Kathryn Vercillo

7 Ways to Define What It Means to Be Middle Class

June 26, 2019 By Kathryn Vercillo Leave a Comment

We hear a lot about the middle class. We know that it’s shrinking. Many of us probably identify with being in this class. But what does it really mean? Is middle class a number? Or is it something more elusive than that? There are actually many different ways to define middle class.

Middle Class as an Income Bracket

When we talk about the middle class, sometimes we’re talking about income. After all, class is, at least in large part, about money. The middle class was historically defined as the middle 60% of income, in between the richest 20% and the poorest 20%. However, that definition has shifted slightly over time.

Nowadays, we have three broad categories of class:

Lower class is the lowest 29% of income earned
Middle class is the next 52%
Upper class is the top 19% of earnings

Looking at this, we can indeed see that the middle class is shrinking. It used to make up 60%. Now it only makes up 20%. We can also see that the lower class has grown by nearly 10%. Fewer and fewer people have more of the riches of the world. And that fact matters because it alters our perception of what it means to be middle class. You see, even though we can define middle class by income, it’s really about so much more than that.

Percentage of Median Income

Another way that we define middle class is by the percentage of median income. If you earn between 67% and 200% of the median income, then you’re considered middle class. According to the Department of Numbers, the most recent calculation for the U.S. median income was $60,336. Therefore, we can define middle class as earning an income between $40,425 and $120,672.

Of course, that’s the national average. Middle class also has to do with how far your money goes where you live. Therefore, it might feel more relevant to look at the median income in your own area. For example, in San Francisco, the median household income is $96,265. Therefore, the middle-class income range between $64,177 and $192,530 if you live here. In contrast, the median income in the state of Alabama is $48,123, which makes their middle-class income range between $32,242 and $96,246.

So, if you make $96,000, you’re going to be middle class in any part of the country. However, if you earn $50,000, you’re technically considered middle class in the United States but might not feel like it if you live in San Francisco (or somewhere similarly expensive).

Income Isn’t Always Representative of Wealth

Even though we typically use income to define middle class, it’s not the only option. It might not even be the most accurate way to define it. Consider, for example, people who have a lot of wealth even though they aren’t currently earning much (or any) income. People in retirement, including those who retire early, may have acquired a lot of wealth but now have very little income. If you looked at just their income, they’d be poor, but if you look at their wealth, then they might have middle or upper-class lives.

One common method of calculating middle class by wealth is to break overall wealth into fifths. The three fifths in the middle are middle class. This also takes into consideration the fact that the middle class, by income, tends to have a lot of debt. If you have debt that offsets your assets, then you may not have much wealth. Therefore, even though your income is middle class, your lifestyle may or may not be.

How Much Do You Spend?

Notre Dame Professor James X. Sullivan argues that middle class can be defined more by what you spend than what you earn. This consumption model of defining the middle class reflects the fact that people with fluctuating income may still have enough money to spend on both necessities and extras. This model looks at spending on food, housing, entertainment, transportation, and other regular expenses. It doesn’t matter if you spend cash, credit, or food stamps. However, it excludes spending on healthcare and education, considering those investments instead of expenditures. With that in mind, if you annually spend between (approximately) $38,000 and $50,000, then you’re probably middle class in America.

What Are Your Aspirations?

Another way to look at spending isn’t just in terms of the concrete amount that you spend each year but also what your aspirations are, which might get reflected in your spending. People in the middle class typically have aspirations that include:

College education
Family vacations
Health care access
Owning a home
Owning a car
Retirement savings

This model is based on a combination of spending and savings but not necessarily on income. Of course, you have to have a certain income to be able to afford these things, but there’s a lot of latitude there. This model reflects that being part of the middle class is really more of a mindset, lifestyle, perception, or culture than it is specifically about money. We think it’s about money because that’s the lens through which we understand it, but it’s really about the way of life you are able to lead.

Recently, one report suggested that the number one thing that defines middle class is access to credit. This aligns with the aspirational model. If you can’t access loans, then you might not be able to own a car or a home or attend college. If you’re in the lower classes, you probably can’t access good loans. Therefore, it’s a mark of middle or upper class, at the very least.

Complex Models of Middle Class

There are also more complex models that take a variety of socio-economic factors into consideration. For example, the St. Louis Federal Reserve Bank uses a flow chart that takes into consideration age, race, and education level to determine whether or not someone is middle class. According to this chart, you’re middle class if:

You are age 39 or under, of any racial background, and have completed college.
You are 40 or older, White or Asian, and finished high school but not college.
Or you are 40 or older, Black or Hispanic, and finished college.

