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Ever wonder how social security is calculated? It’s not just an academic exercise. Understanding how the Social Security Administration calculates your retirement benefits can help you maximize your monthly check.

How Social Security is Calculated

I have exactly one friend who enjoys talking about money — you know, who actually likes discussing 401(k)s, saving rates, and taxes.

Well, she recently brought up the topic of Social Security because her father is 62 and was thinking about filing. I asked her, “Why would he do that?” Her response: “Because he can.”

Her father is an intelligent, successful doctor who still practices medicine several days a week. I thought to myself, “Surely, if I could just help him understand the way Social Security is calculated, he will change his strategy.” And he did! Once he understood the process, he wanted to optimize his check. For him, that meant waiting.

You can understand, too. I’ve described below the basic steps used to determine your benefit. The plan you have now might not be the best plan for your bank account.

1. Every year of earnings is calculated to represent present value

Social Security does this for your benefit, actually. The present value calculation neutralizes the effects of both wage growth and inflation.

Earning $10,000 in 1982 is like earning $25,751 in 2017. Social Security adjusts every year of your earnings to the equivalent value in the year you file. The later you can wait to file, the more likely it is that your benefits will be higher.

2. Your highest 35 years of income are averaged to determine your Average Indexed Monthly Earnings (AIME)

Social Security includes zeros in your average if you worked less than 35 years. Every year you work, your AIME will be recalculated—a high income year will replace a low income year, or a no income year.

If you are currently in your peak earnings, working a few extra years could make a big difference in your benefit.

3. Social Security will apply its own algorithm using your AIME to determine your monthly retirement benefit, or Primary Insurance Amount (PIA)

Social Security uses a complicated calculation. There is no need to compute it on your own. You can create an account with My Social Security to monitor your earnings record and view estimated monthly benefits. 

4. Full Retirement Age

Your monthly benefit is adjusted based on the age you choose to retire. It increases if you wait until after your full retirement age and decreases if you file early. Social Security determines your full retirement age on a sliding scale based on the month and year you were born. For most people retiring soon, this is approximately 67 years old.

When Social Security calculates your monthly benefit, they assume you are going to file as soon as you hit your full retirement age. However, you get to choose your filing date. The earliest age you can collect standard social security benefits is 62.

Filing Early

Let’s say that you are someone born in 1960 who has averaged a salary of $60,000 a year. When you hit your full retirement age in the coming years, you’ll receive a Social Security benefit of $2,007 per month.

Social Security reduces your benefit for every month you collect before your full retirement age. For someone born in 1960 and averaging $60,000 a year in earnings, collecting social security at age 62 results in a monthly benefit of $1,403 compared to $2,007, approximately a 30% reduction.

Filing Late

In contrast, Social Security increases your benefit for every month after full retirement age you delay filing. In the example above, if you wait until age 70, you would receive $2,483 compared to $2,007, approximately a 24% increase. But don’t wait until after age 70 because your monthly benefits stop increasing after that age.

Delaying Social Security for a few years can make a big difference over time, especially if you or your dependent spouse plan to live a long time.

Other Factors

This is not straightforward stuff. The steps above cover basic computations, though many other factors should influence your decision for when to file. For example, you should consider these factors:

  • Your overall tax situation
  • If you are working or earning income before full retirement age
  • Your immediate cash flow needs
  • If you have dependents that may qualify for family or survivor benefits
  • Your health and longevity
  • Your spouse’s health and longevity
  • If you have a spouse or divorced spouse who is a high income earner

When it comes to Social Security, the devil is in the details, and it is nuanced for every situation. And you want to get it right because you only get to file once (well, twice if you include the do-over provision).

To ensure you are filing at the best time for your situation, it’s a good idea to speak with a retirement professional, contact the Social Security office, AND keep learning on your own.

Listen to this podcast on advanced social security strategies

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Aspiration Summit checking account offers a unique blend of features. From an excellent interest rate to virtually no fees, Aspiration is ideal for consumers looking to be treated fairly by a bank. Read our Aspiration Summit checking account review for all the details.

In the world of cash back and interest rates, I try to make as many purchases as I can with a good cash back credit card. Utilities, groceries, clothing, merchandise . . . the list of what I use my credit card for is endless.

And yet, as much as I try, I still end up spending more using my checking account and debit card than I do with my credit card. This means I’m missing out on cash back opportunities.

