have to be your only source of investing, as there may be other investments with the opportunity to give you higher returns – but whenever you can get free money you shouldn’t turn it down!  Employer matching contributions is essentially free money, and should be taken advantage of.

Also, look for flexibility.  Certain accounts, such as the 401K, may offer the ability to take out a loan (with repayments on the loan paying yourself back, including interest on the loan); where as using a traditional IRA does not offer the ability to withdraw money  without paying early withdrawal penalities (except for very specific exceptions – like taking money out for a downpayment on your first home for example)

Consistency is Key

Regardless of the method you choose to save money, the key is to save money on a consistent basis- and to start as early as possible to benefit from compounding interest.