Your Foundation Years
Your focus should be on developing good financial habits during this stage. Make sure you (l) live within your means and avoid accumulating consumer debt, (2) establish a cash reserve for emergencies, (3) get a plan in place to pay off college loans, and (4) begin to build your investment assets by using an employer-sponsored retirement plan or IRA.
Your Accumulation Years
The next stage involves accumulating assets for large financial goals like college education for your children and retirement. Obviously this process starts slowly, but it ramps up as you reach your peak earning potential and your children leave home. In addition to “how much” to save, you want to focus on “where” to save and build a mix of taxable investments, tax-deferred accounts (e.g. 401(k)s, 403(b)s, Traditional IRAs), as well as tax-free accounts (e.g. Roth IRAs, Roth 401(k)s).
Your Pre-Retirement Years
During the 5 to 10 years before retirement you should tighten up your retirement plan, make sure you’re saving enough, and start to get an idea of how you’ll make the switch from accumulating a nest egg to living off of that money in retirement. These years are very important because people are generally at the top of their earning potential and can make up for getting a late start if they plan accordingly.
Your Retirement Years
A big mistake that many people during this stage is being too conservative with their investments and forgetting that they might have another 30+ years of inflation to deal with in retirement. During retirement you should have a strategy in place that will give you the secure income you want as well as the growth potential you’ll need to keep up with inflation over time.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Sunday, November 13, 2011
Wednesday, July 13, 2011
Mid-Year Financial Tips
My wife and I are huge baseball fans, and as such, the All Star Game marks the middle of summer and hence the middle of the year for us. Now that the All Star Game is over (Go National League!), it's a great time to review your finances and make midyear adjustments as needed.
Check your retirement plan contributions
If you have a retirement plan like a 401(k) or a 403(b) through your work, take time to review how much you’re contributing. Start making contributions if you haven’t started yet. And if you are contributing, make sure you're contributing enough to get the full match offered by your employer. (Repeat after me: Never turn down free money!)
The 401(k) and 403(b) contribution limit for 2011 is $16,500, or $22,000 if you're age 50 or older. This limit applies to your contribution, so your employer's match is on top of this amount.
Check your IRA contributions
Anyone with earned income is eligible to make contributions to an IRA. Contributions to a Traditional IRA are tax-deductible when made and taxable when withdrawn. Contributions to a Roth IRA aren't deductible but withdrawals are tax-free. Pairing after-tax Roth IRA contributions with pre-tax 401(k) or 403(b) contributions is a great way to balance current and future taxes.
The IRA contribution limit for 2011 is $5,000, or $6,000 if you're age 50 or older. You have until April 15, 2012 to make a contribution for 2011.
Check your portfolio allocations
The recommended mix of stocks and bonds for your portfolio will depend on things like your age, time horizon, and risk tolerance. But whatever your ideal mix is, your actual allocations will vary over time due to market fluctuations.
Rebalancing your portfolio back to your ideal allocation helps manage risk since it forces you to "sell high" (i.e. decrease exposure to investments that have gone up) and "buy low" (i.e. increase exposure to assets that have gone down).
Evaluate your estimated tax situation
Do you normally receive a large tax refund? Then you should consider changing your withholding to have less money withheld throughout the second half of the year. On the other hand, if you usually owe money at tax time, then you could increase your withholding to avoid having to write out a check to Uncle Sam next year.
Since taxes can be complicated - and penalties incredibly steep if you make mistakes - consider having a CPA or EA review your situation and make recommendations.
Start budgeting for the holidays
It’s no secret that the holiday season can strain our budgets. By starting to plan for now for the expenses associated with travel and gift giving at the end of the year you can avoid getting yourself into financial trouble. You can use www.bankrate.com to find a great high-yield savings account for your holiday savings fund.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Check your retirement plan contributions
If you have a retirement plan like a 401(k) or a 403(b) through your work, take time to review how much you’re contributing. Start making contributions if you haven’t started yet. And if you are contributing, make sure you're contributing enough to get the full match offered by your employer. (Repeat after me: Never turn down free money!)
The 401(k) and 403(b) contribution limit for 2011 is $16,500, or $22,000 if you're age 50 or older. This limit applies to your contribution, so your employer's match is on top of this amount.