Yes, a good checking account is vitally important to a healthy financial lifestyle. But paying unnecessary fees is the easiest way to drain your checking account, especially without the benefit of a great interest rate. Plus, there are way too many banks out there willing to provide such a disservice to you and your account.

Well, the Aspiration Summit Checking Account is the antithesis of those high fee accounts. It offers its customers a fantastic interest rate without the detraction of a single fee.

Here’s how it works.

Aspiration Summit Checking Account

Aspiration Summit Checking Account review

The Aspiration Summit Checking Account is backed by Radius Bank and is FDIC-insured.

After being approved, you’ll receive a Radius Bank debit card. You can use the card just about anywhere. Unlike other checking accounts, it requires no minimum amount of debit transactions in order to receive the fee-free account. There is also no minimum balance requirement.

Even more intriguing, 10% of all revenue that Aspiration generates goes to charity. So, how can they offer all of this?

Well, oddly enough, it’s not available to everyone. In order to become an Aspiration Summit Checking Account holder, you must receive an invitation.

While that may sound daunting, all it takes is a short form with personal information. Soon after, you’ll receive an invitation asking you to join (I received my invitation 4 days after requesting an invite). Any U.S. citizen or permanent resident over the age of 18 with a Social Security Number and a checking or savings account can request an invitation.

There are three primary benefits to owning this checking account. They are:

  1. The current interest rate for accounts with more than $2,500 is 1.00 APY. (It’s 0.25% APY for less than $2,500.)
  2. There are no fees and no minimum balance requirements to maintain. The minimum starting balance to open an account is $10.
  3. Aspiration will never charge you a fee to use an ATM.  Not in the United States or around the globe. Not ever. (The ATM operator may charge you their own fee, though, so be aware.)

To my knowledge, no other account in the country offers all three benefits above. It’s rare enough to find a checking account that offers a high interest rate. When combined with absolutely no fees or ATM fees worldwide, I had no choice but to sign up for an account for myself.

Now my mortgage, electric bill, and every other non-credit card purchase flow through my Aspiration Summit Checking Account.

Aspiration Summit Checking Mobile App

For mobile users, there’s an available free app in the iTunes store. The app allows you to manage your Aspiration Summit Checking Account. Aspiration does a good job of keeping the app updated, too. In fact, the new 1.4.5 version was just updated June 23rd, 2017.

Current features of the mobile app include:

  • Deposit a check with your phone’s camera. No more searching for your bank or an ATM!
  • The only money Aspiration makes are the “tips” you choose to pay them — and you’re free to choose zero
  • Easy transfers between Aspiration and your other accounts
  • Pay your bills, or send a check to a friend
  • To-the-minute balance & transaction tracking
  • Touch ID lets you sign in with your fingerprint (on supported devices)
  • 3D Touch QuickActions (on supported devices)
  • Aspiration works with Apple Pay, Mint, Venmo, & Paypal
  • Two-factor authentication for stronger security

The only time your checking account has the potential to lose money to fees is when it is overdrafted. The bank charges $25 overdraft fee anytime it attempts to draw funds from your account and you do not have them.

Related: 5 Most Annoying Banking Fees

If your account remains negative for five consecutive days, a $5 daily overdraft fee charge kicks in. This will be charged until the account balance is brought back up to the black. Because you cannot also own a savings account, there is no overdraft transfer protection service. So, please do whatever is necessary to keep proper track of your debits.

Rarely do I come across a financial product that I have a hard time finding fault with. Whether a high annual fee, a limited set of circumstances, or some other catch, financial companies that want you as a customer do so to make money. However, the Aspiration Summit Checking Account holds none of these negatives.

For anyone in need of a checking account or looking to upgrade their current checking account, start here:

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10 Easy Ways to Save Money

This article was written by in Saving. 22 comments.

This year, I’ve spent more money than ever. I’ve been able to swing these extra expenses — including lots of fun new gadgets I’d put off buying for years — without hurting my budget. But now, I’m ready to pull back and start ramping up my savings again.

We all know that Americans are generally terrible at saving for retirement. But it turns out that we’re also pretty bad at saving in the short term, too. In fact, nearly 60% of Americans don’t even have $500 in savings. Yikes!

Here’s the reality, though: saving a bit of money doesn’t actually take much effort. I’m planning to use these ten low-effort ways to save money over the next year. Want to join?

