09 Dec

The Dangers of Moving Your Certificate of Deposit (CD)

Certificate of Deposit CD savings stacks of money increasing as years go by

Life is all about balancing risk versus reward and your safe investments should be managed with a safe institution. Safety is why many people have a certificate of deposit or CD. It’s a federally insured savings account that has a fixed interest rate and fixed date of withdrawal, known as a maturity date. These accounts typically do not have monthly fees.

Most CDs come with fixed rates, meaning annual percentage yields are locked in for the duration of the term. These rates are usually higher than regular savings accounts since there are penalties for early withdrawal. CDs really pay off when people are certain they won’t need access to that cash during the duration of the term length.

If you have a longer-term CD, you may be tempted to move it to another institution for a 25 or 50 basis point increase. Moving your CD into a risky institution for a 25 or 50 basis point difference in rate is NOT worth the risk, fees, and hassle for a nominal gain. Advertisements for institutions that will offer you a 25 basis point increase are typically involved in high-risk investments. There’s no guarantee your money will be safe and if you’ll even get the money back on these unpredictable accounts.

Also, if you happen to withdraw your CD early, it will eat into your existing gains. Before you withdraw your CD, take a moment to calculate the cost of CD early withdrawals. Early withdrawal penalties can vary depending on the length of the CD term and the bank offering the account. CDs with longer terms usually pay higher rates, but the early withdrawal penalties for these accounts tend to be harsher. It’s just not worth the hassle, risk, and fees of moving your money.

RMLEFCU is in the Top 40 healthiest credit unions nationwide and our accounts are insured by the National Credit Union Association (NCUA). You can feel good about your investments in our institution helping your community. We use the money you save at RMLEFCU to help fellow law enforcement officers get loans and the interest returned is given to you and other members, not greedy shareholders at a bank!

The cons outweigh the pros of moving your CD to another financial institution. Sure, you might get a few more dollars each year, but at the same time, you’re risking losing all your money and taking money away from the law enforcement officer community. Take a look at how little you’ll earn with a 25 basis point increase.

12 May

How to Build an Emergency Fund

Emergency Funds Coin Jar

Building an emergency fund takes time and dedication, but it’s not as hard as you think! Having funds to cover large, unexpected expenses such as emergency visits, home-appliance repairs, major car fixes, and unemployment will make going through those things a lot easier. We’ll tell you the best tips on how to build an emergency fund and how much you should save.

How Much Should I Save?

This fully depends on your financial circumstance, but a good rule of thumb is to have enough to cover three to six months’ worth of living expenses. While three to six months’ worth of expenses sometimes seems like a massive amount, start small. Even having $500 saved can get you out of many financial emergencies. If you put away something now, you can build your emergency fund over time.

Where Should I Keep My Emergency Fund?

Since an emergency can strike at any time, having quick access to your emergency fund is crucial. The account should have competitive dividends and no monthly maintenance fees so you can get the most out of your savings.

RMELFCU offers multiple savings accounts that all earn competitive dividends, have no monthly maintenance fee, unlimited deposits, free digital banking, and more! Having a savings account with a credit union ensures you have access to your money when you need it and are earning benefits with it when you don’t.

Another, less liquid option, is an RMLEFCU share certificate. With these accounts, you deposit a certain amount, set your term length, and wait! You’ll earn competitive dividends at fixed rates that are higher than regular savings accounts. Keep in mind, the longer the term, the higher the rates. Early withdrawals are subject to penalties, so only use this option if you already have a set amount set aside for emergencies elsewhere to get you out of a pinch and are looking to build your already existing emergency fund faster.

Saving Emergency Funds

How Do I Save?

So, how do you get up to that three to six month goal? For a lot of people, this might seem like an enormous goal that will take years to reach and you might get disheartened along the way. Instead, a great way to start is to set a goal that is more reasonable and much smaller.

As mentioned above, an initial emergency fund of $250 or $500 is much more palatable and reaching those goals will make you feel accomplished and urge you to save more! Breaking down that emergency fund goal into even smaller pieces, like $25 dollars a week can make it even easier, and you can make those into automatic transfers, so you don’t even know the money is going to your savings!

