Issue 3, 2026
In this issue:
Are My Finances Healthy?
A Checkup in 4 Steps
Financial health is both a feeling and an objective fact. Facing unexpected bills may cause stress, but a short-term cash-flow issue doesn’t always mean poor financial health.
In healthcare, doctors and nurses use measures such as blood pressure, BMI, and EKGs to assess health and identify problems.
Determining the health of your finances is no different. And you have four key tests to see how you’re doing:
- Could I handle an emergency if my income stopped tomorrow?
- Do I own more than I owe?
- Is debt taking too big a bite out of my paycheck?
- Is my money building the future I want?
Here’s an at-a-glance view of each calculation. Keep it simple by logging in to use the Four Financial Ratios calculator.
1. Emergency Savings
Liquidity Ratio = Cash Assets ÷ Monthly Living Expenses
2. Assets to Debt
Assets-to-Debt Ratio = Total Assets ÷ Total Debt
3. Debt to Income
Debt-to-Income Ratio = Annual Debt Payments ÷ Gross Annual Income
4. Investment Assets to Net Worth
Investment Assets-to-Net Worth Ratio = Investment Assets ÷ Net Worth
Get Your Ratios
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Plan Contributions:
Pre-Tax or Roth?
Reader Question:
I’m new to my employer’s plan. Should I make my contributions pre-tax or Roth?
If you’re just getting started in your employer’s retirement savings plan, congratulations. You’re taking a meaningful step toward securing a livable retirement.
But enrolling in your plan will likely involve many decisions, including how to invest your savings and whether to make those contributions pre-tax or Roth.
The truth is, even if you’ve been saving for years, it’s always a good idea to review what you’re doing and consider your options.
One of the first questions you may have to consider is whether your contributions go in as traditional pre-tax dollars or as Roth after-tax dollars. How do you choose?
Think of pre-tax and Roth contributions as two separate buckets. You can place your contributions in one, the other, or both. The bucket you choose determines when you pay taxes on that money — and how much flexibility you’ll have when you’re ready to use it.
Pre-Tax Savings
Many retirement savings plans let you contribute pre-tax dollars, reducing your taxable income. Later, when you retire and start withdrawing, Uncle Sam will collect his share.
And to make sure he gets it, the government requires you to start withdrawing funds from your tax-deferred account by age 73 or 75, depending on when you were born. That’s called a Required Minimum Distribution or RMD.
The idea is that if you’re making less in retirement, you’ll pay taxes on those funds at a lower rate. But that’s not always the case.
Roth Account
A Roth account is one in which you contribute money after you’ve paid income taxes on it. That means – with qualified Roth withdrawals – both contributions and earnings are tax-free. And there’s no Required Minimum Distribution. You can withdraw those funds whenever you want, without penalty, provided you’re age 59½ and meet the 5-year holding period requirement. Or you can leave your funds in the plan for a rainy day.
So which one is better for me?
Learn more about Pre-Tax and Roth Contributions through My Penny Earned’s mini-webinar.
Weigh Your Options
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