If you’re under 39 and haven’t completed college then you’re probably lower class (or what they call “stragglers.”) On the other hand, if you’re older than 40 and white or Asian and you completed college then you’re probably upper class (or what they call “stragglers”.) While this isn’t a perfect model, it does factor in that there is more than just income at play when it comes to defining the middle class.

Buying a House? A Credit Union Mortgage Might Be Best

June 25, 2019 By Kathryn Vercillo Leave a Comment

You have so many different options for banking today. In addition to traditional banks, there are online-only banks. You can invest with robo-advisors and apps. If you need money, you can get a personal line of credit or set up a Go Fund Me account. With so many options available, it can be difficult figuring out what the best choice is at any given time. If you’re looking for a home mortgage, then you might want to consider going with a credit union. They’re almost always cheaper than a traditional bank for mortgage loans.

What is a Credit Union?

A credit union is a type of bank. However, a regular bank is owned by a company or corporation. For example, Wells Fargo and Bank of America are regular banks.

In contrast, a credit union is a co-op. When you join a credit union, you become a member who partially owns the credit union. Therefore, credit unions tend to work harder than traditional banks to secure the best options for their members. After all, the members themselves own the bank.

Credit unions historically served particular groups of people. For example, there are firefighter’s credit unions and teacher’s credit unions. However, today, you can find a credit union for just about anyone. For example, San Francisco Credit Union is open to any resident of the city.

You Get More and Pay Less at a Credit Union

A traditional bank is a for-profit company. In contrast, a credit union is non-profit. As a co-owner of the bank, the extra “profits” or benefits go back in your own pocket. Therefore, you get better rates and lower fees when you use a credit union instead of a traditional bank.

In terms of rates, you get more interest. For example, if you open a savings account at a bank and open another at a credit union, you’ll most likely discover that you earn more interest on the credit union savings account.

In terms of fees, you often find that you aren’t charged for things at a credit union that a typical bank would charge you for. ATM fees, overdraft fees, and similar charges are often not a problem at credit unions. Of course, each credit union is different, so you’ll always want to check the terms of your own account. Don’t assume anything. Generally speaking, though, you’ll pay less and earn more when banking with a credit union.

People Choose Credit Unions for Loans

Although there are benefits to opening a checking/savings account with a credit union, the real reason that people opt for credit unions is often because of the loans.

First of all, if you’re already a member of the credit union, then loan approval usually happens very quickly. You can apply to become a credit union member just to get a loan. However, you’ll have the best luck if you’re already a member. Therefore, if you know that you’ll need a loan in the near future, you might want to set up a checking and/or savings account with the credit union first.

More importantly, credit unions often offer the best rates for loans. If you were to apply for a loan through your regular bank and also apply for one through your credit union, chances are that the interest rate would be a lot lower on the latter than the former.

In other words, you can borrow money more easily from a credit union, and you won’t have to pay back as much in interest. Of course, your credit history will still play a role in the decision process for a loan. However, your credit union will also consider other factors, which your regular bank may not. They’re more people-friendly and consider different human circumstances. Therefore, if you have irregular or non-traditional income, a higher-than-average debt-to-income ratio, or some other credit history quirk that would cause another bank to turn you down, then you might have better luck with a mortgage company.

Get Your Mortgage Through a Credit Union

You can get any number of different types of loans through a credit union. However, it’s an especially good choice for people who need to get a mortgage. After all, a mortgage is probably the most significant loan you’re ever going to get. When you’re taking out that money, to be repaid over such a long period, it’s critical to get the best rate possible. You’ll find better rates at your credit union than through a regular bank.

The most important difference is the interest rate. When you’re taking out such a huge loan, even a small percentage difference can make a huge impact on how much you end up paying overall. But that’s not the only way you’ll benefit when you get your mortgage through a credit union. You might also find that your closing costs are significantly cheaper. When you work with a traditional bank (or a mortgage bank), you work within a system that’s designed to rack up the fees. When you get your mortgage through a credit union, you work within a system that’s designed to give you the best rates.

