Your 2011 Military Money Guide
See where you stand.
- Start off the year with a financial checkup. USAA’s free Financial Assessment takes only 10 minutes.
- Calculate your net worth. Add up the value of everything you own and subtract all your debts.
- Take a look at what you bring home and what you spend each month. Set up a budget and find some painless ways to save.
Check your credit.
- Keeping a high credit score starts with making sure the reporting agencies have accurate information. By law, you’re entitled to a free copy of your credit report every year. Request one from each of the three major agencies (Equifax®, Experian® and TransUnion®) by visiting annualcreditreport.com.
- Your actual credit score isn’t free. Expect to pay the agencies around $15 for it. For easy, unlimited access to your credit score for a low monthly fee, sign up for USAA’s CreditCheck® Monitoring through USAA.
Consider a Roth conversion.
- If most of your retirement money is in traditional IRAs and employer plans where you get an upfront tax break, you may want to consider moving some of your money into a Roth IRA3.
- Because qualified withdrawals from Roth IRAs are tax-free, having money in both traditional and Roth retirement accounts can give you more flexibility in managing your tax burden during retirement. Use our Roth IRA conversion calculator to see if it’s the right move for you.
Gather your tax papers.
- It’s time to get ready for tax season by gathering your W-2, 1099 and other tax forms.
- If you want to file your taxes on your own, take advantage of a 25% USAA member discount and sign up for TurboTax1. It’s an easy, secure, web-based service. After you start, you can save your progress and come back to pick up where you left off at any time.
Attack your debt.
- Carrying around a big debt burden can make it harder to pay the bills and diverts money that could be used to save for your future. Make 2011 the year you turn the corner on high-interest, non-deductible debt.
- First, get smart about debt, then use USAA’s Debt Analyzer to assess your situation and put together a customized plan of attack.
Check mortgage rates.
- With mortgage rates at historically low levels, this might be a good time to refinance your fixed-rate mortgage — or make the switch from an adjustable-rate mortgage to one that’s more predictable. But since refinancing isn’t free, make sure it’s worth your while.
Don’t squander your raise.
- If you were lucky enough to get a raise this year, don’t let that extra money get lost in the shuffle. Dedicate at least half of it to savings or paying down debt.
- This is a great time to increase your contributions to your employer’s retirement plan, or set up an automatic monthly transfer from your checking account to your savings account.
Max out your IRA.
- You have until April 18th to make an IRA contribution for the 2010 tax year. The maximum contribution is $5,000 per year if you were under age 50, or $6,000 if you were 50 and older at the end of last year.
- It’s hard for many people to scrape that much money together all at once. Make it easier to reach the 2011 max by setting up an automatic investment plan this month.2
Clean up your investment clutter.
- If you have investment accounts, 401(k)s and mutual funds scattered across the financial world, simplify your life byconsolidating them with one provider.3
Get rid of the paper piles.
- Switching from paper statements to electronic delivery will give you a cleaner desk and make your mailbox less attractive to thieves out to steal your identity.
- Save stamps: Pay bills easily and electronically with USAA Web BillPay®.
- Learn how to use USAA mobile to check balances, transfer funds, request an auto ID card, deposit checks4 and more.
Adjust your withholding.
How did your tax return look?
- If you got a big refund, don’t celebrate. That only means you gave the government an interest-free loan during the year. On the other hand, if you ended up owing Uncle Sam too much, you may have been penalized for doing so.
- Fine-tune your withholding to make sure you’re closer to the target next time around.
Put your refund to work.
If you got a tax refund, do something strategic with it.
- Pay down debt.
- Build your emergency fund.
- Consider an Individual Retirement Account.
- Save it for college.
Get ready to move.
- Summer is a popular season for moving. If you’re buying a house, figure out how much you can afford to spend, then put yourself in a position to negotiate by getting pre-qualified for a mortgage.
- Check out MoversAdvantage®5. We’ll help you through every step of the relocation process, from selling your current home to buying a new one using a USAA-preferred agent. Plus, you can receive up to $3,100 when you use the service.6
Start an emergency fund.
- You should have a stash of cash big enough to cover three to six months of your regular expenses.
- Use a conservative account you can access easily, such as a savings account.
Re-think your insurance deductibles.
- Take a look at your auto, property and health insurance deductibles. Consider increasing them to an amount you could cover on your own, which could lower your premiums significantly.
Travel safely and smoothly.
- Planning a summer road trip? Store the number for USAA roadside assistance in your cell phone: 1-800-531-8555.
