Small Moves You Can Make That Will Add Up to Big Financial Changes

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency, and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

Sometimes making financial improvements in your life can seem overwhelming and leave you with a sense of “Where do I start?”  This can happen in situations such as if you’re dealing with a huge debt load, if your life is far too busy, if you’ve never been educated on money management or for a myriad of other reasons.

But the good news about financial changes is that they don’t have to be big to make a big impact on your money situation. Often it is the small changes that add up to big results. Here are seven small changes you can make in your life that will add up to a big improvement in your overall financial health.


Choose to Save a Percentage of All of Your Income

I look back on the day we started saving a percentage of all of our income as one of THE best financial moves we made. We had never been savers, and so financial emergencies such as a home or car repair would really hit us hard. When we started saving money we were deep in consumer debt, so we committed to putting away just 1% of our take-home pay.

We didn’t feel as if it would add up to much, but it did, and over time we were able to raise it up to 2%, then 3%, etc. We now have a few thousand in an emergency savings fund and sleep much better at night knowing that we’ve got cash to cover emergencies and won’t have to resort to racking up credit card balances again.


Contribute to Your 401(k) at Least Up to Your Employer’s Match

The great thing about employer 401(k) matches is that it is FREE money. In other words, if you are taking advantage of your employer’s 401(k) match program, you automatically gain a 100% return on all matched funds. This will not only help your retirement fund grow faster but will also act as a cushion from any market downfalls – at your employer’s expense.

Don’t leave money on the table by shunning the free 401(k) match funds your employer offers. Sign up today and take it as a bonus for your hard work.  


Read One Personal Finance Book

The one money book that changed my life the most is The Millionaire Next Door. Growing up poor, I always assumed that millionaires had big, fancy houses, nice cars, and designer clothes. To me, being a millionaire came with certain expectations about one’s appearance, and so I equated having “stuff” with being rich.

The Millionaire Next Door set me straight and showed me the real path to millionaire status. If you want to make a big difference in your finances, do something different and read one of the many powerful personal finance books out on the market today.


Set One Financial Goal

Making your financial situation better doesn’t have to entail turning your life upside-down and living like a hermit until you accomplish your financial goals. Instead, set just one financial goal and make a plan to achieve that goal.

For instance, when we decided to cut entertainment expenses (our main one was eating out) down to $75 a month, we saved $200 a month compared to our prior entertainment spending. And it really wasn’t as difficult as we thought it would be. As a bonus, now that we’re eating out so much less, our restaurant excursions are much more appreciated.

Your goal could be anything from setting up an automated savings plan to foregoing the daily trip to the coffee shop to cutting eating out by fifty percent. The goal is to do something – even if it’s just one thing – to improve your financial situation.


Pay an Extra $50 on Your Mortgage Each Month

Most people easily waste $50 a month and even more. What if you took that $50 a month that you waste on drive-thru trips and daily lattes, and put it toward your mortgage, applying it as an additional principal payment each month? If you had a home with a $250k purchase price, a $200k mortgage and a 3.83% interest rate on a thirty-year loan, paying an extra $50 a month would mean you’d pay off your mortgage almost three years early. Total savings: over $33,000.


Track Your Spending

Tracking our spending was life changing for us in terms of our financial health. It turned out we were spending quite a bit more in areas such as groceries and entertainment than we thought we were. We track our spending using a simple Excel spreadsheet to this day to make sure we are keeping discretionary spending at reasonable levels and to have an at-a-glance view of our financial situation. Total savings compared to our non-tracking years: over $500 a month.


Cancel One Membership

How many memberships do you have that are eating away at your ability to have extra money for reaching financial independence or other financial goals? Cable TV, gym memberships, magazine subscriptions and stuff-of-the-month clubs can add up to big dents in your financial health. Choose to cancel just one of those unnecessary memberships, and put the money toward debt payoff, save it for your next car purchase or invest it in a mutual or retirement fund.

Revamping your financial life doesn’t have to mean living under a rock. Instead, choose one financial change and use the money to meet an important monetary goal. I’d be willing to bet you’ll find the habit contagious.

How about you all?

Share your experiences by commenting below!

