Finance

I opened two accounts to help grow my savings. Here's what I learned as a Gen Z personal finance reporter

Published

3 months ago

February 18, 2024

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I opened two accounts to help grow my savings. Here's what I learned as a Gen Z personal finance reporter

Klaus Vedfelt | Digitalvision | Getty Images

‘The Roth IRA is an incredible savings vehicle’

Roth individual retirement accounts require investors to pay taxes on the contributions they make now, rather than when they take withdrawals in their retirement years. That trade-off means after-tax dollars grow tax-free for decades.

A Roth can be a powerful tool for younger investors, who are often starting out their careers with lower salaries, putting them in lower tax brackets. And in all likelihood, they are in lower tax brackets than they’ll be later in their careers.

“For younger professionals, the Roth IRA is an incredible savings vehicle, because given our earnings, it’s very likely that we’re not being taxed at the highest rate,” said Clifford Cornell, a certified financial planner and associate financial advisor at Bone Fide Wealth in New York.

Roth IRAs also tend to be great for younger savers because there are income limits on eligibility for single and married filers, he said.

Original contributions to a Roth IRA can be withdrawn at any time without penalties, serving as a great tool for long-term goals or short-term emergencies. However, there are penalties involved if you withdraw earnings from the account too early.

Here are three more key strategies I learned or was reminded of as I prepared to open a Roth IRA:

1. Investors can make prior year contributions before tax season ends: You have until the end of tax season, or April 15 this year, to save money in your Roth IRA that will count toward the prior tax year, experts say.

“If you’re between January [1] and April 15, you can technically make both a 2023 contribution and a 2024 contribution,” said CFP Tommy Lucas, an enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.

2. While you can’t get a deduction, you may qualify for a credit: Unlike a traditional IRA, you can’t get a tax deduction from Roth contributions. Yet, there is a perk that gets overlooked a lot, said Lucas: Roth savings count toward the so-called Saver’s Credit, which is available to low- and moderate-income taxpayers.

“Depending on your income level, it can go as high as for every $2 you put in, you get $1 back,” he said. “To be able to put money tax free and essentially get some sort of matching contribution from the IRS is actually really nice.”

3. Remember to invest the money: This point was more of a self-reminder for me, especially after I saw my initial deposit linger in cash in my account for 24 hours. In order to make your money grow, it’s not enough to merely fund the account; you have to invest the money. (Not doing so is actually a common mistake.)

“The Roth IRA is kind of like a label on the account; it still must be invested,” Cornell said.

While there’s a plethora of investment products to choose from, ask yourself two important questions: “How hands-on do you want to be? What’s your risk tolerance?” Cornell said.

Younger investors are able to be more aggressive with their investments because these are savings they won’t, ideally, use for two or three decades, Lucas explained.

“Investing in a diversified way is what yields results over the long term,” he said.

Investors can either build their portfolios themselves or delegate the decision-making process to an account manager or robo-advisors. From there, you can decide how you want your post-tax dollars to grow over time.

What I learned about high-yield savings accounts

About 56% of adult Gen Zers, or ages 18 to 26, did not have enough savings aside to cover three months of expenses, according to Bank of America, which conducted the survey in August.

Reading these reports sometimes feels like I’m looking into a mirror, or even the renowned line from Taylor Swift’s song “Anti-Hero”: “It’s me, hi. I’m the problem, it’s me.”

To address the issue, I opted for a high-yield savings account. While you are typically limited to a certain amount of penalty-free withdrawals per month, these accounts can be an ideal nest for both emergency funds and sinking funds, or money saved for bigger goals such as homeownership.

Here are two things to know about opening an account like this:

1. Compound interest does not make money appear overnight: When it comes to compound interest, it will depend on the bank or financial institution you choose to work with. But usually, the 5% interest is an annual rate, not monthly, said Lucas.

For example, if you put in $10,000 into an account that earns a 5% APY, you could earn $500 worth of interest, said Lucas.