Check your IRA contributions
Anyone with earned income is eligible to make contributions to an IRA. Contributions to a Traditional IRA are tax-deductible when made and taxable when withdrawn. Contributions to a Roth IRA aren't deductible but withdrawals are tax-free. Pairing after-tax Roth IRA contributions with pre-tax 401(k) or 403(b) contributions is a great way to balance current and future taxes.
The IRA contribution limit for 2011 is $5,000, or $6,000 if you're age 50 or older. You have until April 15, 2012 to make a contribution for 2011.
Check your portfolio allocations
The recommended mix of stocks and bonds for your portfolio will depend on things like your age, time horizon, and risk tolerance. But whatever your ideal mix is, your actual allocations will vary over time due to market fluctuations.
Rebalancing your portfolio back to your ideal allocation helps manage risk since it forces you to "sell high" (i.e. decrease exposure to investments that have gone up) and "buy low" (i.e. increase exposure to assets that have gone down).
Evaluate your estimated tax situation
Do you normally receive a large tax refund? Then you should consider changing your withholding to have less money withheld throughout the second half of the year. On the other hand, if you usually owe money at tax time, then you could increase your withholding to avoid having to write out a check to Uncle Sam next year.
Since taxes can be complicated - and penalties incredibly steep if you make mistakes - consider having a CPA or EA review your situation and make recommendations.
Start budgeting for the holidays
It’s no secret that the holiday season can strain our budgets. By starting to plan for now for the expenses associated with travel and gift giving at the end of the year you can avoid getting yourself into financial trouble. You can use www.bankrate.com to find a great high-yield savings account for your holiday savings fund.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Wednesday, June 22, 2011
Child Labor - Reduce Your Taxes By Putting Your Kids to Work!
Do you have a business? Do you have children? If you answered "yes" to both of these questions you might be able to cut your taxes by hiring your kids!
I grew up working for my Dad's surveying business. Aside from the fun I had working 12-hour days outside in 100+ degrees (Typed with sarcasm!), working with my Dad put spending cash in my pocket, taught me the value of a dollar, and provided him some much-needed tax relief.
How This Process Works
Paying your child to work shifts income from you to your child. This results in income tax savings since children are usually in a lower tax bracket than their parents. This can also reduce other types of taxes since children under 18 are exempt from Social Security and Medicare taxes and children under 21 are exempt from federal unemployment taxes.
For an example of how this process works, assume you are in the 28% tax bracket. You would pay approximately $4,330 in total taxes on the last $10,000 you earn.
Now assume you paid this $10,000 as a salary to your minor child instead of keeping it and paying taxes on it yourself. After taking the standard deduction of $5,800 (tax-year 2011), your child would have taxable income of $4,200 and would pay around $420 in taxes. This is a tax savings of $3,900 dollars!
Parent’s Total Tax: $4,330
Child’s Total Tax: $420
Tax Savings: $4,330 (Parent's Tax) - $420 (Child's Tax) = $3,910
Although this example is certainly overly simplified (Apologies to my CPA and EA friends!), it gives you an idea of how much you could save by paying your child to work in your business.
Four Rules to Follow
Here are four tests that must be passed before the IRS will allow you to deduct money you pay your children:
1. The services provided by your child must be ordinary and necessary expenses directly related to your business.
2. The amount paid to your child must be reasonable.
3. The services must actually be performed.
4. You must have incurred the expense in the year you take the deduction.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
I grew up working for my Dad's surveying business. Aside from the fun I had working 12-hour days outside in 100+ degrees (Typed with sarcasm!), working with my Dad put spending cash in my pocket, taught me the value of a dollar, and provided him some much-needed tax relief.
How This Process Works
Paying your child to work shifts income from you to your child. This results in income tax savings since children are usually in a lower tax bracket than their parents. This can also reduce other types of taxes since children under 18 are exempt from Social Security and Medicare taxes and children under 21 are exempt from federal unemployment taxes.
For an example of how this process works, assume you are in the 28% tax bracket. You would pay approximately $4,330 in total taxes on the last $10,000 you earn.
Now assume you paid this $10,000 as a salary to your minor child instead of keeping it and paying taxes on it yourself. After taking the standard deduction of $5,800 (tax-year 2011), your child would have taxable income of $4,200 and would pay around $420 in taxes. This is a tax savings of $3,900 dollars!