***Photo courtesy of

Secure Your Future Retirement By Avoiding These Missteps in Your 40s

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

When you’re in your 40s, you may begin to feel a great deal of financial pressure.  Your children are growing up, and the expenses associated with that begin to pile up.  You may find yourself shelling out money for more expensive extracurricular activities, higher grocery bills thanks to your children’s endless appetites, car payments so your children can begin driving themselves, car insurance payments, and college tuition.

As if that is not enough to put a strain on your budget, this may also be the time when your aging parents need more support, both financially and physically.  You may be helping them out monetarily or helping them out physically, which may mean less time at work for you as well as less income.

This decade, more than any other, is the one where your choices can make or break your future retirement.  This is partly because if you make a mistake financially in your 40s, there is not much time to recover financially, unlike mistakes you may make in your 20s when you have four or five decades to recover before retirement.

In your 40s, be careful to avoid these financial mistakes:


Refinancing Your Home and Extending the Life of Your Mortgage

Refinancing your home for a significantly lower interest rate is a smart money move.  However, too often, people refinance to lower their interest rate, but then they also extend the life of the mortgage.  True, this can reduce your monthly payment, which may offer you financial relief now, but it can later wreak havoc with your finances and your target retirement date.

Let’s say you bought a house when you were 35, and you pay on the loan for 10 years.  You are now 45 and have just 20 years left on your loan; you would own the home free and clear at age 65.  This works out rather nicely as 65 is a time when many people retire.  However, if you refinance at 45 and extend the loan back to the original 30 year term to lower your payment and create some financial breathing room in your budget, your home won’t be paid off until your 75.  This can cause quite a strain in retirement.

Many people do not have enough money set aside in their retirement account to comfortably cover a house payment, especially as medical expenses typically increase as you age.

You may say that you won’t retire until the home is paid off, but you can’t always control that.  Sometimes medical issues make retirement come earlier than planned.


Taking Out a Home Equity Loan

When you feel a financial crunch, your first thought may be to tap the equity in your house by taking out a home equity loan.  After all, the interest rates are usually much lower than a loan you can take out at your bank or a credit card.  You can also extend repayment time, often to 10 or even 15 years, which is typically not available on a loan that you get from the bank.

However, if you’re unable to make your home equity loan payments, you can lose your house just as you could if you weren’t able to make your mortgage payment.  In addition, if your home loses value during the time you’re repaying your home equity loan, you may find yourself underwater, meaning you owe more on the house than the house is worth.  If you need to sell during this time, you would need to pay the difference between the current value of the house and what you still owe between the mortgage and the home equity loan, which is often tens of thousands of dollars.  Too often, people who are underwater are unable to even put their home on the market because they know they won’t be able to generate the money needed to pay off the house loan when they sell their house.


Taking Out a Student Loan for Your Child

When your child is ready to attend college, you may feel a natural instinct to help him.  College is expensive, and you may not want your child saddled with student loan debt.  However, there are plenty of alternatives to taking out student loans for your child.

First, let your children know, from the time they are in upper elementary school, that you will not be able to help pay for their college education.  (Does this sound too harsh?  Trust me, your children will be glad when you’re retirement age and have enough money to take care of yourself because you made saving for your own retirement a priority.  Your children will be glad that you are not their financial responsibility, especially when they’re just starting out.)

By letting your children know this early, they can pick local colleges that will be cheaper, they can apply for scholarships and grants, and they can save money themselves for college.

Yes, if you don’t take out loans for your children, they will probably have to take out student loans themselves.  Remember, they are the ones who may qualify for loan forgiveness based on their career.  That will never be an option when a parent holds student loans.  Also, children with student loans can choose an income-contingent based repayment plan; parents can’t.

The government takes very seriously defaulting on student loans and will recoup their money if you stop paying.  “Federal payments to borrowers who have not made scheduled loan repayments can be withheld to repay the loan, including tax refunds and Social Security retirement or disability benefits” (US News).

Finally, if you don’t take out student loans for your children and you’re doing well financially and saving enough for retirement, you can always choose to help your children pay down their student loans faster.

Simply put—don’t take out student loans for your children.  Just don’t do it.  You and your child will be glad you didn’t twenty years from now.


Raiding Your Retirement Account

Once you start to amass a fair amount in your retirement account, you may be tempted to tap into that account when you hit a financial bind, which is likely in your forties.  However, there are significant drawbacks to raiding your retirement fund.

