No 401(k)? No problem.

401(k)s are the most efficient retirement plan. Recapping my last post, if you have a 401(k), take advantage of it. Especially the before tax contributions. Tax deferred compounded growth is incredible over time, some might say it’s magical.

“What if I don’t have a 401(k)?”

There are other retirement plans out there- don’t worry. Employers have other types of sponsored plans and you can always set up your own. In this post, I will focus on the traditional Individual Retirement Account, also known as an IRA.

If your company doesn’t offer you a retirement plan like a 401(k) or a 403(b), you can open and contribute to an IRA.

Some things you need to know about an IRA:

  • You can contribute a maximum of $5,500 a year
  • You can contribute until you are 70.5
  • If you are not covered by a qualified plan, your contributions are tax deductible
  • When you take money out of your IRA at retirement, you will be taxed on the distribution
  • If you take a distribution before you are 59.5, you will incur a 10% penalty
  • You are required to take a minimum distribution from this account starting at age 70.5

Downside to an IRA? If you put more than $5,500 a year in, you will incur a 6% annual penalty tax on the excess amount. You will keep getting taxed as long as that excess stays in the account.

New tax law changes allow individuals over 50 years to contribute an additional $1,000 a year without getting hit by the penalty tax. This is known as the “Catch Up” provision. If you start saving for retirement early, you probably won’t need the Catch Up provision. If you don’t think about retirement until you’re 50, then this can be a useful tool.

Another type of IRA is the Roth IRA.

Some things you need to know about Roth IRA:

  • You can contribute a maximum of $5,500 a year
  • There is no age limit for contributions into this account
  • There is no tax deduction up front
  • Withdrawals are tax free (as long as the money is kept in the account for five years and you are 59.5)
  • There is no requirement to take a minimum distribution from the account when you are 70.5.

Downside to a Roth IRA? High income earners (over $131,000) can’t contribute to it.

If you have an employer sponsored retirement plan, you can still open up an IRA and contribute to it. You could have both a  Roth IRA and a traditional IRA if you wanted. Disclaimer with having a Roth and a traditional IRA: you can only contribute a total of $5,500 into the two accounts yearly.

When should I invest?

If you open an IRA, I strongly suggest putting money into that account monthly. Sure, you could put a lump sum in all at once if you wanted to, but you will miss out on sales. Who doesn’t love a good sale?

If you put $100 into your IRA monthly and the market is down, you’re taking advantage of the market and buying more shares at a lower price. Most investors are too scared to invest when the market is down. They don’t get to take advantage of the market like systematic investors do.

Systematic investors outperform the market over time because they remove their emotions from investing.

When you invest the same dollar amount monthly or periodically in fund shares, you’re using an investment method known as dollar cost averaging. As long as prices fluctuate fairly evenly, dollar cost averaging always results in slightly more shares being purchased, resulting in a lower average cost.

You get more for your money this way. You worked hard to invest that money, make sure you’re getting all you can from it.

Another reason I suggest systematic investing? Maxing out your IRA in one or two transactions is overwhelming. Especially if you are just starting out. By investing smaller monthly amounts, you are able to take advantage of dollar cost averaging and you aren’t left with a big hole in your pocket that month.

How do you eat an elephant? One bite at a time.

photo 2        photo 3

Speaking of bites…this week’s sweet is one of my favorites, hummingbird cake.

Disclaimer: no birds were harmed in the making of this cake.

Pineapple, pecans, bananas, and cinnamon go so well together. Instead of using crushed pineapples, I like to cut the pineapple into larger chunks. I think it’s nice getting a larger piece of fruit, it makes the whole cake eating thing seem a little healthier. Seem being the key word here.

I was pretty rushed on time, so I decided to try the rosette frosting technique again. I finally got it right- starting from the inside and working my way outside. I think it looks a lot better than the last one!

It’s safe to say that this cake will also be making an appearance at Easter dinner.

That’s all for this week, folks! If you have a question on which retirement plan is right for you, why dollar cost averaging is a great investment method, or anything else, shoot me an email at

Thanks for reading!





401(k)s & Super Bowl Sunday

Can you believe football season is over already? I swear months fly by now that I’m working.

Last week I had a few people ask if I could write about 401(k)s. Here goes. A 401(k) is a defined contribution plan. You (the employee) can put a set amount of money from your paycheck into that 401(k) monthly. Most of the times your employer will have a few investment choices within the 401(k) and you have to choose which one is right for you. Simple enough, right?

Let’s go a little deeper into this simplified definition. You can make contributions to your 401(k) before or after tax. Which one should you do, you ask?

Before tax.

Let me tell you why. Let’s say your annual salary is $36,000. In taxes, you pay 15% Federal, 5.75% State (VA), 1.45% Medicare, and 6.2% Social Security. If you make $3,000 a month before tax, you take home $2,148.

Let’s say that you have a 401(k). You decide to contribute $250 a month.

If you choose to put the money in before it has been taxed, you are not being taxed at the federal or state level. You do have to pay Social Security and Medicare tax. Subtracting Social Security and Medicare tax, $230.87 would go into your 401(k).

If you allowed that same $250 to be taxed, you would have $179 after tax. By avoiding Federal and State tax, on day 1, you have already had a 20.75% return. Without the money even being invested! Where else can you get a return like that?

Let’s look at post tax. To compare the two, let’s say you want $230.87 in your 401(k) after taxes. In order to put $230.87 in after tax, you would have to earn $291.32 in pretax money.

What would you rather do? Would you rather put $250 or $291.32 in your 401(k) to get the same ending value of $230.87?

So you pick pretax. You’re getting a phenomenal return and now you have to choose which fund or funds to put this money into.