If you save like this, you’ll realize quickly you’ve hit your first emergency fund milestone, and that will feel GREAT! Your account will start earning interest or dividends and you can continue the cycle by setting another easy-to-reach goal and you watch your emergency fund grow. Before you know it, you’ll reach that three to six month emergency fund and have it stashed away so your life isn’t disrupted by these kinds of inconveniences.

If you have any questions about RMLEFCU’s savings accounts or would like to open one in minutes, visit www.rmlefcu.org or give us a call at 303-458-6660. We would also love to see you in person! Find a branch near you.

08 Mar

Retirement 101

saving for retirement

Ahh, retirement. The greener pasture that lies ahead. But how do we keep that pasture green for the rest of your retirement? If you have doubts on how much you’re saving or how to save for retirement in the first place, keep reading to get the lo-down!

First thing’s first, how do you save for retirement? With these three easy steps, you’ll be saving for the future in no time.

How to save for retirement in three steps

  1. Free money
    If your company offers an employer-sponsored retirement plan, like a 401(k), and matches any portion of the money you contribute, put your first savings into that account. If your plan doesn’t offer matching contributions, or you don’t have a workplace retirement plan, start with the next step.
  2. Contribute to an IRA
    You can contribute up to $6,000 to an IRA each year (or $7,000 if you’re 50 or older).
  3. Max out your IRA
    If you max out your IRA, return to your 401(k) or other employer plan and continue making contributions there.

Okay, but what is a 401(k) and IRA?

And wait, there’s a Roth IRA and a traditional IRA?

Let’s break down what these three investment accounts are for retirement savings.

Let’s start with the 401(k)

A 401(k) is a retirement savings plan that is sponsored by your employer. It lets employees save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account.

Some huge pros are how easy it is to save on autopilot. Money is taken out of your paycheck automatically, so you don’t even see it! A lot of employers also match a portion of employee contributions making them one of the biggest tax havens as the IRS lets individuals save more than 3x as much as in an IRA. Again, the investment gains are tax-deferred so as long as the money remains in the account, you owe nothing as it grows!

But not all that shimmers is gold. The investment choices for a 401(k) are limited. They’re picked by the plan administrator and selections are typically small. Fees can also eat at your returns. In addition to investment expenses (which are charged by the investments themselves, not the 401(k) plan), there may be administrative fees charged by the company that manages the plan.

The best way to invest in a 401(k) is to invest up to the match and pay attention to fees! The money you contribute to your 401(k) lowers your taxable income for the year and you get tax-deferred growth on investment gains.

What is a Traditional IRA?

A Traditional IRA is an individual retirement account that offers tax advantages to savers. The money you contribute is deducted from your taxable income, meaning the money you put into the account is pre-taxed. The taxes you’ll pay will be what you withdraw in retirement.

There’s no income limit to open and contribute to a traditional IRA! And you can use Traditional IRA money to pay for qualified college expenses without paying an early distribution penalty, although taxes are still a thing… You can also use up to $10,000 from a Traditional IRA toward the purchase of your first home as well!

However, if you tap into the money before age 59½, you’ll pay taxes AND a 10% early deduction penalty. You HAVE to begin taking distributions at 70½ and can no longer make contributions.

Let’s compare to the Roth IRA.

For the Roth IRA, contributions are not deductible as the account is funded with post-tax dollars. This offers you a tax benefit which raises the incentive to save! A Roth IRA is an account that holds your investments, which means you can select what you want to invest in, such as mutual funds, stocks, bonds and exchange-traded funds (ETFs).

It has all the benefits of a traditional IRA, but you get no upfront tax break as you do with the traditional IRA. The payoff comes later as withdrawals in retirement are not taxed at all.

Lucky for you, RMLEFCU offers options with the Traditional IRA and the Roth IRA and on top of that, Debby, our registered representative with LPL Financial, can offer you expert financial planning advice. RMLEFCU provides you with all the resources to plan a happy, healthy retirement. Give us a call now: (303) 458-6660.