First, you lose the ability for the money you withdraw to continue generating interest and growing your nest egg further.

Second, you’ll need to pay a 10% penalty for withdrawing the money if you’re under the allowable age.

Third, the money that you withdraw will count as taxable income on your tax returns, so you’ll also need to pay taxes in addition to the 10% penalty.

Your 40s can be the time when you secure your retirement funding and can begin to plan for a relaxing, enjoyable retirement.  However, as you face dual financial stress in your 40s from increased financial needs from your growing children and your aging parents, you may feel pressure to find more money to infuse in the budget.  This pressure can lead to any of the above unwise financial decisions that can derail your retirement plans and lead you to a difficult financial position in your 60s and 70s.

How about you all? What financial moves do you suggest people in their 40s avoid to keep their future retirement secure?

Making Early Retirement Happen When You Have Kids

family-grandma-my-personal-finance-journeyThe following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry.

Nearly everyone it seems is holding out for early retirement. But what happens when you have kids? It’s not impossible, but it is admittedly more difficult. You have to rearrange your finances and your timing to accommodate the raising of children. It can be done, but it requires more creativity.

Think of Your Kids (and Grandkids) as Motivation for Early Retirement

While most people focus on the financial costs of having children, the flipside is that you think of them as being one of your primary motivations for early retirement. If it will be possible for you to retire while your kids are still fairly young, that will give you more time to be with them, and to raise them the way you want.

It will also eliminate the career stress and the financial uncertainty that can go with the dual obligations of child rearing and having a career.

And even if you are unable to retire when your own children are young, your Plan B can be to retire early and spend more time with your grandchildren.

You May Have to Adjust Your Independence Date

It probably won’t be possible to early retire on your own specific timetable. You’ll have to work your independence date around your kids.

Much will depend upon how far along you are in the planning process, but you may have the need either to accelerate early retirement to be home with your children, or to delay it until they are emancipated.

Flexibility will be a critical part of your early retirement planning strategy when you have kids.

You Know Those Kids Who Seem to Have Everything? Yours Won’t

In every neighborhood (or classroom or extended family) there’s always that one kid, or family of kids, who seem to have everything. It might be the latest and the best bicycle, motorized Kiddy car, cell phone, laptop, sporting gear or clothing. Such a child or group of children have a way of “setting the standard” for just about every other kid in the group.

That’s a game that you will not be able to play with your own children. It’s an arms race for the best stuff, and it’s a very expensive lifestyle. If you plan to retire early, you’ll have to prepare your children to live more conservatively.

That’s not being selfish on your part either. A conservative outlook when it comes to finances is a life strategy that will benefit your kids throughout their own lives.

Preparing for College on the Cheap

It can cost well over $100,000 to send a child to a state college, and more than $200,000 for a private college. Those are options you may have to scale back on.

You might want to start your kids at a community college for the first two years. From there, you might encourage attendance at a state school to finish their undergraduate degree.

You should also encourage any efforts to get scholarships or grants. And even though it’s fairly unusual these days, there’s nothing wrong with having your kids participate in providing at least some of the cost for their own education.

Your Time WILL be More Limited

This is a limitation that there is no skirting around. While a childless person may be able work two or three jobs, 100 hours per week, your life will require more balance.

Though you may have to work more than the average person does, such as a full-time job plus a side business, you will have to allocate plenty of time for your kids.

No matter how important the goal of early retirement is, this is a challenge that you will have to meet successfully. The time that you don’t spend with your kids when they are young will be gone forever!

This will perhaps be the biggest challenge you will face as a parent preparing for early retirement. And there’s no sugarcoating the fact that you will have to make trade-offs. Only you can decide what the specific balance between work and child rearing will be.

Think carefully, because there’s no do-over when it comes to kids.

And So Will How Much Money You Have For Savings and Investing

There’s also no debating that children will leave less money available for savings and investment. Children mean higher medical costs, disposable diapers, a succession of clothing and toys, afterschool programs, tutoring, day care and higher-than-you-think costs for participating in high school sports.

All of that will be less money available for savings and investing. But you must view the money that you will spend on your kids as an investment in their future. That’s no less an investment than preparing for your own retirement.