1. Automate your savings

Chances are you already use direct deposit for your paycheck. If not, it’s time to get with the program. With direct deposit, your money goes straight to the bank. It’s more convenient for you and your employer. Plus, it lets you automate your decision-making about savings.

Instead of deciding how much to save each payday, you can set your account to automatically move money from checking to savings. Your paycheck will hit your account, and your savings will disappear from that account almost simultaneously. It’s much easier to save money that you never see in your checking account!

Even if you start by moving only $5 or $10 per paycheck to a high-yield savings account, you’ll have more saved at the end of the year than you would have otherwise.

2. Collect your excess coins

I enjoy looking through circulating coins, on the off chance that I discover a rare specimen, such as a silver quarter. No, it doesn’t happen often; most of the good stuff has been removed from circulation by other collectors or knowledgeable bank tellers.

But while I’m saving my daily change in a glass jar, I’m also saving myself from spending that money. Every so often, I roll the coins with free sleeves from the bank and take them in for deposit.

What if you don’t typically spend cash? If you usually swipe your card instead of spending cash, you may not have any loose change to save. In this case, check out apps like Qoins.

You can connect this app directly to your checking account. Each time you spend, it’ll round up to the next dollar and “save” the change from that transaction. Once you reach a certain threshold amount, the app will put that change towards a debt.

Other similar apps, such as Digit and Acorns, use this concept to sock away change in a savings account or investing account. These apps act like a virtual change jar, putting the dregs of your daily transactions towards important financial goals.

3. Use goal jars

You’ve seen those jars in country shops. They are short, wide-mouthed clay pottery or stoneware jars with cork tops.

On the outside of the jars, they are labeled using varying levels of wit. In these jars, you can set aside money you’d like to budget for “retirement,” “kids’ education,” “dreams,” or the “Harley fund.”

Again, these are a great option if you typically spend with cash. You can make them even more powerful if you dedicate certain “leftover” money to these jars.

Say you normally spend $125 for a weeks’ worth of groceries at the grocery store. One week, you get creative with meal planning and couponing and you only spend $115. Put the extra $10 — which you normally would have spent — into a goal jar.

You can do this virtually, too. More and more banks are offering free savings accounts, and some checking accounts offer unlimited free “sub-accounts.” Open several, then label them for specific goals.

Related: Variety of Savings Accounts: Where I Keep My Cash

You can split up your extra money at the end of the month to these accounts, or just throw in “saved” money whenever you can. For instance, if you usually spend $10 on your work lunch, but bring a lunch from home, toss the $7 you saved into one of your savings accounts.

4. Form a budget, but budget for fun

A budget can be the most depressing part of personal finance if you let it be. I tend to avoid budgets, but if my income fails to meet my expenses, I’ll have to reconsider this approach.

The key, though, is that budgets should be flexible. Budgeting isn’t about limiting yourself to only the most frugal spending. It’s about realizing that sometimes you have to sacrifice in one category to pay for another.

Want to eat out more? Great! Be a super frugal grocery shopper when you do eat at home. Want to travel? Awesome! You may have to give up purchasing some of those new electronic gadgets.

A budget that saves you money is usually one that has at least some “fun” spending built in. You can only seriously restrict your spending for so long before you make yourself more likely to go on a spending binge. So, make sure you write in some fun — whether that’s dining out, saving up for travel, or working on a hobby. Then, stick to it!

If you need a jump start, here are the best budgeting tools to track your money.

5. Find ways to make your hobby cheaper

Hobbies can be expensive. Just ask anyone with a Faberge egg collection! Many hobbies require materials and monetary investments, and this can really add up over time.

Just like budgeting for your “fun,” though, you should budget some money for your hobbies. Of course, moderation is key here. Try not to spend too much, especially to the detriment of the rest of your budget.

Here are some tips to help you manage that hobby spending:

  • Get good at finding your supplies on sale or secondhand. If your hobby is crafting, sign up for coupons from all the local craft stores. You can often save 50% or more on your craft materials. Into biking? Consider buying your gear secondhand to save big.
  • Figure out how to make money from your hobby. Turning your hobby into a side business is an excellent way to make money. But even if your hobby doesn’t turn a profit, selling what you create can cover most or all of the expenses associated with your hobby.
  • Make the most of what you have. It’s easy to overspend on your hobby thinking you need the next big thing. If you sew, it’s tempting to upgrade your machine every couple of years, whether you need to or not. And if you hike, adding on ever more cool gear is tempting. The truth, though, is that you can probably enjoy your hobby without these things. I’d suggest instituting at least a one or two month waiting period before you can spend on pricey hobby-related items. In that time frame, you might just find that you don’t need the upgrade after all.