- If you have a USAA credit card, let us know when you’ll be traveling. It will help protect your card from fraud and avoid unnecessary disruptions triggered by unusual transactions. Just enter “manage travel notifications” in the search box right here on usaa.com.
Take a look at long-term care.
- The younger you are when you buy long-term care insurance, the lower your total lifetime premiums may be. If you’re 45 or older, it’s time to learn why this coverage is so important to your financial well-being.
Protect your assets.
- Homeowners policies don’t cover floods. Even if you don’t live near water, consider a flood policy.
- If you rent, your landlord’s policy probably doesn’t cover your possessions. Get a renters policy for as little as $10 a month.
- Protect your high-value items — such as jewelry, art, silverware, cameras and weapons, with valuable personal property insurance.
- Homeowners, renters, auto and watercraft policies have liability coverage that protects you if you’re responsible for harming others or their possessions. As a rule of thumb, each policy should have enough to cover your assets and future earnings. You can supplement this coverage with an umbrella policy.
- If your property’s lost, damaged or stolen, you’ll want a good record of what you owned. Make a list or capture images of all your possessions using a camera or video camcorder.
- You can also download free inventory software from the Insurance Information Institute.
- Store your inventory records in a safe and separate location, such as a safe-deposit box.
Boost your energy efficiency.
- You can save money on your utility bills and on your taxes at the same time. If you install a geothermal heat pump, solar energy system or small wind turbine, you may be eligible for a tax credit that’s equal to 30% of your cost — with no upper limit.
- Tax credits like this can be more valuable than deductions. They reduce your tax bill dollar for dollar. Visit the federal Energy Star site for details.
Take a hard look at your bank.
- Your bank is at the center of your financial universe, so make sure it’s giving you what you need.
Get the most for your money.
- With interest rates low, it takes a little more work to earn a meaningful return on your cash. Consider using certificates of deposit.
Review your investments.
- Are you confident that you have the right mix of investments? The USAA Portfolio Planner can give you a personalized recommendation in a matter of minutes.
Conduct a back-to-school review.
- Use USAA’s Education Savings Planner to get started on saving for college or check your progress toward this goal.
- A 529 college savings plan is a great way to save because there are no income limits on contributions, and qualified withdrawals are tax free.7
Make a (new) will.
- Don’t leave a mess for your family to clean up. Plan your estate by creating a health care power of attorney, a living will and a durable power of attorney.
Review your life insurance.
- Make sure you have the right amount of coverage. Don’t rely on employer coverage. It may not be enough, and you may not be able to take it with you when you leave.
- To cover both short- and long-term needs, consider a combination of term and permanent insurance.
Set up Required Minimum Distributions.
- If you’re age 70½ or older, IRS rules require you to tap your IRA and employer retirement plans. Review the rules and then make arrangements to avoid a harsh 50% tax penalty.
Set a holiday shopping budget.
- Before you hit the stores or the web, set spending limits to make sure you don’t get carried away with the spirit of giving. If you can’t pay for it in the month you bought it, don’t do it.
- Check out USAA MemberShop® for rewards of up to 20% when you buy online from hundreds of affiliated merchants8.
- Some consumers desperate for cash during the holidays fall prey to payday lenders, pawn shops and rent-to-own stores. Don’t be one of them: you’ll pay sky-high interest rates and dig yourself into a financial hole.
It’s Medicare season.
- Nov. 15 is the first day of Medicare’s annual open enrollment period. You have until Dec. 31 to enroll in a Part D prescription drug plan, switch Part D providers or change your health coverage.
Have a heart-to-heart talk with your parents.
- Use the holidays to set aside some time to ask your parents about their financial situation.
- Make sure they have a sound retirement income plan, have addressed the potential need for long-term care and have all the right estate planning documents.
Make your end-of-year tax moves.
Use these tips to lower your 2011 tax bill:
- Pay deductible expenses early. This might include your January 2011 mortgage payment, property taxes or charitable contributions you’ve pledged for the coming year.
- Defer income. People who are self-employed have the greatest ability to push off income into the next year. Simply wait till the beginning of the year to issue some of your invoices.
Before making a move, talk to a tax professional. If it looks like you’ll end up in a higher tax bracket next year, you may actually want to reverse these tactics — accelerating income into this year’s lower return, and pushing off deductions to the next year, when they’ll be more valuable.
Track your donations.
- December is a popular time for making charitable donations. Keep a record of what you donated, and remember you’ll need receipts for contributions of $250 or more and an appraisal for non-cash contributions worth more than $5,000.