Do As Much As You Can Before Becoming a Parent

If you don’t already have children, but you want to, you will help your own cause considerably if you can do as much retirement preparation in advance as possible.

This will actually have to advantages:

  1. The more that you can do before you have kids, the more likely it is that you will retire early in their lives and have more time with them, and
  2. The more that you can do in advance will mean less pressure later on, enabling you to spend more stress-free time with your kids, while still being on track for early retirement

Advance preparation will include minimizing debt, and frontloading as much retirement and investment savings as possible before your kids are born.

This will not only give you a head start, but it will also set you up in the right life patterns. This will be extremely important once your first child arrives. Having children very much puts you in a position where you are dealing with the unexpected. If you already have your early retirement plans in a row before they are born, you can continue to make progress even as you deal with the uncertainties that children bring.

A Scaled Back Version of Early Retirement is OK

If in spite of your best efforts, you are unable to reach your early retirement age goal as a result of having children, you can simply regroup.

No major financial milestones are ever achieved without building a healthy dose of flexibility into the plan. If you have to delay your early retirement by five years, that will be a small price for properly raising your children.

And even if you are forced to accept an early semi-retirement – in which you mostly scale-back on your career in favor of more time off – you’ll still be better off than you would have been if you never prepared for early retirement.

Early retirement is a worthwhile goal, but it should never be seen as more important than raising your children. It takes some real talent to balance the twin goals of child rearing and early retirement. But if you can, you’ll be well prepared for whatever life throws at you.

How about you all?  Have you or anyone you know planned an early retirement successfully?  What roadblocks have you encountered along the way? Do you have other strategies for planning for an early retirement not listed above?

Share your experiences by commenting below!

***Photo courtesy

What Should You Expect In Retirement?

retirement-plan-my-personal-finance-journeyThe following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy! 

Although most of us are extremely busy leading our lives going about our daily routines, at some point, you might take a moment to wonder what to expect if and when you do ‘retire’.

Are there patterns that most people follow during their retirement years?  Are there similarities in things such as what we spend money on, how much we travel, amount of time spent with family, part time jobs or volunteerism activities.  Are there patterns that occur at different points in retirement – at different ages?

I’ve been retired now (or semi retired) since spring 2010.  I’ve observed some changes in the way I deal with retirement and have noticed changes in other retired folks that I know as well.

The Planning Years

Before you actually retire, you are probably spending at least some time thinking about finances after you leave the workforce.  How much do you need to save to quit work, how much can you spend after you retire, will your taxes be less (unlikely) or more when you do retire – all these can be ongoing concerns from the time you first start imagining a retirement.

Closer to the actual retirement date, you may spend time doing some analysis of current expenses to compare that to the income you anticipate drawing during retirement.  Of course you also need to add on any additional expenses that you may anticipate during retirement – moving, travel, health spending, new hobbies, etc.

I spent quite a bit of time in 2009 pouring through checkbooks and building spreadsheets of all our expenses for the past few years – then classifying them as required vs discretionary – to see where we would stand.

The Early Years

The early years of your retirement may diverge wildly from what other retirees do.

If you are healthy, active and well funded, these years may include multiple vacations, and/or more spending on entertainment such as concerts, tours, theaters and restaurants.  Some decide to pursue a dream – such as living in another part of the country or world, or selling the house and buying an RV, or pursuing more education or training.

You may decide to try to spend more time with family members, perhaps assisting with the care of your grandchildren or visiting out of town relatives or simply doing more with your spouse.

You probably are making adjustments to the absence of work related activities, associates and recognition.  You may be making related adjustments to the constant presence of a spouse – finding balance between the need for your own time and the time you share.

Most start these years with eager anticipation and many change lifestyles.  I dedicated time to learning how to build my website ( and finally achieving a life long desire to write and publish.  My spouse, after spending 30 years encased in a cubicle, has spent his retirement so far joyously working outside on our 6 acres.  A couple I know downsized from a luxury home to a luxury condo – not for the savings, but for the freedom from some of the homeowner chores.  They became snowbirds – relocating from the Midwest to the Southwest during the winter.  An aunt and uncle sold their subdivision home and went back to farm living – complete with vegetable gardens, fruit trees, cattle and cats.