22 Jan

Here’s What You Need to Know About Saving for College

Saving for College

You might have heard the frightening statistic that 44 million borrowers have a divided 1.48 trillion dollars in student loan debt looming over their heads. Yes, trillion. The Class of 2017 graduated with an average of $39,400 in student loan debt. It’s no doubt college is expensive with the average cost of attendance in Colorado for 2018 being $21,646 for in-state students and $31,887 for an out-of-state student.

As a parent, you’re probably thinking there has to be a way around this! It’s not easy, but with careful planning and focused dedication, it’s possible to save enough so your child can go through college, debt-free. To help you better prepare yourself and your child for the cost of a college education, here are some suggestions to get you started on saving for college.

When to Start

“The best time to plant a tree was 20 years ago. The second-best time is now.”

This quote definitely resonates with savings goals and the best time to start is now! If you don’t have children yet or your children are young, time is on your side. The key is saving early and regularly! If your children are older, it’s great to start saving now and help reduce their tuition costs.

Cost of Tuition

Before executing a savings plan, you’ll need to see your end goal. As mentioned above, the average cost of attendance in Colorado for 2018 is $21,646 for in-state students. Take into account the living expenses as well. Will your child stay at home or will they move out? Will they stay in dorms or in an apartment? Does the University require first-year students to stay in the dorms? Will they need a university dining hall meal plan or be on their own for meals? On-campus housing costs range from $12,000$14,000 in Colorado.

Savings Funds

Now that you have the expectations of how much to save, it’s time to decide how to save. Choosing the right saving method is key to setting yourself up for financial success. RMLEFCU provides different types of savings accounts; Regular Savings, Custom Savings, and Premier Money Market.

If you sign up for the Regular and Custom Savings, you can earn competitive dividends on balances of $100 more with no monthly maintenance fee. The Premier Money Market account earns you competitive, tiered dividends on balances of $2,000 or more to maximize earnings on your higher savings balance.

Dual-Credit High School Classes

Many high schools are focusing more on college preparation and offering dual-credit classes. AP classes also provide an opportunity to earn college credit in high school, albeit a test will need to be taken in order to earn the credit. The more college credit your student can accumulate beforehand, the better! This may even mean graduating early for your child.

Scholarships

There are loads of different, unique scholarships your child can apply for. A lot of websites help you find scholarships that are suitable for your child and that they qualify for. The hard part is applying for them. Anything helps to supplement your college savings fund.

Emphasize Savings

It’s always a great time to talk to your child about money and the importance of saving. If your child has a part-time job, encourage them to save first. This is an important time to build a strong savings foundation and teach them the importance of having an emergency fund in case something happens once they become financially independent.

Part-Time Jobs

You can always talk to your child about getting a part-time job in college as well to help with their cost of living and teach them to be financially independent. Nearly 52% of students are working part-time while studying for their degrees. An even better option for your child would be to look into paid internships. On top of receiving money, they are also getting industry experience. It’s a win-win situation.

It’s never too early to be saving for college. By estimating your child’s education expenses, regularly contributing to your savings fund, and involving your child in the process along the way, you’ll give them the money-management tools they need for success. If you have any more questions about our savings accounts, don’t hesitate to give us a call at (303) 458-6660 or stop in a branch to speak to a representative!

 

 

10 Feb

Getting Your Finances Ready for 2015 Part 2

Planning and Saving in 2015, Your Best Financial Year!

The holidays may be a distant memory past, but the debt you incurred while trying to make sure you gave everyone the present of their dreams has not. It’s time to get out of the red and into the black with some easy tips on budgeting and saving in the New Year!

Planning and Saving in 20151.) Make sure you’re getting the most out of your financial institution. Not all banks are created equal, and certainly not many (or any!) banks are better than credit unions (in our humble opinion). Does your financial institution offer free checking? Low interest rates on auto loans and mortgages? ATM fee refunds? Make sure you shop around and find a place that suits your service and financial needs.

2.) Establish your financial goals and then prioritize them. People often feel overwhelmed with everything they should be saving for, like paying off debt, buying a car, and/or building savings. It can feel a lot less impossible if you work towards one goal at a time. Decide what is the most important to you, and save for it. When you reach that goal, you’ll feel so good you’ll be ready right away to jump into your next savings project. Be sure to check out RMLEFCU’s Custom Savings Accounts!

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