Plus, you get the personal touch that banks just don’t offer. When you buy a house, especially for the first time, it’s a really huge decision. It’s confusing. You will probably have a lot of questions. And while you can certainly get many questions answered by your real estate agent, it also helps to have your financial team on your side. Your credit union will go the extra mile to provide customer service that helps you understand each step of the process, what your options are, and how to make the best decisions as you buy your home. They’ll also help you with funding a non-traditional home that other banks might turn their noses up at.

A Mortgage is a Long-Term Relationship

No matter how long you have an account at a regular bank, it usually feels like an impersonal service. In contrast, you truly build a relationship with your credit union over time. This is particularly important as a homeowner. Inevitably, you’re going to need some additional financial help for your home. Perhaps ten years down the line you’ll need to replace the roof. Maybe you’ll grow your family and want to add on to the home. Or maybe you’ll just need money for something else, and you’ll want to refinance your home to get that cash. Whatever the reason, you’ll have a better chance of getting a great home-related loan if you’ve established a relationship with your credit union over the years. Getting your home mortgage with them and paying it off consistently is a great way to establish that relationship.

Plus, your credit union is likely to stick with you throughout the loan. Many traditional banks sell and re-sell their loans over time. As a result, you might start out sending payments to one company only to find a few years later that your checks need to go somewhere else. While that’s usually not a big deal, it can feel like a hassle when it happens. Things can go awry. Moreover, you can really start to feel like you don’t know who’s dealing with your money. You don’t have those issues when you work with a credit union, which is typically unlikely to sell your mortgage.

CORI: How Uber Drivers Can Become House Flippers

June 18, 2019 By Kathryn Vercillo Leave a Comment

Uber drivers often don’t make enough money to survive off of that gig alone. Even if you drive full-time, you may not be able to make ends meet as an Uber driver. That’s why so many Uber drivers take on additional jobs. Many drive for multiple companies (Lyft, Amazon, etc.) Others take on extra Uber work, such as delivering Uber Eats. And some are taking advantage of a brand new opportunity to assist a real estate company, doing work for them at the same time that they drive for Uber.

What is CORI?

CORI Corporation is an Atlanta-based real estate investment company. It appears to have just launched this year. It’s headed up by CTO and co-founder Eric Richner who also manages The Richner Group, and We Buy Crappy Houses. Although based in Atlanta, they also work with real estate in Virginia Beach, Chicago, and Minneapolis.

CORI is a company that locates run-down homes, buys them, fixes them up, and sells them. In other words, they are a company of house flippers. They specialize in finding homes that aren’t already on the market. The home is disrepair, but the owner hasn’t moved forward with selling it, yet. They just need someone to approach them and make the right deal. That’s what CORI does.

CORI’s Deal Finders: How Uber Drivers Can Make Money with CORI

What does any of this have to do with Uber? Well, it turns out that Uber drivers are particularly well-suited to finding great homes for CORI to invest in. Uber drivers are out there on the road, all day, every day, driving up and down many different streets. They see homes in disrepair. They see homes that someone could easily fix up and flip. It’s easy for them to provide leads about those homes to CORI.

In fact, CORI has specifically marketed to Uber drivers to get them to do just that. They have a program called Deal Finders. Although they don’t have a main CORI website (the URL just sends you to their Facebook page), they do have a page for their Deal Finders Elite program. Uber drivers can head to the site and sign up to become a Deal Finder, through which they can provide CORI with housing leads.

As you’re driving around picking up and dropping off your Uber rides, you just have to keep an eye out for good houses for the program. As you get used to how it works, finding the right types of houses should become easier and easier. If you’re good at it, then you can earn decent money for your leads. You make money when CORI sells a house that you’ve pointed them to with your leads.

How to Use CORI’s Deal Finders Program

Once you go to the website, you’ll click on the big yellow button that says, “let’s do this.” That will take you to a page that tells you that you’re signing up to do “Driving for Dollars.” What does that mean? They explain:

“Driving for Dollars is the term used for locating and logging properties, that are either in bad shape or vacant, while using any method of transportation.”

So, you don’t actually have to be an Uber driver, or any type of driver at all, in order to become part of the Deal Finders program. If you’re a flaneur who enjoys walking the streets of your city every day, you can sign up to become a Deal Finder with CORI. That said, they’ve explicitly marketed to rideshare drivers because of how convenient it is for them to incorporate house-finding into their existing work.

