Flex Your Money Muscles in 2012
As 2012 takes shape for new wealth builders or current investors, it is the perfect time of year to review your taxes from last year and determine what last-minute strategies can be used to both minimize your taxes for 2012 as well as set up longer-term strategies to minimize your taxes going forward. I’m going to discuss several options with you in this article on how to create a stronger balance sheet for your retirement in a tax advantageous manner. I always welcome comments and feedback, and I would be happy to discuss any of these strategies with my readers.
Most employed Americans have the opportunity to contribute to an employer sponsored retirement plan such as a 401(k), 403(b), 409A, 419A, or even a 457(b) Pension Plan. Unfortunately, since these Internal Revenue Service Codes are very complex and daunting, many people are not taking full advantage of these plans. You may be missing out on your full benefits in your deferred group retirement plan.
These plans could be the best-kept secrets for more tax-deductible income whether now or later. To me, the Section 79 of the IRS Code is one of the best ways to potentially get more bang for your buck for qualified candidates. It provides the opportunity to save in taxes now while putting more money away tax deferred. It also may give you tax advantaged income later, during your actual retirement. For those individuals that qualify (such as business professionals in the health care industry, legal, profitable restaurant franchise owners, professional athletes, and etc.), I would suggest you discuss such retirement plans with your financial professional or email me for further information. These plans are not for everyone. Also the Individual ROTH and TRADITIONAL IRA are great ways to create ownership away from your employer plan for self control and diversification opportunities.
Another plan that will pay you personal gratification for a tax deduction is by using a gifting program. You could give tax-deductible dollars to your church through a 501(c)3 plan or 509(a) plan, donor advised funds, or by gifting funds for college savings with a Coverdale IRA account or a 529 Higher Education Savings Plan. Ask your tax advisor or wealth coach about these strategies to determine how much you could contribute to these “gifting” strategies.
One thing to remember is that if you invest your dollars without having it in a retirement vehicle, you will be taxed at the current capital gains rate of any monies earned when you withdraw funds. I have mentioned several ways to put money to work and cut your tax costs on personal and business taxes (even to the executive level) without getting into any great detail. It is up to you to find out what fits your short or long-term goals.
As you read Black Enterprise, Money, or even Worth Magazine you have identified yourself as a success-driven leader. Your current financial advisor should help you recognize the tax implications of your entire portfolio and assist you in selecting the most effective pension and business structure needed. While we have mentioned building wealth, it is just as important to provide asset protection, regardless of your net worth. One must have a team of specialist that work closely with you to design your personalized wealth plan. Retirement or pension professionals should educate their clients with plan designs and qualification issues, counting on legal counsel with extensive Employee Retirement Income Security Act (ERISA) experience and actuarial resources well versed in large and small defined benefit plans if needed. Their expertise enables you to take full advantage of the tax law changes recently enacted under the Economic Growth and Tax Relief and Reconciliation Act (EGTRRA). EGTRRA changes dramatically increase doctors’ or business owners’ retirement savings opportunities in tax-deductible net practice or business earnings inside IRS-approved plans. Just as important, however, is the fact that qualified retirement plans, by their very nature, are protected by ERISA law. Due to the fact that qualified retirement funds are exempt from the bankruptcy estate (other than contributory IRAs over $1 million), maximizing your retirement assets is a critical component of sound financial planning. In addition, because of the strength of the Act, it is more important than ever to protect your personal and business assets inside a qualified retirement plan.
Every individual, affluent investor or highly compensated profession should have a financial plan. Every financial plan should be set up to cover structure, risk management, portfolio design, and asset protection. All you should have to do is your diligence, find a financial coach to make sure you have the correct plan and strategies, and decide to reach financial independence in a tax-efficient manner. Contact your wealth advisor or tax advisor today to discuss some of these ideas. Again, if you do not have a wealth advisor, or if you would like a second opinion, please email me. Go to www.livingbalancesheet.com and ask me how this can benefit you!
By:Marc A. Click
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