Forecasting Your Finances

1064

My partner and I are looking into buying a house together.
What do we need to know?
Michael, Austin

Number one—can you spend a sizeable chunk of your existence in close proximity to this other person? Assuming you’ve got that one figured out, the next few steps could be a bit tricky. When you close on the house, you’ll end up being named on the deed to your property. By default, most title companies list your names on the deed the same way they would if you were buying a house with a sibling or even a stranger. When opposite-sex married couples buy a house, their default titling is JTWROS, which stands for “Joint Tenants With Rights of Survivorship.” That means if one spouse dies, the other has an automatic right to the home. When you purchase a home with your same-sex partner in Texas, the default titling will probably be TIC, or “Tenants in Common.”

Tenants in a TIC relationship split things 50/50. That includes everything from the refrigerator that came with your house to the drawers and lightbulbs inside it. If your partner dies under this arrangement, his heirs receive your partner’s portion of the estate. That relative you never liked could end up being your new roomie. Estate-planning attorneys can help put basic protections in place. You can also talk to your title company to discuss your options in more detail.

I’m 31 and I think I’m behind the eight ball when it comes to saving for retirement. I only have about $30,000 total in stocks and a 401(k). What can I do to speed up the earning of these accounts?
A.J., Houston

At 31, it’s tough to wrap your arms around the idea of retirement, but it’s never too early to start thinking about it. In the past several years, the equity markets have been volatile and, without careful management of those investments, they can backfire. Don’t forget: Most often, greater rewards mean greater risk. If your stock investments are in a self-managed account, you may want to find a financial advisor to help you, but, understandably, this may be difficult until your portfolio has grown. For now, you may have more control over how much you save than how much your savings and/ or investments earn. The question becomes, where do you put the money you save?

You may want to look into that 401(k) you mentioned. There are two types of 401(k): traditional and Roth. You can contribute up to $16,500 this year if you’re younger than 50. If you have a traditional 401(k), contributions can be made pre-tax into the plan. Depending on your tax bracket, that could result in a pretty nice tax deduction each year. So, even though you’re receiving a tax deduction for your contribution, fast-forward 30 years and remember that you’ll be paying income tax on all of your distributions.

On the other hand, if you have a Roth 401(k), contributions occur after tax. No matter how big your account grows, distributions will not be subject to any income tax as long as you are not subject to any limitations or restrictions. As a bonus, most employers will make matching contributions. If you’re not contributing enough to the 401(k) plan to earn the maximum employer-matching contribution, consider increasing your own contribution.

In addition to your 401(k) and retirement savings, consider having adequate cash available for emergencies. Most financial planners recommend an amount equal to at least 3–6 months’ worth of living expenses. It’s a good idea to try to maintain your savings by looking into automatic payments and payroll deductions for your contributions. It’s a lot easier to save it if you never see it hit your checking account.

 

Disclaimer—Neither ING Financial Partners nor its representatives offer tax or legal advice. Information provided in this publication is only intended to be used as a guide and should not be interpreted as specific advice. Please consult with your tax and legal advisors regarding your individual situation.

 

 

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