After entering your name, you’ll get a little bit more information about the job. You’ll learn that your job is essentially to find houses that are in disrepair. You’ll photograph them and log them into the system using a unique mobile app. Then you’ll add tags to help the flippers understand more about the house. For example, you might tag that it has fire damage or that it’s a vacant building.

How Much Money Can An Uber Drive Make with CORI?

According to the site, you receive payment whenever you provide a lead that turns into a closed property deal. In other words, if you provide terrible leads and CORI doesn’t buy, then sell, the houses then you don’t make money. However, if you excel at providing leads, then you can make some cash. In fact, the more good leads that you provide, the more money you can make per lead.

They call their payment on closed property deals a “performance bonus.” You get your performance bonus when the sale happens. So, first, you provide the lead through the app. Then CORI may buy the house, fix it up, and sell it. You earn money based on the amount of profit CORI makes with that sale.

If the sale’s profit exceeded $15,000, then you’ll get a $1500 performance bonus. If the deal was for between $5000 and $15,000, then you’ll get $1000. And if the deal was for less than $5000, then you’ll still get $500. In other words, you more or less get 10% of the deal price on average.

Moreover, if you successfully send 3+ good deals that close, then you are guaranteed 10%. For example, if you send them a lead that results in a $40000 profit for CORI, then you’ll get a $4000 performance bonus. You would have only gotten $1500 if you hadn’t already sent some great leads, but if you’ve sent more than three successful leads, then you get this better-guaranteed price.

If you really love this work, then you can make even more money. “Deal Finders that send over 50 properties will be eligible for payment of $1 per approved lead, for every 50 leads.” Therefore, you might make a little bit of cash even when it doesn’t lead to a property sale.

You can receive payments via check, Paypal, Venmo, or “cash app.”

What is the Difference Between UberX and UberXL?

Cord Cutting: How to Save Money on TV

June 17, 2019 By Kathryn Vercillo Leave a Comment

I have to admit that I get a little bit of a kick out of how trendy cord cutting is right now. That’s because I haven’t had an actual TV in my home in years. There was one in my house in 2006, but that’s only because my roommate set it up.

I’ve been watching TV online for about as long as it has been possible. Before that, I subscribed to Netflix DVD deliveries to get my show-watching fix. I am definitely someone who is thrilled that technology has advanced to the point where we can easily stream videos of all kinds, including live. It’s become a popular way for many people to save money on TV.

Here’s How to Save Money on TV

I use a combination of Netflix, Hulu, Philo, Amazon Prime, and individual network apps to see all of the shows that I want to see. Therefore, I find it a little surprising that anyone still subscribes to TV “the old-fashioned way.” And I guess that’s why I find it funny that cord cutting is such a hot trend.

But it is. And it makes sense that it is. So if you’re still watching TV through cable company subscriptions, you might want to think about cord cutting.

What is Cord Cutting?

If you haven’t guessed by now, cord cutting is the practice of canceling your subscriptions to cable or satellite television. In their place, you can sign up for streaming services. Of course, you can still use an Internet-equipped television to watch those shows. Apple TV is one of the most popular options for people who want to watch TV on their televisions but use a streaming service instead of cable.

Why is it Called Cord Cutting?

It’s called “cutting the cord” because of the concept that you’re no longer wired to the physical system of a cable box or satellite dish. You can just get your television shows through the wireless Internet.

The people who do this are called cord cutters. Interestingly, there is also a segment of the population called “cord nevers.” These are people who have never subscribed to a traditional service where you pay for a package of tv channels.

There are also “cord trimmers,” which are people who do continue to pay for a traditional TV service but have trimmed down their package and supplement that with streaming services. Research shows that nearly half of US consumers pay for both TV and streaming services.

Cord Cutting is on the Rise

The research above came from Deloitte’s Technology, Media & Telecommunications’ 13th edition of Digital media trends survey. They noted that this was the first time in the history of the survey that more people are paying for streaming TV than paying for TV subscriptions. The difference is small (69% compared to 65%; “cord trimmers” are the reason this combined number exceeds 100%). However, the trend is that paying for streaming is on the rise while paying for traditional tv services is on the decline.

One of the biggest reasons that people still subscribe to traditional TV services is that they want to be able to watch live television. People who enjoy live news and sports will usually keep their TV subscription. The cord trimmers will pare down to a plan that allows them to enjoy just these shows, then they’ll use streaming services for other viewing. However, streaming services are increasingly beginning to offer live viewing, so it seems like only a matter of time before this won’t be a reason to keep your old service.

