Which will pay you the most over time: a traditional 401 (k) or Roth 401 (k) retirement account?

The economy has shifted into high gear, with soaring corporate profits, plummeting bankruptcies and foreclosures and a national unemployment rate falling to 3.8%, an 18-year low.

Americans have become more optimistic, but their personal finances don’t necessarily reflect the progress of the economy. the Federal Reserve’s latest assessment of household financial health, released in May, shows “many signs of growth and improvement, along with remaining pockets of distress and fragility.”

Has your own financial situation hit an all-time high? Otherwise, here are some actions to consider:

Find a better and more stable job

With unemployment so low, maybe now is the time to find a new job if you can, as long as things are going well. This low rate of 3.8% hides a darker secret: Many jobs are poorly paid or have irregular working hours or other undesirable qualities. Three in 10 adults have unstable incomes, according to the Fed’s survey, which included responses from more than 12,000 Americans.

About 10 percent of adults depend on financial support from people outside their household, including one in four adults under the age of 30. Middle-aged parents are often the ones providing such assistance. Many Americans are now supplementing their incomes with part-time jobs ranging from cleaning homes to driving for rideshare companies like Uber.

By the way, while about half of workers said they received a pay raise last year, only 18% said they requested one. With relatively few workers available, the time has come to make such demands.

Build a silver cushion


When it comes to your financial future, procrastination can make things much more difficult down the line. Here’s how to be confident in your money.

The root of many financial problems is the lack of cash on hand. People who can’t cope with emergency or unforeseen expenses often respond by building up credit card balances, taking other expensive loans, or emptying their retirement accounts. Only 45% of survey respondents said they did not have a month-to-month credit card balance last year.

People tend to draw on their cash reserves during recessions, while economic expansions are normally a good time to build them up. Yet four in ten adults, in the Fed’s latest survey, said they would struggle to cope with an unexpected expense of just $ 400 – even at a favorable time in the business cycle. One in five adults said they couldn’t pay all of their monthly bills last year, and one in four said they skipped needed medical care last year because of their inability to pay them.

Americans reported improvement in saving money and paying bills, as 50% of respondents to a 2013 survey said they would struggle to pay a payment of $ 400. Still, the percentage that would struggle to find $ 400 is alarming given that financial advisers recommend that people try to accumulate enough money to manage at least three months of living expenses. American households spend about $ 45,000 per year on average, according to the Bureau of Economic Analysis. This suggests that people should have at least $ 11,000 in savings, not $ 400.

Get your banking in order

The latest Fed survey suggests more Americans are tied to the banking system. This is good because customers of banks and credit unions tend to be more financially fit, in part because they get better deals on financial services.

About 95% of survey respondents reported having bank or credit union accounts. However, some of these people are ‘underbanked’ meaning they have traditional accounts, but also use expensive alternatives such as check cashing or prepayment services or pawn shops or cash loans. Property titles.

Together, the proportion of unbanked or underbanked respondents fell to 23%, from 29% in a 2015 Fed survey.

Either way, now is a good time to sign up for free checking accounts and buy credit cards that offer lower interest rates, don’t charge annual fees, and have attractive rewards programs. . With credit now plentiful, this could also be the time to refinance a mortgage, even if interest rates aren’t as low as they were a few years ago.

It is also a good idea to subscribe to banking services that can help you save more or lower fees. In the latest Fed survey, 62% of respondents said they paid at least some bills automatically (reducing shipping costs and potentially avoiding lost or stolen checks), and 52% signed up for alerts for them. notify of low balances, suspicious payments, etc. at. Additionally, 46% said they automatically save money by transferring money from paychecks or checking accounts to investments.

Improve your retirement preparations


Simply Money Advisors Discuss Social Security Gaps.

The survey did not reveal many new revelations about retirement planning. Many Americans still haven’t made adequate preparations, including a quarter of working-age adults who say they have no retirement or retirement savings. To improve this, start with a savings plan, increase your contributions, use tax-sheltered accounts, make the most of employer matching funds, and educate yourself on how various investments work. .

A worrying finding from the report is that many people continue to retire at an early age. Of those who retired last year, half said they stopped working before age 62. Another quarter retired between the ages of 62 and 64.

Many retirees reported having stopped working for health reasons or because of an inability to find a job. Still, delaying retirement for a few years, if possible, can make a huge difference in building financial preparedness. When people delay, they can delay withdrawing money from investment accounts, giving those balances more time to grow. They can also postpone the start date for taking social security benefits. This is important because monthly benefits increase with each year a person delays (up to age 70).

It also helps reduce the “leakage” of your retirement funds while you are still working. According to the Fed’s survey, 5% of working-age respondents borrowed money from their account last year, 4% withdrew funds permanently, and 1% did both. People who take advantage of their accounts early take their toll on their finances and are less likely to view their retirement planning as on track.

Contact the reporter at or 602-444-8616.



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