Parent’s Total Tax: $4,330
Child’s Total Tax: $420
Tax Savings: $4,330 (Parent's Tax) - $420 (Child's Tax) = $3,910
Although this example is certainly overly simplified (Apologies to my CPA and EA friends!), it gives you an idea of how much you could save by paying your child to work in your business.
Four Rules to Follow
Here are four tests that must be passed before the IRS will allow you to deduct money you pay your children:
1. The services provided by your child must be ordinary and necessary expenses directly related to your business.
2. The amount paid to your child must be reasonable.
3. The services must actually be performed.
4. You must have incurred the expense in the year you take the deduction.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Monday, March 28, 2011
5 Steps for Financial Success
Step 1: Spend less than you earn.
Spending less than you earn is the starting point for doing well financially. Anytime you find yourself trying to keep up with the Joneses, remember what Dave Ramsey says, “If you will live like no one else now, later you can live like no one else.”
Step 2: Don’t be cash poor.
A cash reserve can protect you (i.e. keep you from casing in investments or accumulating debt) when you face an unexpected expense like car repairs, home maintenance, etc. Having cash on hand is also a good way to make sure you can take advantage of any unexpected opportunities or investments that come your way.
Step 3: Accumulate the right types of assets.
When building your net worth, focus on accumulating assets that (1) are likely to appreciate and (2) can be converted into income later in life. It might feel great to have an expensive house that’s paid off, but if you don’t accumulate sufficient investment assets, you might have to sell your home later in life to fund your retirement. If you live in it, drive it, or wear it, then it’s not the right type of asset.
Step 4: Don’t forget the little things.
Many Americans have unsecured debt like balances on credit cards. Debt like this is often accumulated gradually – rather than all at once – until one day it seems too large to handle. Think twice before using your card to charge for spontaneous purchases. Make sure you actually have money to pay for it.
Step 5: Keep it simple.
When it comes to finances, “complicated” doesn’t always mean “better”. Be leery of any investment requires you to sign complicated contracts, disclosure documents, or suitability statements. There are plenty of straightforward, easy to understand savings and investment vehicles available to investors.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Spending less than you earn is the starting point for doing well financially. Anytime you find yourself trying to keep up with the Joneses, remember what Dave Ramsey says, “If you will live like no one else now, later you can live like no one else.”
Step 2: Don’t be cash poor.
A cash reserve can protect you (i.e. keep you from casing in investments or accumulating debt) when you face an unexpected expense like car repairs, home maintenance, etc. Having cash on hand is also a good way to make sure you can take advantage of any unexpected opportunities or investments that come your way.
Step 3: Accumulate the right types of assets.
When building your net worth, focus on accumulating assets that (1) are likely to appreciate and (2) can be converted into income later in life. It might feel great to have an expensive house that’s paid off, but if you don’t accumulate sufficient investment assets, you might have to sell your home later in life to fund your retirement. If you live in it, drive it, or wear it, then it’s not the right type of asset.
Step 4: Don’t forget the little things.
Many Americans have unsecured debt like balances on credit cards. Debt like this is often accumulated gradually – rather than all at once – until one day it seems too large to handle. Think twice before using your card to charge for spontaneous purchases. Make sure you actually have money to pay for it.
Step 5: Keep it simple.
When it comes to finances, “complicated” doesn’t always mean “better”. Be leery of any investment requires you to sign complicated contracts, disclosure documents, or suitability statements. There are plenty of straightforward, easy to understand savings and investment vehicles available to investors.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Wednesday, March 2, 2011
Don't Fall For These Tax Myths
Myth 1: It’s good to get a large tax refund.
Although it’s exciting to find out you’re getting a tax refund, it’s important to keep in mind where that money came from. Most refunds come from money that has been taken from your paychecks throughout the year. So getting a refund means you gave Uncle Sam an interest-free loan throughout the year. Instead of planning on a refund at tax time, consider adjusting your withholding so you get to keep more of your paycheck throughout the year.
Myth 2: Business owners can deduct all of their expenses.
As a business owner, I always like it when my friends say, “You pay for it. You can deduct it”. First of all, something has to be a legitimate business expense before you can deduct it. Second, many business costs like meals and entertainment are only partially deductible. And you can never deduct personal use of business assets like a car or cell phone.