Who is Cutting the Cord?

Interestingly, millennials are the biggest group of both cord cutters and cord nevers. 88% pay for a streaming service while only 51% pay for traditional TV. It may not be surprising that they’re more likely to stream than their older Gen X or Baby Boomer counterparts. However, it is a bit surprising that the younger Gen Z is less likely to cut the cord. Among that group, 80% pay for streaming services and 57$ pay for regular TV. Since they grew up with streaming, it’s intriguing that they’re opting in to television services.

Why People Prefer Cord Cutting

So, why is it that people are opting out of traditional television subscriptions in favor of streaming? I know that the number one reason that I won’t pay for a traditional service is that I don’t like the few companies that offer it in my area. I’ve used their services thanks to roommates. And I’ve used their non-TV services, such as cable Internet, and I don’t like what they have to offer.

Therefore, I prefer the option to choose from a wide range of companies, including small companies, that offer streaming services instead. There are more than 300 different streaming services to choose from! (Not sure where to start? The New York Times has a great article on that topic.) If I don’t like the one I’m working with, I can easily switch. That’s my number one reason. But it’s not the only reason, of course.

Cost Comparison of TV vs. Streaming

Many people cite cost as the big reason that they prefer cord cutting. Cable TV and satellite TV are expensive. You can easily pay over $100 per month. Often, you end up paying for a whole bunch of channels that you don’t want so that you can have the few channels that you do. This is frustrating. If you only want to watch a few channels, and you can access those shows through a streaming service, that it can be far cheaper to cut the cord. So, yes, you really can save money on TV when you aren’t depending on cable.

That said, as streaming becomes the norm, it’s hard to say what will happen with the price. The Deloitte research found that people, on average, have three streaming subscriptions. That’s still currently less per month than an average cable TV bill. However, those prices shift all of the time. Whether or not they remain as low as they are right now … well, only time will tell. But if you’re looking to save money immediately, then it’s definitely worth it to see if cord cutting would work for you.

Streaming TV Has Fewer Ads

One of the major reasons that people switch to streaming is that they’re tired of commercials. In the Deloitte survey, “44 percent of respondents cited “no ads” as a top reason for subscribing to a new paid streaming video service.” However, I have to point out that this varies widely from service to service. Netflix doesn’t have ads. YouTube television does. Hulu has the option to pay more for an ad-free experience.

One of the things that I’ve noticed over the years is that the ads have gotten longer on streaming services. I remember when there were only a few commercials during a show, and they were about 30 seconds each. Now I regularly see 1-2 minute commercial breaks on my streaming services. So, this is also going to shift over time.

Other Reasons for Cord Cutting

Here are some of the other reasons that people choose streaming services:

There is great new original content available. Did you know that Netflix’s original shows tied HBO for the number of Emmy’s last year?
Many streaming services offer seamless viewing across multiple platforms. I can start a show on my desktop computer, pause it, and then pick up where I left off on my mobile phone. I can take my TV wherever I go.
Each platform has a different design. Therefore, you can choose the streaming services that offer you the best ability to find new content or organize the shows you love.
If you add an antenna to your television, you can still get some channels, such as NBC, for free. Remember when that’s the way it always was?

Will You Run Out of Money in Retirement? Check Your RISE Score Today

June 12, 2019 By Kathryn Vercillo Leave a Comment

Have you checked your Retirement Income Security Evaluation (RISE) score yet? Most of us do our best to plan for retirement. However, it’s really hard to know whether or not we’re doing enough.

It can seem like we must need an impossible amount to live well in retirement. On the other hand, we generally aim for fairly realistic savings that we can accomplish without compromising our current lifestyle. Yet, we don’t want to reach retirement only to run out of money.

Your RISE score can help give you a realistic picture of your money in retirement.

What is the Retirement Income Security Evaluation (RISE) Score?

RISE is an acronym for Retirement Income Security Evaluation. It’s a new tool available to consumers who are interested in checking the pulse of their future retirement income. If you want to know whether or not you’re going to be able to make your money last through retirement, then it’s a tool that you might want to check out.

After entering some basic information, you’ll receive a score. It looks a lot like a credit score. Over 750 is “excellent,” and under 350 is “very poor.” There’s a reason for that. We all have a solid understanding of our credit score. When it’s bad, we know we need to take action to make it better. The RISE score is the same way. A bad score doesn’t mean that you’re doomed to a future in poverty. It means that you need to take steps to improve your retirement income.

