Rolling Over a 401(k) to an IRA: You Make the Call

Rolling Over a 401(k) to an IRA: You Make the Call

If you’ve got retirement money residing in a 401(k) with a former employer, you’ve probably been wondering whether or not you should roll that money over to an Individual Retirement Account (IRA). You’ll want to consider several criteria before doing so.

A rollover to an IRA might be right if you:

  • Want more flexibility and control with your investment choices
  • May need to borrow money from your retirement account and are above age 59.5
  • Are concerned about a possible large tax hit to your beneficiaries in the future
  • Want to consolidate multiple retirement accounts
  • Are looking to maintain a balanced asset allocation across multiple retirement accounts

A rollover might be wrong if you:

  • Have significantly lower fees with the 401(k)
  • Live in a state that gives greater lawsuit protection to a 401(k) than an IRA
  • May need to borrow money from your retirement account and are below age 59.5
  • Would lose access to retirement planning services provided to 401(k) holders at your previous company

These criteria should help to get you thinking about the ramifications of a potential rollover. A final decision should only be made after consulting with both a tax professional and a professional financial planner.

What are Bankruptcy Risk Scores?

What are Bankruptcy Risk Scores?

Although much more information has come to light about credit scores and how they are calculated over the past several years, their cousin the bankruptcy risk score has remained mysterious. While what the general public has been told is limited, a few of the basics are known.

What are they?
Bankruptcy risk scores are an attempt to attach a numerical value to the likelihood you will declare bankruptcy. This differs from credit scores, which attempt to measure the likelihood you will pay back a debt.

How are they calculated?
Like credit scores, bankruptcy risk scores are based on information in your credit report. Companies that calculate bankruptcy scores compare data from past consumers who have declared bankruptcy to the financial aspects of your credit files to arrive at the score. Some companies that sell bankruptcy scores also use transaction data from your credit card provider(s), cross-referencing your activity against recent trends for bankruptcy declarers.

What’s a good score?
Not only do bankruptcy scores use a different scale than credit scores, but they also use a rating system in which a lower score is better. Add in the fact that there are several different companies producing scores and it becomes impossible to nail down one milepost for a “good” score.

How do I improve mine?
While the credit bureaus understandably refuse to give away the complete formulas for calculating their scores, they have noted that bankruptcy scores – like credit scores – reward paying bills on time, keeping balances low on revolving accounts, having a variety of types of credit and limiting the number of new credit applications. A couple specific tidbits that have come to light are that bankruptcy scores put a great deal of negative emphasis on consumers who quickly amass large amounts of debt and/or apply for new credit several times in a short period. According to the companies that produce bankruptcy scores, these behaviors are frequently precursors to bankruptcy.

Who uses them?
Just about any lender you would apply for a financial product from has access to bankruptcy scores. They could be used in conjunction with an application for a mortgage, car note, personal loan, credit card, or other form of credit.

How are they used?
Lending experts have pointed out that financial institutions most commonly use bankruptcy risk scores as a backup to credit reports and scores. In other words, they likely wouldn’t be the major determining factor, but a questionable bankruptcy score could still mean you are denied for credit.

How do I get mine?
Unfortunately, you as a consumer do not currently have access to your personal bankruptcy score.

Without a doubt, it’s frustrating to have decisions being made on your financial future with information you don’t have access to. That may change soon, though, as at least two of the major credit bureaus have expressed an interest in selling bankruptcy risk scores to consumers. Stay tuned.

5 Secured Credit Card Must-Knows

5 Secured Credit Card Must-Knows

A secured credit card can be a wonderfully effective tool for building a positive credit history or gaining entrance into the world of credit. Because it allows people with little financial history or less-than-perfect past credit to have and use a genuine credit product, a secured card can open up myriad opportunities for the future. However, not all offerings are created alike. There are a few basic criteria to make sure you understand before you jump into this type of account.

Secured credit cards are generally easier to qualify for because you are essentially putting down a security deposit for the amount you are able to charge on the card. This deposit amount normally ranges anywhere from $100-$500, with the limit on the card usually equaling your deposit amount. If you can find a secured card with a low deposit amount, it would free up money to put toward your other financial goals.

Interest on the Deposit
Many financial institutions allow you to earn interest on the deposit you have put down to secure your card. While this may not amount to a vast sum of money, if everything else is equal, you should choose the card that helps you put your deposited money to work for you. Don’t forget to compare interest rates for the money you put down.

