It pays to take RMDs early in the year (Financial Planning, by Ed Slott)

I just love coming across something that seems counter-intuitive.  Typically investors are given advice to take their RMDs as late in the game as possible (note: an RMD is a “required minimum distribution” from an IRA once you reach age 70.5 or otherwise inherit an IRA from someone).  The main thought process is it makes sense to postpone the tax-deferred nature of the account for as long as possible.  So taking a distribution in November/December should probably be worth more than a distribution taken earlier in the year, such as January/February.  From the perspective of many a self-serving advisor (who are often getting a fee to manage the money), they also want the money in the account as long as possible.  I haven’t seen much counterarguments to that, until now, and the reasons are valid.  Like most things, the rule of “it depends on the situation” applies and taking an RMD early in the year versus late in the year has pros/cons.  But if you read Slott’s arguments here – you will give pause to when you take (or advise others to take) their IRA distributions. Taking it earlier in the year can result in less stress, less potential for missed deadlines, and other ramifications that will take time to correct.  Good intel for those in the RMD situation.

3 Ways to Use Credit Card Rewards to Your Advantage (Entrepreneur.com, by Alex Miller)

I’ve been on a mission this month – ever since I realized that the one main credit card we’d been using had a CAP on the bonus points I was getting for my spending on groceries/gas.  So I did some digging which included podcasts, phone calls, and internet research, and have since acquired another card to use as a 1-2 punch and maximize my points.  For starters, there is no shortage of articles and advice out there for people who have decent credit scores (say >750) and are looking to maximize the value of their spending.  One of the things I would encourage people to do is use CASH back rewards, since that tends to be the best value from spending.  If you shop at certain locations versus others (i.e. Amazon vs. Target) or spend most of your eating out (versus buying groceries and cooking at home), then target those cards that give the sweetest deals for your lifestyle habits.  If you are reading this and thinking this is “no-brainer” kinds of stuff, let me share a statistic.  I learned that 41% of people NEVER redeem their rewards, for one reason or another (expire, forget, death, etc.) so don’t let this be you!  Other perks that cards offer include providing your current credit scores, offering some purchase protection, and providing a cash bonus for starting with them.  Even if the card charges an annual fee – some do, some don’t – it could still be worth it.  So my advice is to do some homework, crunch the numbers, and make your spending work for you!  Oh and one last thing that should go without saying, but I don’t want to assume it’s understood: pay your balance in full monthly (the purpose is defeated if you are carrying a balance each month).

How a $500 Monthly Allowance Saved Our Marriage (Slate, by Catherine Baab-Muguira)

Couples therapists often say that “money” is one of the most common reasons people seek counseling.  The above article is how one couple decided to handle it, and to their credit…it’s a great idea!  I often come across this concept when I do a budgeting exercise with clients, so let me share this strategy with everyone reading – come up with a number that you and your significant other can spend (weekly/monthly) on discretionary items.  You want a pedicure?  Have at it.  Splurge on a $6 Starbucks frappuccino – no problem. Your partner wants to blow money on video games – go right ahead.   This allowance number ($500 in the case of the author) might take some time to derive, but it should be specific to your cash flow situation.  Spend that money however you wish, or maybe choose to save it…no questions asked by your partner!  In the end, if it’s a number that both of you agree to, and stick to, it can save you many arguments and avoid (non-discretionary :o) trips to the counselor.

Enjoy the light reading!