How Does RISE Work?

You can easily go online to access your RISE score. You will anonymously enter basic information including your age, gender, and health (on a four-point scale from very poor to excellent). Then you will enter certain financial information, including:

The amount you have in savings
Current monthly income
The income you expect in retirement from social security, pension, or other sources
Estimated expenses including monthly living costs and medical costs

You can enter these as an individual or choose to enter them jointly with your partner. If you don’t have the exact numbers, you can use the estimated averages that the tool provides. However, you will obviously get the best picture of your own retirement income situation if you enter your own information as exactly as possible.

The more you know about your money, the better the tool can help you. For example, when you enter your estimated monthly living expenses, you have the option to list if the dollar amount you give is current (nominal) or future (real). You also can choose whether or not to adjust for inflation. The more accurate and detailed you can be, the better.

Who Should Get Their RISE Score?

There is definitely a target market for this tool. It’s designed for people who are at least 45 years of age. It’s particularly useful for people who have assets of $75,000 – $2,000,000 that they can invest. That’s because if you discover that you are going to need more money in retirement, your best course of action is to make proper investments now.

The tool isn’t going to be particularly helpful for people who don’t have a fairly steady income. If you don’t have a pension coming, and you can’t anticipate what your social security payments will be, then the tool can’t provide you with very accurate information. Likewise, if you’re wildly off when guesstimating your monthly expenses, then the tool’s score might not be accurate.

That said, you can use the tool at any age from 25-85.

How Reputable is the RISE Score?

This tool was developed by Milliman, which provides a variety of different financial tools. Alliance for Lifetime Income, which is a non-profit organization whose purpose is “helping Americans address the risk of outliving their retirement income,” launched it. The financial services industry backs that organization. Therefore, it’s a fairly reputable tool.

Of course, the tool is new, which means we haven’t been able to see the test of time. We don’t have information yet to reveal whether the information it provides will hold water when retirement time comes. Moreover, it’s just one tool. You certainly can’t bank your entire financial plan on this one score.

Nevertheless, it’s a good starting point. If you’ve ever questioned whether or not you’re going to have enough money in retirement, then the RISE score is a good next step.

RISE Helps You Plan for the Future

The whole point of this tool is just to get a general picture of your retirement income’s health. Then you have to take the information and put it to use. The idea is that this information can assist you greatly in determining how to make smart moves for your financial future.

Choosing Your Investment Approach

There’s actually a part of the tool that helps with this. As you enter your information, you come upon a page that asks you to choose from one of three descriptions that “best describes your current self-determined retirement approach.” They provide some additional supporting information to help you choose. The three choices are:

Conservative, in which you have 20% equity and 80% bonds, and will probably want to minimize risk.
Moderate, which is 60% equity and 40% bonds, and you’re open to some risk in order to get long-term rewards.
Aggressive, the inverse of conservative (80% equity, 20% bonds), where you’re willing to take lots of risk to maximize returns.

Even answering this question can get you thinking about how the choices that you’re making will affect your financial future. The tool itself considers your choice as it helps you plan.

Helping You Figure Out The Effect of Annuities

In a second section, you’ll see a question about how much money you’d be willing to put towards annuities. The tool explains why they are an important part of your retirement portfolio. They note that “the average retired American portfolio allocates 20% to annuities.” However, you can choose any percentage that you would like. You can see how changing the percentage changes your financial future.

Taking Next Steps

Much like with a credit score, when you get your RISE score report, it provides you with some information to help you take the next steps. First, it tells you which category you fall into. For example, a score of 550-649 is considered fair. You’ll get some tips about how people with fair scores can improve things.

You’ll also get some specific tips about how to easily boost your score. For example, mine said that increasing my annuities to 20% would boost me up by about 16 points.

The next step is to take your score to a financial advisor. You can work with them to figure out how to make the right changes to secure your future retirement.

Read More:

10 Reasons to Consider Investing in Savings Bonds with TreasuryDirect

June 10, 2019 By Kathryn Vercillo Leave a Comment

There are so many different ways that we can invest our money. If you’re smart, you’ve diversified your options. However, you might have overlooked one of the smartest options available today: TreasuryDirect.gov. Investing in savings bonds that are backed by the government is a flexible, secure way to stow your money and let it grow. If you haven’t considered this option, here are ten reasons why it’s a smart course of action:

1. It’s Quick and Easy to Get Started

So what is TreasuryDirect? As they succinctly explain directly on their own website:

“TreasuryDirect is the first and only financial services website that lets you buy and redeem securities directly from the U.S. Department of the Treasury in paperless electronic form.”