Transition period
In most cases, financial institutions are willing to refund your initial security deposit after a sort of probationary period. For example, if you make all your payments on time for a period of one year and never go over your limit, the financial institution that gave you the card may be willing to give you back your deposit and transition your account into an unsecured credit card. This may be timed to coincide with a regularly scheduled account review taking place every six or twelve months.

It has become increasingly common for financial institutions to offer secured credit cards with no fees. By shopping around, you should be able to find a card that at the very least has minimal fees. Be careful to review all potential charges, since some less morally encumbered issuers of secured cards will try to mask fees under other terminology.

Credit Bureaus Reported To
If building a strong credit history is one of your goals for opening a secured card, you’ll need to find out which credit bureaus your payment history on the card will be sent to. Not all cards – secured or otherwise – report to all three major credit bureaus. The best-case scenario is that they report to each of the three major bureaus – Equifax, Experian and TransUnion. This way, you avoid a future situation in which a lender doesn’t see enough of a credit history to approve you for a financial product.

Like unsecured credit cards, secured ones come in a variety of shapes and sizes. Shopping around can help you find the card that makes the most sense for you. You might also find a financial institution you’ll want to have an ongoing relationship with.

Beware Bait and Switch!

Beware Bait and Switch!

Retailers and other companies have gotten very good at convincing you to buy their products. While most of these appeals are perfectly within their rights, there are a few deceptive practices that can actually be illegal. Bait and switch is one of these.

What is it?
Bait and switch refers to the practice of advertising a product or service at a low price to entice you into the store, only to claim that the original sale item is no longer available. You are then pressured to buy a higher-priced product instead of the one you originally came in for.

What’s an example?
While browsing ads for a new vehicle to replace your current nightmare-on-wheels, you see a listing for a dealership selling your dream car in new condition at an extremely attractive price. Excited about the possibility of getting a great deal, you manage to coax your rust bucket the 25 miles to the dealership. Once there, you are told that the ad was actually a mistake, but the salesperson does have an even nicer car for only $5,000 more.

How do I counteract it?
In short, have a plan and stick to it! For larger purchases, it helps to have not only a model in mind, but also a price ceiling. If, for instance, you want to buy a new TV, there are dozens of choices with varying price tags. If you try to make your decision “in the heat of the moment” with a salesperson whispering in your ear, you’re much more likely to make a choice that is counterproductive to your budget. 

Don’t be afraid to walk away. There are very few things you need to buy IMMEDIATELY. If what you wanted isn’t available – whether because of a company’s deception or for legitimate reasons – head back home and regroup. Chances are there’s no need to rush into a decision. 

How do I report it?
If you feel a company is engaging in deceptive advertising practices, file a report with the Federal Trade Commission at Additionally, it’s a good idea to contact the Better Business Bureau at to warn others of this potential hoodwinking. Lastly, contact your state’s attorney general office to see what punitive action may be applicable in this situation.

If you’re like most people, you’ve been conditioned to expect things to be available quickly: car insurance quotes, movies on demand, drive-through coffee, etc. However, when you’re in a store or even if you’re buying online, take the time to slow down and analyze your options. This way, you decrease the likelihood you’ll fall for sneaky sales practices.

Self-Employed Tax Deductions Checklist

Self-Employed Tax Deductions Checklist

Are you your own boss? If so, you already know some of the advantages that can come with that role. You get to set your own hours, wear Hawaiian shirts whenever you want and always be first in line at the coffee machine. But the good times don’t have to stop there. Being self-employed also comes with the potential for numerous advantages at tax time too. Don’t forget to either research the following deductions on your own or bring them up with your tax professional.

  • Self-employment tax
  • Home office expenses (portion of rent/mortgage, furniture, property taxes, utilities, insurance, maintenance, depreciation)
  • Health insurance
  • Social Security
  • Meals
  • Entertainment
  • Travel
  • Interest on business loans or credit cards
  • Subscriptions
  • Software
  • Education or training
  • Retirement plan contributions
  • Equipment purchases
  • Depreciation of equipment
  • Supplies
  • Professional organization fees
  • Advertising/promotional costs
  • Banking fees
  • Telephone bills
  • Gifts

While not all deductions will apply to your situation, it’s wise to invest a little time in researching the ones that do. You can also pay a tax professional to research it for you; you’ll still probably come out ahead even after adding this expense.

