Tuesday, November 26, 2013

Why Opening an IRA Savings Account Pays Off

Although Individual Retirement Accounts or IRAs are more popular among adults, the benefits are just as important to young individuals! Opening an IRA savings account may not show immediate benefits for young individuals, but if they start saving now, they will have a larger savings to dip into in the future! What makes IRAs such a great retirement savings tool is the special federal tax laws governing the taxation of amounts earned within an IRA. Earnings within Traditional IRAs are tax-deferred until they are distributed from the Traditional IRA. Earnings within Roth IRAs may be distributed tax-free, and Coverdell Education Savings Accounts generally are not subject to federal taxes as long as they are used for qualified education expenses..

Here are 3 reasons why young individuals should open an IRA savings account:

Financial Responsibility

Opening an IRA savings with your child, or talking with them about an IRA will teach them important lessons they can carry with them in the future. They can learn how to earn, save, and spend money wisely. They will also learn more about taxes and retirement. This will give them tools to make more responsible financial decisions as they start living on their own.

Secure Finances for the Future

If young individuals start saving now, they may have a nice amount of money to help them with college expenses or other big purchases. Also, when the time comes to put money toward their first home, young individuals can feel comfortable knowing they have started to set money aside that could potentially be used to offset these expenses.

Finances for Retirement

As they grow older and become adult earners, the contributions to their IRA will probably increase and continue to build to their savings. Even though retirement is probably not in the back of their minds right now, young individuals will be happy they started their IRA savings when they are able to retire comfortably and securely. They can spend more of their time enjoying retirement instead of worrying about finances!

Making the decision to open an IRA savings account will benefit young individuals, not only now, but well into their futures. Building responsible financial habits and knowing they have secure finances for the future can make any young individual feel successful and accomplished! For more information on IRA savings accounts and how to open one, visit our website or come see us at any MMFCU location!

As with any tax-related investment, consult your tax advisor for complete qualifications and penalties.

Friday, November 15, 2013

Should You Refinance Your Home?

Refinancing your home has the potential to save you thousands of dollars but there are situations where refinancing might not be right for you...

Refinancing is NOT advised if:
  • You’ve had your mortgage for a long time. Later in your mortgage more of your payment goes toward principal reduction. 
  • Your current mortgage has a prepayment penalty. Often times the prepayment penalty will outweigh the benefits of refinancing. 
  • You plan to move within the next few years. Lower monthly payments might not outweigh the costs of refinancing. Use the break-even calculator to determine if it would be worthwhile for you. 
If the above scenarios do not apply to you, refinancing could be a smart move. The following are a list of the benefits refinancing could provide:
  • Lower your interest rate. Typically the lower the interest rate, the lower the payment. Lower interest rates are possible because of market changes and improved credit scores. 
  • Adjust the length of your mortgage. 
    • Increase the term of your mortgage: This will reduce your monthly payment. It will also increase the duration of your payments and the total amount you pay for your home.
    • Decrease the term of your mortgage: This will reduce your interest rate, shorten the duration of your loan and reduce the total you pay for your home. However, it will increase your monthly payment. 
  • Change your mortgage type. With an adjustable-rate mortgage, or ARM, your monthly payments will change as the interest rate changes. If you switch to a fixed-rate mortgage you are guaranteed your mortgage will be the same each month. 
  • Get an ARM with better terms. Not all ARMs are created equal. If you want to stick with an ARM you may be able to find one with a lower starting interest rate, smaller interest rate range or lower payment caps. 
  • Cash in on Equity. When you refinance for more than you owe, you can receive the difference in a cash payment. You can use this money to pay off other debt, however you will have less equity in your home (“A Consumers Guide to Mortgage Refinancing” The Federal Reserve Board). 
If you still have questions and are unclear if refinancing is in your best interest, don't be afraid to use the staff members at MMFCU as a resource. We're with you all the way!