Cautious retirees carefully track spending and income in their early years, until they are comfortable that their new levels of income will support their new lifestyles.  It can be difficult to adjust to varying amounts of income as opposed to a regular paycheck.  It is hard to anticipate what you can spend or what you will have to put aside for taxes when a good part of your income is paid out once a year at year end in the form of interest and dividends.

The Middle Years

After the initial thrill of not having to go to work every day wears off, retirees typically settle into a new pattern.  Spouses generally will have worked out new routines of living together and may have had an opportunity to deepen their understanding of each other (or on the other end of the spectrum, discover they are really incompatible).

On the whole, more than half of surveyed retirees report being well satisfied with life.

However, questions of self-worth may start to arise during these years, perhaps causing an interest in finding and supporting a cause – leading to volunteerism.  According to the National Institute of Aging’s Health and Retirement Study:

“People ages 60 to 69 at the time were most likely to have engaged in volunteer service, with one in three people in that age group having done so.”

To counteract feelings of worthlessness, some decide to take a more active role with grandchildren, or find a way to mentor others in an area of expertise.

Health issues may begin to plague us during our middle retirement years.    At a minimum, incidents of arthritis, hypertension and suspicion of cognitive impairment (you know – those ‘senior moments’) increase.

Some may find themselves slowing down, becoming less physically active due to depression, flagging interest in formerly enjoyable endeavors or health issues.

Loss of physical and mental ability can be disconcerting to us as we move through retirement stages.  Adjusting to fading eyesight and reduced hearing as well as increased difficulty in moving through the day can take awhile.  These signs of our impending mortality can make a person seek answers to the age old question of what happens when I die, or what purpose do I have on Earth.

The Later Years

As we age through retirement, we encounter more limitations and health restrictions to our activities.  However, in spite of that most of us continue to own our own homes.  The Health and Retirement Survey is finding that even among those 85 and older, more than half of the study participants (which were selected to be a broad spectrum of the American population) live in their own home.

Spending on health care typically rises during these years – whether from increased out of pocket prescription and doctor costs; more frequent hospitalization; or from the need for increasing daily activity care.

That Aunt and Uncle I mentioned above that moved to back to the farm in their early retirement years later moved (in their 80’s) to a smaller home across the country to get closer to a daughter and now have settled into a graduated retirement living center.  They are now in their 90’s and are in an independent living unit, but receive house cleaning, maintenance and cooking services.  They are set to be able to receive more care from the facility if needed as their bodies continue to fail.  For now, they still enjoy the center’s activities, their church and weekly visits to the daughter’s house – and both still drive.

A 93 year old mother-in-law, was moved to a senior living center closer to family.  Although still mobile and alert, her failing eyes (macro degeneration) and unreliable knees cause multiple doctor visits a month.  A decade ago, she gave up driving due to her eyes, so one of the kids escorts her around town.  She has a one bedroom apartment in a multistory center and gets maid, laundry and meals and maintenance as part of her rent.  She is active attending family events her many children, grandchildren and great-grandchildren generate, as well as participating in activities put on by the senior living center – such as morning exercise.

How about you all? What have you observed about the patterns of retiree’s?

Share your experiences by commenting below!

***Photo courtesy

Why Your 401(k) Shouldn’t Be Your Only Retirement Plan

401k-my-personal-finance-journeyThe following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry.

People sometimes believe that if they have a 401(k) plan that their retirement is covered. That’s sometimes true – if you can make the maximum contribution, and you have an excellent plan with a wide variety of low-cost investment options. But if you don’t, then your 401(k) shouldn’t be your only retirement plan.

Here are some major reasons why you should accumulate retirement savings outside of your 401(k).

Increasing Your Retirement Contributions

If your company caps your retirement contributions at a certain percentage of your income, you may not get the full benefit of the maximum contribution. For example, for 2016 the IRS allows a 401(k) contribution as high as $18,000 (or $24,000 if you are 50 or older). But if you earn $60,000, and your employer caps your contribution at 15%, you’ll only be able contribute $9,000.

At the opposite end of the pay scale, if you earn well over $100,000, the $18,000 maximum contribution may not be adequate for you to reach your retirement goals.

In each situation, you may need to add additional retirement plans in order to reach your retirement investment goals.

