Monthly Archives: February 2015

Is Tax Free Income For You? (No, I’m NOT Talking About Tax Free Bonds)

MArgie Blue

The last few years have really opened up the ability for almost anyone to have tax free income. I’m not talking about purchasing tax free bonds either. I’m talking about creating and living off of tax free income.

Whether you are building your nest egg, or already there, opportunities may exist for you to turn your cash flow or savings into tax free income.  While many people may have heard about or are aware of their ability to purchase tax free municipal bond, that isn’t what I am talking about.

Several strategies exist for you to take current earned income and turn it into future tax free income. There is also a strategy that exists for you to take your current retirement assets and convert it to tax free income as well.

Three strategies that may be a good option for your future retirement involve Roth IRA’s and Roth 401k’s.  Even if you earn too much money to contribute to a Roth IRA, you still may have the ability to grow your savings tax free.

Here are the strategies for those with earned income to start growing future tax free income:

  • Roth IRA’s – Depending upon your filing status, if you are under certain income limits, you are eligible to contribute to a Roth IRA. For those eligible, the limit for 2015 is $5,500. If you are over 50 you can add an additional $1,000 under the catch up provision.
  • Roth 401(k)’s – Many 401(k) plans now offer Roth options. So now matter what tax bracket you are in, you can elect to contribute any portion of your maximum allowed amount as a Roth deferral. In 2015, the maximum amount allowed to be contributed is $18,000 and another $6,000 for those over 50 for the catch up provision.

Here is the strategy for those with or without earned income to create tax free income:

  • Roth Conversions – This used to just be an option for those individuals in lower tax brackets. With the laws changed in 2010, the opportunity for individuals to convert certain retirement accounts now exists for all income earners. This allows your tax deferred accounts to be taxed now, instead of your retirement years. It eliminates the often dreaded, required minimum distributions (RMD’s) each year starting the year you reach 70 ½. It also enables you to pass on your retirement account assets to your beneficiary’s income tax free.

These three strategies all have different rules and reasons that you may, or may not want to utilize the strategies.  If you are looking at any of these three strategies, your financial planner should be running different scenario’s to show you the pro’s and con’s about how this will affect your goals both now and in the future. Along with scenario’s, your financial planner should be developing a plan for you to implement in order to maximize any taxes owed.

For more information on whether one or all of these strategies may be right for you, please call my office at 810-714-5566.

Margie Shard is a CFP® and founder of Shard Financial Services, Inc., a financial planning and investment strategies firm in Fenton, MI.  She is the author of Financial Planning Exposed and the radio host of The Margie Shard Show – Financial Health for the Modern Day Family.   To contact Margie please call (810)714-5566 or email margie.shard@shardfinancial.com.  For more information on Shard Financial Services, Inc., please visit www.shardfinancial.com.

 

Securities offered through LPL Financial Member FINRA/SIPC

The Worst Enemy

Blog #1

I have a favorite quote. It drives me to workout when I don’t want to. It encourages me to remember that no matter how fast paced my world may seem, that I need to be present – to show up and put my best foot forward and be the best person I can be each day.

It’s a simple quote and it’s amazing the power it holds. It simply is this:

“I’m here”

It’s interesting when I think about this quote and what I consider to be one of the worst enemy’s we hold inside ourselves.  This enemy encourages us to not make the extra effort, to not show up and be present, and to not take the reins and work toward the better future we wish we had.

The worst enemy is called procrastination.

When discussing finances, I often hear, “I’ll do it later.” Or, “I’m just not ready to meet yet.” Or, “I don’t think I’m at a point where I need to worry about that.”

This is procrastination in its truest form. It rears its ugly head and we give it power to not take responsibility and do what we know we need to do in order to move our lives forward.  It’s a dream killer and yet we allow it to have so much authority in our lives.

To take a quote from my book, Financial Planning Exposed, “Money doesn’t just happen to people. Poor money choices are a cycle of bad behavior. You have the power to break the cycle and rise above.”

Allowing procrastination to give you excuses and reasons why it’s ok to not take action today regarding your finances is a cycle of bad behavior. The only person who can break that cycle is you. You have the power to say no to the enemy. You have the power to say, “I’m here” and be present in your current and future situation.

So while you may not be able to get a complete financial plan done today,  you can still take action today. You can say no to that purchase you want to put on your credit card. You can sign up for your 401(k) at work.  You can call and make an appointment with a financial planner (and keep it!) to start you on your financial health journey.

You have the power to kick your worst enemy to the curb. It’s up to you.

Margie Shard is a CFP® and founder of Shard Financial Services, Inc., a financial planning and investment strategies firm in Fenton, MI.  She is the author of Financial Planning Exposed and the radio host of The Margie Shard Show.  To contact Margie please call (810)714-5566 or email margie.shard@shardfinancial.com. For more information on Shard Financial Services, Inc., please visit www.shardfinancial.com.

Securities offered through LPL Financial Member FINRA/SIPC