“So it’s not $500 a month, it’s $500 for the year â and that’s assuming that the interest rate doesn’t change with the high yield savings account,” he said.

2. The IRS wants a piece: The tax man considers money earned from compound interest as an income. Any time you make over $10 in interest income, the bank will notify the IRS, which will send you a 1099-INT form, said Lucas. Even if you earn less than that, you’re supposed to report it on your taxes.

“The IRS knows you made $500 on that interest, you need to pay tax on it,” Lucas said.

Even so, “that is a lot better versus a checking account making half a percent,” he added.

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Finance

What are the best ways to finance excellent hotel studies? – Part 2

Published

5 hours ago

May 21, 2024

Press Room

What are the best ways to finance excellent hotel studies? – Part 2

While the hospitality industry is renowned for being a veritable social ladder, where someone without a degree can start out as a dishwasher before working their way up to become a hotel manager, education remains the quickest route to positions of great responsibility. Future talents are turning to the best hotel schools to train and join this rich industry. However, the cost of excellent studies can be daunting for many students. This is a financial barrier that schools, authorities and even the students themselves are trying to overcome through various financing solutions.

To (re)discover part 1 of this analysis, which looks at the cost of student life in 2024, click here. A wide range of funding options Grants, funding and support While such studies may seem out of reach for many students because of their cost, there are many ways of financing them. Whether it’s the…

Finance

Rana Abbasova, Adams aide whose home was raided, is cooperating with feds’ campaign finance probe

Published

12 hours ago

May 21, 2024

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Rana Abbasova, Adams aide whose home was raided, is cooperating with feds’ campaign finance probe

An aide to Mayor Adams whose home was raided amid an FBI probe into his 2021 campaign is cooperating with federal authorities, a source with knowledge of the matter said Monday.

The aide, Rana Abbasova, is one of several people whose residence was raided as the feds probe allegations that the Turkish government funneled illegal cash into Adams’ campaign through straw donors.

The mayor has not been accused of any wrongdoing and strongly denies any suggestion of impropriety in connection with the investigation.

It’s unclear what Abbasova may have discussed with the feds, though her cooperation pertains to the general allegation of illegal Turkish government-financed contributions to the mayor’s campaign, according to The New York Times, which first reported her cooperation. Her lawyer Rachel Maimin declined to comment.

Brendan McGuire, the mayor’s former chief counsel at City Hall who now represents him and his 2021 campaign in the FBI investigation, confirmed Abbasova’s cooperation, but said it’s “not a new or meaningful development.”

Abbasova, the director of protocol in Adams’ International Affairs Office and the mayor’s unofficial liaison to the local Turkish community, was put on unpaid leave days after her home was raided in November, according to two sources with knowledge of the matter. She remains on unpaid leave, and her position at City Hall has not been filled, they added.

The sources spoke on condition of anonymity due to the sensitive nature of the Adams campaign probe, which burst into the headlines when the home of the mayor’s chief campaign fundraiser, Brianna Suggs, was raided in November. Days later, Adams had his own electronic devices seized by the feds.

Abbasova received three tickets in New Jersey in January for offenses linked to driving a for-hire vehicle, the Daily News previously reported.

While she’s been on unpaid leave, another Adams aide targeted by the feds in a separate matter went on paid sick leave after her Bronx homes were raided in February. That aide, Winnie Greco, has since returned to work at City Hall, receiving a raise earlier this month.

McGuire noted the mayor’s administration reported to investigators late last year that Abbasova had engaged in “improper conduct.” Sources confirmed at the time that the conduct in question was Abbasova instructing other Adams staffers to delete text messages they’d exchanged with her.

“It is our understanding that Ms. Abbasova has been talking to investigators since her improper conduct was reported by the administration in November,” McGuire said in a Monday night statement.