Increasing Your Investment Options

One of the common complaints about 401(k) plans is limited investment options. In many company plans, your investment choices are limited to a small number of mutual funds or exchange traded funds (ETFs). In some plans, you are limited to the funds from a single fund family.

This can limit your investment options. For example, if your plan does not offer sector funds, you won’t have the option to invest specifically in technology stocks, energy stocks, or resource related stocks. There may also be no option available for you to invest in real estate through real estate investment trusts (REITs).

Self-directed plans, such as IRAs, allowing you to hold your plan with any investment broker you choose. As such, you can choose a broker that offers the widest variety of investments in such a way that your investment options will be virtually unlimited.

This can also improve return on investment, which can make a huge difference in the size of your retirement portfolio by the time you retire.

Adding Income Tax Diversification to Your Retirement Plan

401(k) plans are great when it comes to income taxes while you are funding your plan. Your contributions to the plan are tax-deductible, and the investment income earned on your capital are tax-deferred. From a tax standpoint, contributing to a 401(k) plan is a double win.

But the dynamic shifts when you retire and begin taking withdrawals. After all, 401(k) plans are not tax-free, but tax-deferred. “Deferred” means that the taxes are simply due at a later date, and that date is when you retire and begin taking withdrawals.

You can get around this problem by simply not taking distributions from the plan – under the assumption that you won’t need the income. But even if you do this, eventually you will be required to take distributions. That requirement will apply once you turn 70 1/2. 401(k) plans are subject to required minimum distributions, or RMDs. That means that distributions from the plan become mandatory at that age.

For this reason, you may want to have certain retirement related investment accounts that will not be tax-deferred when you retire, but not subject to tax at all.

A Roth IRA is one such account. The contributions to this plan are not tax-deductible, but the investment income you earn is tax deferred. But both your contributions and the accumulated investment income can be withdrawn tax-free when you turn age 59 1/2 and have been in the plan for at least five years.

Another alternative here is to have money invested in regular taxable investment accounts. Since you pay tax on the investment earnings in such accounts on an annual basis, you can withdraw money from them that is not subject to income tax.

Either account could be an excellent counterbalance to a fully taxable 401(k) plan.

You Will Need Emergency Funds Outside Your 401(k)

Even if you have a very large 401(k) plan, you will want to have savings for retirement that are held outside of the plan. This is because the primary purpose of a 401(k) is to provide you with income. As such, you won’t want to be withdrawing large amounts of money to cover emergency expenses. That will be a strategy for draining your 401(k) plan prematurely.

For that reason, you should plan to accumulate a significant amount of money to have available to cover expenses that can’t be paid out of regular income. Examples include large uncovered medical expenses, major repairs to your house, the replacement of one or more vehicles, or even money to help your adult children.

Other Retirement Plans to Add to the Mix

There are plenty of choices even if you have a 401(k) plan.

Traditional IRA. You can save up to $5,500 per year ($6,500 if you’re 50 or older) and put the money into a self-directed investment account, maximizing your investment options. Your contributions to the plan will be tax-deductible, however there are income limits which if exceeded will limit or eliminate their tax-deductibility.

Roth IRA. These have the same contribution limits as traditional IRAs, and you can also invest money into a self-directed investment account. However your contributions are not tax-deductible, and there are income limits after which you will no longer be able to make a contribution. But up to that income level you can make contributions even if you are already covered by a 401(k) plan. And as already mentioned, the distributions you take from a Roth IRA are tax-free as long as you are at least 59 1/2 and have had the plan for at least five years.

Regular Taxable Investments. These can include any investments are held outside of a retirement plan. This includes an investment brokerage account with stocks and funds, money held in mutual funds or ETFs, certificates of deposit, or US Treasury securities. There is no tax benefit while you are accumulating this money, but for the same reason you can access it without tax consequences. This is an important part of retirement tax diversification.

Investment Real Estate. Investment real estate accumulates value in two ways – from property value appreciation and from amortization of any financing on the property. And if you can purchase an investment property now, and pay off the mortgage by the time you retire, you’ll have the benefit of either the cash flow from the property from rents, or the proceeds from selling it.

Each of these investments represents a retirement diversification, so that your 401(k) plan won’t be your only retirement plan.

How about you all? How else have you diversified your retirement portfolio?

Share your experiences by commenting below!

***Photo courtesy