6. Sell stuff online

If you were thinking of having a yard sale, think again. By selling your unwanted items online, you’ll reach a much wider audience, including more of those who appreciate what you have to offer. Plus, online buyers will often pay more because they’re looking for exactly what you have.

Luckily, you’ve got a ton of options for selling online. Don’t want to mess with shipping heavy or bulky items? Check out your local Facebook sale group to make sales locally. Or list your items on Craigslist.

For smaller items that are easier to ship, you often don’t even have to take them to the post office for shipping. You can set up a package service to pick up the item from your home after you print the label. This makes selling items on eBay and other sites easier than ever.

Some sites, such as Swap.com and Thredup, will pay you for your old, lightly-used clothing and accessories. Swap gives you a shipping label to use, and Thredup will actually send you a bag for shipping your items in.

7. Start a new hobby

Are you currently working on an expensive hobby that’s draining your money? Consider starting a new one that actually makes money.

Some hobbies are great micro businesses. Maybe yours won’t make loads of money. But even if your hobby can pay for itself, you can have your leisure for free. Here are some ideas for hobbies you can turn into extra cash:

  • Building or fixing computers: This one’s easy to turn into a money-maker. Just become the local go-to guy for fixing or customizing computers.
  • Arts and crafts: Any sort of art or craft hobby likely has a market. And these hobbies can be expensive, so it’s a good idea to try selling your wares as you make them. Again, even if you just cover the cost of your materials to start, that lets you enjoy your hobby without spending loads of extra money.
  • Gardening: You can, of course, save some money for your family by growing fruits and vegetables you’d otherwise buy. But if you’ve got an eye for planning out beautiful flower beds, too, offer your services at installing and maintaining others’ landscaping.
  • Pets: One or two pets are great, but pets get expensive. If you love to spend time with animals but can’t afford to add any more to your family, consider starting a pet-sitting or pet walking business.

8. Ask for a raise

Sometimes it’s that simple. If it’s been a while since you’ve gotten a raise, or if you’ve recently taken on more responsibility, now is the time to ask.

First, put together your list of recent accomplishments. Hard numbers will often do more than anything else to actually get you that raise. Then, set up a meeting with your supervisor to talk specifically about your raise, or what you can do to earn one if you’re not quite there yet.

Of course, if the goal is to save more money, you should know what you’re going to do with that raise ahead of time. Adding it to your paycheck is a good way to start frittering away that extra money without even knowing where it’s going.Instead, consider directing that money straight to your savings account or 401(k), before it even hits your bank account.

9. Negotiate to work from home

More and more businesses are allowing or even welcoming their employees to work from home. And working from home can help you save loads of money.

Here are just some of the expenses that you can cut back by working from home, even one or two days per week:

  • Gas and car maintenance
  • Parking, if yours is paid daily, and toll roads
  • Dry cleaning or other clothing expenses
  • Less wear and tear on your more expensive work clothes
  • Eating out for lunch, work coffees, etc.
  • Time is money — if you cut out your commute, you have more time for side hustles or hobbies, and less time with the kids in childcare.

Plus, when you work from home, you can often find time to get extra things done around the house, which is just an added bonus!

Resource: Ten Tips For Cutting Car Expenses

10. Cut back on your monthly bills

Saving on things like groceries and dining out is great. But it takes a concerted effort and planning month after month.

An easier way to save right away is to cut back on those recurring monthly bills that you barely think about paying. This includes things like car and home insurance, phone and internet bills, recurring monthly subscriptions, cable, and more.

These are the types of bills that you should price shop at least once a year. So if it’s been more than a year since you last made sure you were getting the best possible rates in these areas, take a few hours to shop around. Start by calling your current providers and asking what they can do to lower your bill; sometimes, you can get a new discount just by asking for one.

Saving on these bills will save you money month after month. Just be sure to keep a running total of how much you’re saving, and then direct that amount to your savings account each month!

Learn More About Cutting the Cord

How else are you saving? Let us know in the comments.

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Bank of America has a long history of supporting the arts through philanthropy and raising awareness. But they’re stepping up their game in 2017 with their Museums on Us program.