Winning Winter Window Weatherproofing

Winning Winter Window Weatherproofing

Ever walk by a window in your home in the chillier months and feel a rush of artic air hit your skin? If so, you’re probably all too familiar with the fact that as the cold air comes in the money goes out. You might think making your windows more efficient requires a huge gust of cash outflow. But you might just be surprised at how much cozier a few inexpensive fixes can make your energy expense situation.

The method: Draft guard
Estimated cost: $5-$10 per window
If, upon closer inspection, you realize that the base of the window is the real problem spot, a draft guard could make a big difference. Sometimes called a draft snake, this device is simply a fabric tube filled with clay, rice or sand to block the air and keep the guard in place on your windowsill. You can find any number of well-reviewed types online, or you can make one on your own with supplies from a home improvement or craft store. 

The method: Weather Stripping/Sealing
Estimated cost: As little as $0.50 per window
In most cases when experiencing a draft, you’ll probably need to shore up more than just the bottom of your window. Weather stripping (sometimes called weather sealing) is a quick and easy way to seal gaps around the edges of your window frame. Besides the low cost, weather stripping also has the advantage of minimally impacting the aesthetics of your windows. Be careful where you apply to the stripping, though, since removing it can peel away paint.

The method: Caulking
Estimated cost: Pennies per window
For areas of your windows that need freedom of movement, weather stripping is terrific. However, for spots that don’t feature moving parts, caulk is probably your best solution. Caulk is a waterproof sealant used to fill gaps in your home where air or water have found vulnerabilities. Watch an online tutorial video if this is your first time using caulk, or ask a sales associate at a home improvement store to give you a quick lesson.

The method: Insulating window film
Estimated cost: $3-$10 per window
In some cases, it may not just be the cracks or gaps that are letting in the cold air, but the glass itself. Much like the plastic sheet that protects the screen of a new smartphone or other electronic device, insulating film fits over the face of your window. In many cases, the film may be heated with a hair dryer to further adhere it to the window. This isn’t a good option for windows from which you want a view of winter happenings, since the wrap will make the window filmy.

The method: Winter shades or curtains
Estimated cost: $23-$39 per window
Depending on the style you are looking for, heavier winter-specific curtains or cellular (honeycomb) shades can help trap frigid area before it gets too far into your living area. Or, to really fortify your sanctuary, use a combination of both. The downsides are that you have to remember to draw the shades/curtains during the day to let the sunlight warm your home and that the energy efficiency achieved per dollar spent isn’t as high as other options.

You really don’t have to spend that much to make your home much more efficient during the winter. Plus, doing so not only makes your home more comfortable, in the long run it puts money back in your pocket.

Getting Your Name Off the Mortgage After Divorce

Getting Your Name Off the Mortgage After Divorce

Your divorce has been finalized. You’ve moved into separate places, set up individual bank accounts and otherwise taken every step you can think of to create distinct financial lives. There’s just the matter of that pesky mortgage with your name still on it – despite the fact that you no longer live in the home!

If this is your situation, you may find yourself very motivated to not have your credit standing or financial obligations tethered to the vagaries of your ex’s payment record. If that’s the case, pay special attention to these options for removing your name from the mortgage.

The reason lenders don’t want to make it easy to just “delete” your name from the mortgage records is because the loan was originally made under the assumption that multiple people would be responsible for payment. If you were to remove yourself from the picture, that fundamentally changes the risk assessment for the loan. For this reason, a lender wants the opportunity to re-evaluate the loan if there is only going to be one person on it – or a new person. If your ex-spouse has enough household income to maintain mortgage payments and has a strong enough equity position, a refinance to take your name off the loan could be an option.

Assumed loan
It isn’t terribly common, but in some circumstances, one spouse may be able to “assume” – or take over – the loan after a divorce. Don’t hold your breath, but it’s at least worth contacting your lender about.

Sell the home
If other methods fail, you can always try to talk your ex into selling the property. Given the financial turbulence that unfortunately tends to accompany divorce, your former spouse may be inclined to unload the property anyway.

Pay off the mortgage
If you’re concerned about the potential for missed mortgage payments to damage your credit, understand that if the mortgage is paid off, these concerns evaporate. If this is an option for you, consider the value of spending a chunk of money now to have a lot less worry in the future.