Myth 3: You don’t have to pay your taxes by April 15th if you file an extension.
Filing an extension will give you additional time to “file” your taxes, but not to “pay” them. Any money you owe has to be paid by April 15th or you could owe substantial penalties and interest. You might want to send in an estimated tax payment if you’re filing an extension just to make sure you don't end up paying more than you need to.
Myth 4: Social Security benefits aren’t taxed.
Up to 85% of your Social Security benefit could be taxable under current law. The Social Security Administration’s website states that benefits usually aren’t taxed unless you have “substantial income in addition to your benefits”. They must have a different definition of “substantial” than I do because individual and joint filers could start paying taxes on their benefits at $25,000 and $32,000 in “combined income” respectively.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Although it’s exciting to find out you’re getting a tax refund, it’s important to keep in mind where that money came from. Most refunds come from money that has been taken from your paychecks throughout the year. So getting a refund means you gave Uncle Sam an interest-free loan throughout the year. Instead of planning on a refund at tax time, consider adjusting your withholding so you get to keep more of your paycheck throughout the year.
Myth 2: Business owners can deduct all of their expenses.
As a business owner, I always like it when my friends say, “You pay for it. You can deduct it”. First of all, something has to be a legitimate business expense before you can deduct it. Second, many business costs like meals and entertainment are only partially deductible. And you can never deduct personal use of business assets like a car or cell phone.
Myth 3: You don’t have to pay your taxes by April 15th if you file an extension.
Filing an extension will give you additional time to “file” your taxes, but not to “pay” them. Any money you owe has to be paid by April 15th or you could owe substantial penalties and interest. You might want to send in an estimated tax payment if you’re filing an extension just to make sure you don't end up paying more than you need to.
Myth 4: Social Security benefits aren’t taxed.
Up to 85% of your Social Security benefit could be taxable under current law. The Social Security Administration’s website states that benefits usually aren’t taxed unless you have “substantial income in addition to your benefits”. They must have a different definition of “substantial” than I do because individual and joint filers could start paying taxes on their benefits at $25,000 and $32,000 in “combined income” respectively.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com.
Monday, February 21, 2011
Five Rules for Investment Success
Rule 1: Lower Your Investment Costs
Rather than wasting time worrying about things beyond your control - like the direction of the stock market, interest rates, or inflation - focus on things you can control in order to improve your odds of investment success. A simple thing to control is the cost of your investments.
You can reduce your investment costs by choosing “no load” mutual funds over funds that pay sales commissions. After all, how does paying a 5.75% upfront commission improve the odds that a fund will make you money? Another easy way to control your costs is to select mutual funds with lower than average expense ratios. (You can read more about mutual fund expenses and fees in a previous post here).
Rule 2: Know What You're Paying for Advice
Another thing you can control in the investment world is how much you're paying for financial advice. Make sure your advisor discloses all sources and amounts of income so you know exactly what you're paying. You might be surprised at how much the "free advice" you receive from your broker is costing you! (FYI - The hidden costs (i.e. sales commissions) of annuities and life insurance can be especially high.)
You can avoid hidden costs by working with a "fee-only" advisor. Unlike advisors that use the term "fee-based", "fee-only" advisors are paid directly by their clients, never receive sales commissions, and have an incentive to recommend low cost investments and insurance. (See if your advisor would be willing to sign a Fiduciary Statement like the one I use here.)
Rule 3: Ignore Your Emotions
All of us are familiar with the saying “buy low, sell high”, but following your emotions when you invest usually leads to doing the opposite. Think twice before going along with the crowd during manias like the dot-com boom and avoid panicking during market declines. Make sure you follow a clearly defined investment strategy so you can take emotions off of the table when making investment decisions.
Rule 4: Don’t Forget About Taxes
Whether or not you realize it, you have an investment partner involved in every decision you make: Uncle Sam. In addition to taxable investment accounts, make sure you're using tax-favored accounts like 401(k)s, 403(b)s, Traditional IRAs, and Roth IRAs whenever possible.
For most investors it makes sense to have a combination of "tax-deferred" accounts (e.g. 401(k), 403(b), Traditional IRA) and "tax-free" investment vehicles (e.g. Roth IRA, Roth 401(k)) in order to balance current and future tax savings. Keep in mind that Uncle Sam won't forget about you later in life!