In other words, you can quickly and easily go online, set up an account, and start investing in savings bonds through the site. It takes less than ten minutes to set up an account. You link that account to your regular bank account, so it is fast and simple to transfer funds. Although there is a lot that you can explore and learn on the site, you can grasp the basics really quickly and start investing in no time.

2. The Government Backs The Products

When you invest through TreasuryDirect, you do so directly through the US government. They back the investments. While it’s not foolproof, it’s one of the most risk-free options for investing today.

3. TreasuryDirect Offers More Than Savings Bonds

Savings bonds are the big thing that people invest in through the site. However, you can invest in a variety of security treasuries with this tool.

For example, you can invest in a specific type of savings bond called TIPS. That acronym is short for Treasury Inflation-Protected Securities, which, as the name suggests, protect your investment against inflation.

You can also invest in treasury bills and notes. The more you get to know about your different options, the more obvious it becomes that you have an array of good investment choices.

4. You Have So Many Options

In addition to having investment options, you really have a lot of choice about how you make your investments. There’s just a lot of flexibility with TreasuryDirect. For example, you can ladder your investments, buying 4-week bills at auction, which means that your money will never be tied up for long. Sometimes people don’t invest because they want the security of having that money easily accessible in the bank in case of an emergency. TreasuryDirect can give you a lot of that security while still allowing you to earn more than you would with a basic savings account.

5. The Investing Rates Are Competitive

People who invest their money in TreasuryDirect definitely want the risk-free security and ease of the product. In the end, though, this is an investment, so they also want a return on their money. It turns out that the investment rates these products offer are quite competitive. Savings bonds pay about 3%, which is clearly better than just sticking your money in a regular savings account.

Investing in bills and notes through TreasuryDirect.gov will give you a slightly lower return. Nevertheless, it’s still about 2%. Even if you invest in TIPS, you still have a competitive rate of about .5%. That doesn’t sound like much but considering that you won’t’ be impacted by inflation, it’s actually a great deal.

6. It Won’t Cost You Much to Earn

You always have to weigh the investment benefits with the costs. In this case, the costs are minimal. There are no fees at all. You can easily invest your money without having to pay extra out of pocket to do so. Moreover, you don’t have to put a lot of money into the account. Whereas some investment forms require huge amounts of cash to start, you can easily begin investing with TreasuryDirect.gov starting with as little as $25.

7. The Interest You Earn May Be Tax-Free

As you begin to learn more about investing in savings bonds, you’ll see that there are numerous benefits. One of them is the fact that you might not even have to pay taxes on the interest you accrue. You get just to add that money to your total net worth. Many of your investments are not so simple. Come tax time, you may be unpleasantly surprised to discover that you owe more than you expected. Nobody wants to owe extra money on the money that they’re trying to save.

This is especially important if you have a lot of money to invest. For example, let’s say that you receive a half million dollar inheritance. You could easily earn more than ten thousand dollars annually in interest from that investment. If you place that in a place where it’s taxed, you quickly lose a big chunk of it. On the other hand, if you put it into savings bonds, then you may not have to pay those taxes at all.

Of course, it’s important to do your research. Some investments will be tax-exempt at the state level but not at the federal level.

8. There Are Ways to Simplify Investing

Some people worry that putting their money into savings bonds is going to require a lot of work on their part. Indeed, if you want to get really involved in the trading, you certainly can. However, you can also automate a lot through TreasuryDirect.gov so that you don’t have to overthink it if you don’t want to. One great option is to buy the 4-week bill, set it to reinvest automatically, and then auto send the maturity directly into your regular savings account.

9. You Can Gift Savings Bonds

Savings bonds make a great gift, particularly for children – whether newborn or graduates. You can easily keep your money in your account then gift it when the time is right. That’s because the site has an easy-to-use “gift box” function.

10. Diversifying Your Investments Is Always Wise

The more places where you can place your money, the better off you are. You just never know what might happen in the market. Therefore, spreading your money out is a way to protect yourself against the unexpected. If you already have basic investment accounts but haven’t worked with TreasuryDirect, yet, then it’s another place to place your money.