Dispute with the credit bureaus
As a final step, always pull your credit reports one month after your name was taken off the mortgage. Even though the lender may have removed you, this doesn’t always translate into your credit file being updated immediately.

If you still see the mortgage listed as an open account on your credit reports, dispute this item with the credit bureau reporting the data – Equifax, Experian or TransUnion. Slap a “.com” on the end of each of those names to reach their website and begin the dispute process. An online dispute should take care of the problem, but also keep handy any paperwork related to your name being removed from the mortgage just in case you need to file a paper dispute with the credit bureaus via mail later on.

While in the first few months after a divorce the mortgage ownership status can be a huge headache, normally with time and persistence the issue is resolved. It can certainly be difficult to communicate with your ex during this period, but working together to resolve the mortgage issue sooner rather than later will give you one less thing to worry about.

Layaway: Six Questions You Need to Ask

Layaway: Six Questions You Need to Ask

While its popularity had been waning over the past several years, layaway now appears to be making a comeback. Because a layaway plan allows you to make weekly or monthly payments on a larger purchase without having to pay interest, it may be an attractive option if your credit isn’t excellent or you are trying to stay within a tight budget. But layaway isn’t always your best option. Read on to find out the details you need to gather before making a commitment.

What are the fees?
While you may not be charged interest, there might be fees you are expected to pay for the privilege of paying off an item over time. Calculate these fees into the total cost of the item and weigh this cost against waiting to purchase the product once you have saved up money on your own.

Is there a price guarantee?
If you have an extended layaway plan, chances are the price of the item is going to change during that time span. Make sure you aren’t going to have pay more if the price goes up. Conversely, plans that give you the lower price if the cost drops are a better choice than ones that don’t.

What happens if you miss a payment?
In many cases, missing a layaway payment means the deal is off and the money you paid toward the purchase price is refunded. Sounds OK, right? Keep in mind that missing a payment may also mean having to pay a cancellation fee and getting nothing in return for the fees you had already paid.

What are your options for canceling?
Let’s say you’ve wanted a new refrigerator for years. You finally decide to buy one on layaway. Next you make the first five months worth of payments. Lo and behold, your Great Aunt Gertrude decides to surprise you on your birthday with…[drumroll]…A NEW REFRIGERATOR!!! Regardless of whether or not you have generous relatives who like to get you unexpected gifts, make sure you know what your rights should you decide to cancel your layaway plan.

How is your money returned to you after cancellation?
It’s not unheard of for some retailers to only offer back the money you have paid as store credit toward a future purchase. In other words, even if you are able to get out of the original deal, you still have to buy something from the store…or see your money go down the drain.

What’s expected of you if the store goes out of business?
In the past few years, a number of stores selling big-ticket household goods went out of business. In many cases, those companies required that customers with layaway plans either pay off their remaining balance in full or surrender any claim to the item. Make sure you are aware of what a worst-case scenario for the retailer could mean for you.

In addition to the questions you’ll be asking the retailer offering the layaway plan, it’s also wise to query yourself about the appropriateness of layaway for your purchase.

  • How does this monthly expense fit into your spending and savings plan?
  • Will you need to make the layaway payments with a credit card and thus be charged both layaway fees and interest?
  • Could you instead save on your own and then buy the item once you have accumulated the full amount?
  • Did the availability of a layaway plan lead you to buy something you otherwise wouldn’t have purchased?

By being an inquisitive spender, you can potentially uncover a lot of important details and in the process save yourself bundles.

Saving on Tools for Your New Home

Saving on Tools for Your New Home

Ongoing maintenance is one of the most important – yet most often overlooked – expenses you’ll need to plan for when buying a new home. By taking the time before you move in to gather the tools you’ll need to perform minor fix-it jobs, you avoid one huge cash-draining trip to the mega-store to fill your tool box. Great bargains can be found on used tools with just a little bit of effort. Search garage sales, Craigslist ads and estate sales for:

  • Toolbox
  • Hammer
  • Nails of various sizes
  • Phillips (4-pronged) and flat-head screwdrivers in various sizes
  • Tape measure
  • Stepladder
  • Duct tape
  • Stud finder
  • Pry bar
  • Vise grips
  • Needle-nose pliers
  • Box cutter
  • Tin snips
  • Wire cutter/stripper
  • Multi-purpose tool
  • Electrical tester
  • Power drill with bit set
  • Steel chisel
  • Box cutter/utility knife
  • Level
  • Putty knife
  • Adjustable crescent wrench
  • Allen key tool
  • Heavy-duty extension cord
  • C-clamp
  • Hacksaw
  • Superglue
  • Durable flashlight
  • Lubricant/WD-40
  • Sandpaper

If you aren’t especially familiar with certain tools, save pictures of them to a mobile device or print out pictures so you remember what to look for at sales. Not only will picking up these items ahead of time save you money, you’ll also experience far fewer 2 a.m. panics when you’ve had a breakdown and all the hardware stores are closed!

Home Repair Financing Options

83107352Performing a fix-it job on your home has the double benefit of making your day-to-day life better AND improving the value of your dwelling. With that said, there’s not always a pile of money lying around to do needed maintenance or improvements. Luckily for you, there are ways to invest in your home without having to fork over the cash right away.

Local emergency repair loan
Many cities and area housing organizations have money earmarked for providing loans to homeowners wishing to make critical repairs to their home. NeighborWorks is a helpful resource for finding organizations in your area that provide these types of loans. Visit and click on “Find a NeighborWorks Organization” for more information.r

Title 1 loan
Offered by financial institutions but insured by the federal government, Title 1 home improvement loans can provide you with up to $25,000 for non-luxury home upgrades. You don’t need to have equity in your home, the repayment term can be as long as 20 years, and the interest rate tends to be very competitive. However, you should be aware that your home is being used to secure the loan. For more on Title 1 loans, visit the U.S. Department of Housing and Urban Development’s website at

401(k) or 403(b) loan
If your employer allows it, you may be able to take a loan from your retirement plan to make home improvements. The advantages of this option are that the interest is low, you don’t have to pay loan origination or closing fees, there aren’t credit score or home equity requirements, and you don’t have to risk your home if you’re not able to make payments. However, it’s important to remember that this choice could mean less money in your retirement later on. You also run the risk of having to pay back the full amount of the loan or face penalties should you leave your employer.

Cash-out refinance
With a cash-out refinance, you get cash for the equity you have in your home. In essence, you replace your existing mortgage with one for a higher amount. You can then use that additional money to make your home upgrades. Make sure you are able to afford the new payment levels before you commit. Talk to your mortgage lender for more information.

Credit card
If the total cost of your work isn’t too high, you may be able to use a credit card to pay for the upgrades. However, it’s wise to calculate the total time it will take you to pay off the debt and how much interest you will pay in that time. If you are making the repairs to increase the value of your home, it probably doesn’t make sense if the cost of the repairs plus the interest is more than the anticipated value added to your home. Also know that the interest rate for using a credit card can be significantly higher than some other options.

Unsecured personal loan
If you decide to pursue the option of a personal loan for the necessary work, make sure you calculate the full cost of the loan – including fees and interest – before committing. Given the lack of collateral needed, if the numbers check out, a personal loan can be a great option.

FHA 203k refinance loan
Through this type of product, provided by the Federal Housing Administration, you lump together your current mortgage and the cost of your non-extravagant home improvements. Talk with your mortgage lender about this option.

Home equity line of credit (HELOC)
If you have equity in your home – meaning you owe less on the home than its current value – a HELOC may be worth considering. Since it is a revolving line of credit, you can keep the account open long-term and borrow from it and pay it down repeatedly. The maximum amount you are able to borrow depends on how much equity you have. Understand that the interest rate on a HELOC is usually variable, meaning it could go up during the time you have the line of credit open. However, the interest rates on HELOCs tend to be relatively low.

Home equity loan
As with a HELOC, a home equity loan allows you to borrow from your home equity while using the home as security for repayment. Unlike a HELOC, the loan is a one-time disbursement, normally with a fixed interest rate. Whereas a HELOC can be better for an ongoing project, a loan may make more sense for a one-off fix or upgrade. You will pay loan fees, but like a HELOC, the interest you pay on the loan can be tax deductible.

In addition to the financing alternatives listed above, be sure to consult your local housing authority about grants or other incentives you might be able to qualify for.

Given the sizeable financial ramifications, it’s important to consider all your options when it comes to financing home improvements. Thankfully, you have several different choices and should be able to find one that fits with your situation and goals.