Funds vary from plan to plan so it is very important that you choose the correct choice for your life stage and what’s going on in the market. Choosing different funds and the percentage in each fund can help reduce overall risk and help your 401(k) grow even more.

Ideally, you want to rebalance your account every eight weeks to stay with the cycle of the market. When you rebalance remember to sell high and buy low. This is the exact opposite of what most everyone does. Most people sell when the market is down, hoping to get out of what seems like a horrible situation, and they buy when the market is high, hoping to get in on the action. They’ve got it all backwards!

Super Bowl Sunday gave me a great excuse to bake. My friends had a bunch of people over for a Super Bowl/Chinese New Year party. There was an interesting mix of food there- I wish I would have taken pictures to share!

I knew I wanted to make something for the Super Bowl half of the party, but I had no clue what to make. I ended up baking chocolate cupcakes with a buttercream field on top.

For the past two months, I’ve been dying to use the grass decorating tip my parents gave me for Christmas. What a great time to try it out!

Getting the grass to 1) stand up and 2) be the same length was tough. Piping the grass killed my wrist. I had to do a little at a time, pipe the lines, take a 10 second break, fix any mistakes, and then move onto the next cupcake.

Football Field

My system might have seemed pretty insignificant, but I ended up with 24 beautiful cupcakes. If you treat your 401(k) like I treated my cupcakes, doing a little at a time, checking for areas that need improvement, you will have retirement savings that you are proud of.

It takes time and maintenance for good 401(k)s and cupcakes. If you would like a complimentary second look at your fund choices, or assistance in selecting funds when you rebalance your portfolio, mention this blog post in an email and we can meet to discuss your options.

Taxes & Tiaras

Let’s talk about taxes. Last week I told you that 1/3 of your paycheck/resources would end up going to them.

“But Bridget, I’m not in the 33% tax bracket??”

You’re right- you might not be in the 33% federal tax bracket. You do end up paying around that amount. Let’s think about all of the things you’re taxed on. Federal tax (15% to 25% depending), state tax (Virginia 5.75%), Social Security tax (6.2%), Medicare tax (1.45%), personal property tax, real estate tax, sales tax, gas tax, and any possible city or locality tax.

See how that can add up real quick?

That’s a lot of taxes! I’m not anti-tax, we need some tax to provide for programs, roads, and schools. But when is enough tax…enough?

If the government is taking one third of your paycheck for services and programs, don’t you think you should keep that same amount for yourself? That’s where the investing/saving third comes into play. If you pay the government a third of your paycheck/resources, you should pay one third to yourself.

For a young professional this is a lot easier said than done.

As an advisor, I practice what I preach. When I make my monthly budget, I use the “third, third, third” rule. As a young professional who is a under a year out from school, I know it’s hard to live off of one third of your paycheck.  Using that rule has made my savings and investment accounts grow a lot more than they otherwise would have.

I learned to live on a budget right out of school and decided it was a good habit to keep. That first paycheck was wonderful. I could and would have been able to spend it all in a few trips to Home Goods and the grocery store. I tried not to fall into the trap of “I owe it to myself.” It is all too tempting to go out with that paycheck and say I deserve this lamp and this nice duvet cover. Don’t fall into that trap!

What I’m saying is: If you try to live off of just one third of your paycheck, you will save more. Odds are, you probably won’t be able to, and will end up using some of the investing/saving third. Trying to stick with this rule will make you aware of how much you spend and hopefully help you save a little bit now so you don’t have to worry as much later.

Here’s a personal story about me and taxes.

I bought a new car this year. Exciting, right? My old car was my dad’s that he had bought in 2001. I loved that car, but there comes a point where you need to know that it will start in the winter no problem and will get you from A to B without leaking all of its oil along the way. I would have kept driving that car, but the constant cost of repairs were not in the cards for me.

Guess what happened in December? I got hit with a personal property tax bill. Luckily, I only had to pay December’s bill. Turns out my county sends two out a year- one in June and one in December.

I’m not going to lie, I was pretty upset about it. Why did nobody tell me this? Shouldn’t there be a disclaimer when you buy the car? Why are they taxing me when I got a more gas efficient car? It might as well be a hybrid! The government should be thanking me. These were all of the thoughts that were going through my head. Some were said aloud. You can ask my boyfriend, Patrick. I was an angry elf.

I paid the tax bill. Do you know what I did next? I put the exact same amount of money into my savings account after. Why wouldn’t I want to pay myself what I had to pay the government? Gotta look out for #1. The government’s doing it, why shouldn’t you?

Silver lining to that story? I know those two tax bills are coming this year and you can bet that I will have money set aside in anticipation of them. I know they’re coming, and I will be ready.

Last week was my birthday. Naturally, I had a tiara on at the dinner table. See? Taxes & Tiaras. I feel like TLC could use this idea for a spinoff show of Toddlers & Tiaras. I can see it now… toddler beauty queens doing taxes for their talent portion of the show.

The cake I talked about last week turned out great! I had seen a lot of rosette cakes pop up on Pinterest and wanted to give that a try. I put my 1M tip on a piping bag and started icing the cake. Turns out you’re supposed to start rosettes from the inside and work your way out. As a novice rosette maker, I started from the outside and worked my way towards the center.

Rosette  Cake

I thought it still turned out pretty good for a reverse rosette. Here’s a tip for all you first time rosette makers: use a biscuit cutter (or any type of circle shape) to outline where you want each rosette to go. If you plan it out before you start piping them on, you can make sure you don’t have any awkward gaps.

Feel free to email me if you would like to talk more about “third, third, third” of if you want the cake or icing recipe.

Thanks for taking the time to read this week!