This program allows qualifying Bank of America members to get into local museums for free on certain weekends, through the rest of this year! Here are some details of the program:

Who is Eligible?

Anyone who holds a Bank of America credit or debit card or a Merrill Lynch debit or credit card can participate. You’ll just have to show up at the right museum on the right weekend with both your card and a photo ID.

Here’s the catch: this is only good for one free general admission ticket. It doesn’t apply to special events or exhibits. And you can’t bring guests with you.

However, if you have a Bank of America credit card with an authorized user, that person can get into the museum for free, as well. It sounds like an excellent option for a free date night to me!

Resource: The Best Cash Back Credit Cards of 2017

Plus, many of these museums already allow children under a certain age to get in for free, so it could make for a great family adventure at no cost. Even if the museum does charge for your children, the little ones are usually at a very discounted rate, making the adventure definitely worthwhile.

When Can You Go?

Do you fit the bill? Or have you been considering a Bank of America or Merrill Lynch credit card, anyway? Here’s when you can take advantage of this free museum admission:

  • August 5th and 6th
  • September 2nd and 3rd
  • October 7th and 8th
  • November 4th and 5th
  • December 2nd and 3rd

You’re responsible for figuring out if the museum is actually open on those days, of course, but most participating museums should be.

Related: Which Credit Card Should Be Your First?

Where Can You Go?

Here’s another catch: the list of participating museums is fairly short, especially if you’re outside of a major metropolitan area. But if you’re traveling to a larger city, you could have loads of options.

In Chicago, for instance, you have a long list of options. These include:

  • The Art Institute of Chicago
  • Chicago History Museum
  • Museum of Contemporary Art
  • National Veterans Art Museum
  • Shedd Aquarium
  • The DuSable Museum of African American History
  • The National Hellenic Museum

New York City has an impressively long list of participating museums, of course, as do Miami, San Antonio, and Charlotte, NC.

You can check out the full list of available options here. Just keep in mind that it could be a good idea to call ahead and confirm participation before you count on those free tickets!

Should You Get a Bank of America Card for This?

In short: probably not. There’s much more that goes into choosing a credit card than a random one-off perk that you might use once per year. The benefits or lower interest rate on another card might easily outweigh the free museum tickets.

With that said, it’s one perk to consider if a Bank of America credit card is already in your wallet or on your to-apply-for list!

So, how about you? Will you be taking advantage of this Bank of America perk?

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Capital One Spark Business Checking Account Review

by Michael Pruser

I created my small business in 2010. One of the very first things I did was sign up for a business checking account. Living in Miami at the time, there was a brick-and-mortar Citi location just a half block away. So, that is the bank I signed on with. The “green” business checking account was […]

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A Complete List of Sales Tax Holidays in 2017

by Abby Hayes

Sales tax holidays are a surprisingly great way to save money, especially during the back-to-school shopping season. On specific dates, states do not require merchants to charge customers sales tax. Even if sales tax seems like a minor line item in your budget, it can make a big difference. Sales tax holidays are an excellent time […]

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Are Cash Back Websites Really Worth the Hassle?

by Adam Luehrs

You’ve probably seen at least a few of your friends brag about their coupon-clipping triumphs and bargain-hunting victories all over social media throughout the years. However, it suddenly seems like everybody has moved past sales and coupons into the world of cash back websites. What’s the hype? These websites offer a very tempting service by […]

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How to Get the Best Deals on Amazon Prime Day

by Stephanie Colestock

Starting last night, Amazon’s 3rd annual flash sale, called Prime Day, went live. The big event runs for 30 hours, ending at 3am EST on Wednesday, July 12. So, shoppers still have plenty of time to take advantage of hundreds of huge deals on the site. So, what is Amazon Prime Day, and how can […]

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How to Travel On a Budget

by Stephanie Colestock

Travel is the one thing you can buy that makes you richer.   -Anonymous Do you dream of sandy white beaches and daquiris in the sun? Maybe your ideal getaway is a cabin in the mountains, instead. Or perhaps you’re the type who would rather backpack through Italy, eating your weight in pasta and visiting the […]

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Do You Really Need to Buy Travel Insurance?

by Adam Luehrs

Traveling to another state, or even to a foreign country, means experiencing a new culture, meeting new people, and making memories that can last a lifetime. It can also mean visiting a hospital in a place where you don’t have any type of medical coverage or being stranded at an airport without your luggage. This […]

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