Finance

Trends in residential solar finance, equipment and maintenance

Published

19 hours ago

May 20, 2024

Press Room

Solar informational site SolarReviews released its annual survey, sharing results gathered from a group mostly represented by residential solar installers, as well as commercial installers, equipment providers, and utility-scale installers. SolarReviews operates a Solar Calculator that enables prospective customers to have a snapshot of the benefits of adding solar to their roof based on customized data for their area.

Finance

With higher financing costs industry-wide, 54% of U.S. installers said customers were less likely to take a solar loan over the past year, while cash deals are up. About 49% of sales reported were cash deals, while 41% were loans. HELOC, PACE loans, power purchase agreements, and leases combined for 10% of reported solar sales.

The top financing providers used were Credithuman (15%), Mosaic (14%), Sunlight Financial (9%),Dividend (8%), and Clean Energy Credit Union (8%).

Typical loans for loaned systems varied widely depending on whether dealer fees were assigned. Average terms are seen below.

Image: SolarReviews

Heightened cost of finance has pressed the residential solar industry. About half (49%) of installers said demand went down in 2023 versus 2022.

In California, where rates paid for exporting solar production to the grid were slashed by about 80%, about 69% of installers reported lower sales in California in 2023 versus 2022. However, 68% of installers reported including battery energy storage with their solar installation, about double the national average. Installers report a median payback period of eight years for solar systems with a battery, while standalone solar systems have a longer median payback period of about 10 years.

California was not the only state to cut rates for solar exports, a process known as net metering. Georgia, Arizona, Kansas, Arkansas, and Wisconsin all noted an increase in installed systems not tied to a net metering agreement.

Top products

As for the top equipment brands in residential solar, SolarReviews surveyed installers based on five criteria of performance and quality, brand name reputation, product warranty, pricing, and product availability from distributors. Based on the five criteria, SolarReviews listed Qcells as the top performing panel brand.

Installers said the top five most-used panels were Qcells (53%), REC (41%), Canadian Solar (35%), Mission Solar (29%), and JinkoSolar (20%). About 19% of solar installers offer one panel brand, while the majority provide alternative options to meet the needs of their customers.

For inverters, the top five most-used were Enphase (62%), SolarEdge (43%), SMA (23%), Sol-Ark (21%), and Tesla (21%). Tesla made a notable leap up into the top five, gaining a larger market share than Fronius and Generac.

Enphase was also listed as the most commonly used battery energy storage provider, offered by 46% of installers. This was followed by Tesla (42%), SolarEdge (35%), FranklinWH (29%), and Fortress Power (18%). A sizeable market share was also held by SunPower, Generac, LG Energy Solution, and HomeGrid.

Maintenance

Given that solar is often a 25-year investment, post-installation services are a critical feature in a solar agreement. About 96% of installers have access to system monitoring, while 63% said they proactively check their customers’ installations at least once per quarter to ensure they are working.

The most common reasons for service, in order, were inverter hardware failures and replacement, inverter software and setup issues, battery software updates, communications and monitoring fixes, roof leaks, battery hardware failure or replacement, wiring issues, and broken or underperforming panels.

“Fortunately, when issues do occur, they are often covered by some type of warranty, leaving only 15% of cases where the customer is responsible for repair costs,” said SolarReviews.

Outlook

The residential solar industry looks to recover from a rocky 2023, where growth was slowed by high finance costs and unfavorable policy changes like the reduction of net metering rates.

“Some solar businesses are still reeling from the events of 2023. 22% of solar businesses say they have concerns that make them unsure whether they can stay in business in the coming six months,” said SolarReviews.

Despite this uncertainty, residential solar installers appear to have a good outlook for 2024. About 54% of surveyed installers said they expect to sell more solar in 2024, and an additional 23% said they think they will be able to maintain the same level of business next year.

Notably, surveyed installers listed pv magazine as the top trusted media platform for solar news and analysis, with 52% responding we are the preferred source. The marks the second year in a row as the most-trusted media source. We thank you for your continued readership.

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