Tag Archives: Roth IRAs

Tax season is over: or is it?

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To reduce future tax bills, now is the time to start planning

By Rob Cordasco

Special to the Financial Independence Hub (American Content)

With this year’s income-tax-filing deadline finally past, you may have sat back with a sigh of relief, happy to forget about taxes for another year. But that’s a mistake because it’s already time to start thinking about taxes for next year if you hope to lower the amount you ultimately will owe, says Rob Cordasco (www.cordasco.cpa), a CPA and author of A Framework for Growth: Smart Financial and Tax Planning Strategies Throughout the Entrepreneurial Life Cycle.

“People often make the error of only worrying about taxes when it’s time to file,” Cordasco says. “By then, your taxes are pretty much locked in. Although you can’t avoid taxes, you can take steps to minimize them. But this requires proactive planning – estimating your tax liability, looking for ways to reduce it and taking timely action.”

And timely, he says, isn’t waiting until the week before the filing deadline. The real deadline for taxes in the United States – at least for taking action that could save you money – is Dec. 31 of the tax year, he says. (One exception is that you may be able to make a tax-deductible IRA contribution right up to the filing deadline if you meet certain criteria.)

Cordasco says some things to consider that can help you reduce the tax bill you will owe come April 2023, include:

“Bunch” charitable donations

Many people take the standard deduction when they file their taxes because that’s higher than their total itemized deductions. But Cordasco says you might benefit from “bunching” your charitable donations in alternating years, raising the amount you could itemize every other year. Here’s how that would work: If you make a large donation on Jan. 1 and another on Dec. 31, those donations are essentially a year apart, but they fall within the same tax year for itemizing purposes. In effect, you make two years worth of charitable donations in one tax year. Continue Reading…

Investing 101: The Road to Financial Independence and Early Retirement

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By Darren Wilson

(Sponsored Content)

Financial independence and early retirement: almost everyone dreams of achieving this. Most won’t succeed. And most of those will think it’s because they can’t

The truth is financial independence and early retirement are not concepts similar to a utopia and a belief in Avalon. Being knowledgable about your finances, where your money is coming and going, and financial planning is half the battle. The rest is discipline.

If you’re armed with the discipline, motivation, and desire to become financially independent, then check out these tips for early retirement today!

 Income vs Wealth

One of the first things to understand right out the gate is the difference between income and wealth. Many people believe how much money they make is how much they are worth.

However, think of celebrities and athletes who run into financial problems because they spend more money than they make. And there are opposite stories about lower class shift workers retiring as millionaires.

This is because of spending. Wealth is usually viewed as a person’s total net worth. In this way, wealth is made up of your assets minus your liabilities. What’s left is your equity or, wealth.

Plan for the Long Term

It’s important to plan for as long term as possible. This means thinking beyond conventional means of income. While working several jobs or longer hours to increase your income may seem like the best idea for saving, it’s not.

Instead of focusing on longer hours and multiple jobs, begin looking into investing: long-term investments such as a traditional IRA or a Roth IRA for your retirement (in the United States; the Canadian equivalents would be RRSPs and TFSAs.)

Investments don’t have to be retirement accounts only: it would also be wise to start a different portfolio for personal investments. This portfolio could consist of private businesses, car washes, mutual funds, and real estate. These are great cash generators for after you retire and some of the best stocks to buy today.

While wealth may not be made up of just income, some income will be necessary for retirement. Investments are a great way to achieve that. Continue Reading…

Graduating from College? Your financial future starts now

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By Jackie Waters

Special to the Financial Independence Hub

Graduating from college is a huge milestone. You’re now ready to start your career, and you’re excited about getting a house or apartment, a car, a new work wardrobe, and more. But all of those things cost money. And don’t forget repaying student loan debt, insurance premiums, utility bills, food costs, and a long list of other expenses. Since you’re facing these new expenses, it’s essential to create a solid financial plan.

Make a budget and manage your debt

Experts recommend starting your monthly budget by thinking of the “50-30-20” rule. After receiving your first paycheck, you’ll know your net income, which is how much you receive after paying taxes and insurance premiums. From your net income, put 50 per cent towards needs such as rent, utilities, and food; another 30 per cent towards non-necessities or “wants;” and the final 20 per cent towards debt repayment and savings. However, if your student loan debt is substantial, flip the percentages so that 30 per cent goes towards debt repayment and savings, and 20 per cent goes towards wants.

Student loans are usually broken up into several loans with varying interest rates. The best way to tack them is to pay off the loans with the highest interest rates first. Pay the minimum towards the balances with the lowest interest rates, and make larger-than-the-minimum payments on the loans with the highest interest rates. “The biggest mistake you can make is paying the minimum into each loan and waiting until you make more money when you’re older to deal with them,” warns Time.

Look to the future

Life is full of unexpected surprises, so an emergency fund is crucial. If your car needed a major repair, if your laptop needed replacing, if you lost your job – what would you do? If you have an emergency fund, you’ll be able to pull from there instead of from your monthly budget. People often face going into debt because they have no way to cover unexpected expenses. To prevent this from happening to you, plan for the unexpected by putting a small amount of each paycheck into a savings account.

Continue Reading…

Americans worried about Retirement, unlikely to save more in 2017

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While 70% of Americans say they saved for retirement in 2016, many are anxious about the level of their savings and the need to direct money towards other goals and expenses, says a Harris Poll of 2,000 American adults conducted by the personal finance site NerdWallet. You can find the full results here.

Other major financial concerns include lack of emergency funds (cited by 35%), health care expenses (also 35%)and credit-card debt (27%). Retirement remains the most commonly cited savings priority (mentioned by 28% surveyed) but only 29% feel confident they saved enough in 2016, while one in three aren’t saving for retirement at all (including 43% of Millennials aged 18 to 24). Lesser forms of financial anxiety in 2016 include making mortgage or rent payments (19%), stock market volatility (17%), student debt (14%), and paying income taxes (13%).

Next year may not be much better: of those with workplace pensions, only 32% plan to increase their contributions in 2017. Older Americans aged 45 to 54 are most likely to report concern about lack of retirement savings (40% surveyed), while only 20% are confident they saved enough this year.

Savers should favour tax-advantage accounts over savings accounts

Continue Reading…