Rule 5: Understand Risk
All investments involve risk. If you invest in stocks, you face the risk that stock prices could tumble. If you hold more stable investments like bonds and CDs, you face the risk that the return you receive won’t keep up with inflation over time.
That’s why most investors diversify into a mix of different types of investments. Make sure you understand and are comfortable with the risk you’re taking with each individual investment as well as with your portfolio as a whole.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Rather than wasting time worrying about things beyond your control - like the direction of the stock market, interest rates, or inflation - focus on things you can control in order to improve your odds of investment success. A simple thing to control is the cost of your investments.
You can reduce your investment costs by choosing “no load” mutual funds over funds that pay sales commissions. After all, how does paying a 5.75% upfront commission improve the odds that a fund will make you money? Another easy way to control your costs is to select mutual funds with lower than average expense ratios. (You can read more about mutual fund expenses and fees in a previous post here).
Rule 2: Know What You're Paying for Advice
Another thing you can control in the investment world is how much you're paying for financial advice. Make sure your advisor discloses all sources and amounts of income so you know exactly what you're paying. You might be surprised at how much the "free advice" you receive from your broker is costing you! (FYI - The hidden costs (i.e. sales commissions) of annuities and life insurance can be especially high.)
You can avoid hidden costs by working with a "fee-only" advisor. Unlike advisors that use the term "fee-based", "fee-only" advisors are paid directly by their clients, never receive sales commissions, and have an incentive to recommend low cost investments and insurance. (See if your advisor would be willing to sign a Fiduciary Statement like the one I use here.)
Rule 3: Ignore Your Emotions
All of us are familiar with the saying “buy low, sell high”, but following your emotions when you invest usually leads to doing the opposite. Think twice before going along with the crowd during manias like the dot-com boom and avoid panicking during market declines. Make sure you follow a clearly defined investment strategy so you can take emotions off of the table when making investment decisions.
Rule 4: Don’t Forget About Taxes
Whether or not you realize it, you have an investment partner involved in every decision you make: Uncle Sam. In addition to taxable investment accounts, make sure you're using tax-favored accounts like 401(k)s, 403(b)s, Traditional IRAs, and Roth IRAs whenever possible.
For most investors it makes sense to have a combination of "tax-deferred" accounts (e.g. 401(k), 403(b), Traditional IRA) and "tax-free" investment vehicles (e.g. Roth IRA, Roth 401(k)) in order to balance current and future tax savings. Keep in mind that Uncle Sam won't forget about you later in life!
Rule 5: Understand Risk
All investments involve risk. If you invest in stocks, you face the risk that stock prices could tumble. If you hold more stable investments like bonds and CDs, you face the risk that the return you receive won’t keep up with inflation over time.
That’s why most investors diversify into a mix of different types of investments. Make sure you understand and are comfortable with the risk you’re taking with each individual investment as well as with your portfolio as a whole.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Tuesday, February 15, 2011
Sizing Up Your Retirement Nest Egg Need
One of the biggest mistakes I see people making in their retirement planning is underestimating how much a secure retirement costs. In fact, most people don’t have any idea how much they'll need to have saved to be able to retire comfortably.
How much income will you need in retirement?
The first step to determining how much you need to save is to estimate your annual income need in retirement. A simple way to do this is to start by figuring out how much you spend each year to support your current lifestyle.
Once you get this figure, subtract expenses you won’t have when retired (like retirement savings and expenses for your children) and then add expenses you might incur (like money for additional travel or increased health care costs).
That should give you a rough idea of what you’ll need to retire in today’s dollars.
How large does your nest egg need to be?
Withdrawals from your nest egg will be needed to cover any shortfall between your retirement spending and any steady income you’ll have from things like Social Security, pensions, fixed annuities, and part-time work. For example, assume you’ll need $50,000 in retirement income and will receive $18,000 per year from Social Security. This leaves an income gap of $32,000 per year.
To get a rough idea of how large your nest egg needs to be, simply multiply this gap by 25. This will calculate how much you need to have saved to cover the income gap at a 4% withdrawal rate.
In this case you’d need around $800,000 to produce the extra income you need assuming you withdraw 4% of this amount per year.
What about inflation?
These calculations estimate how much retirement income and how large of a nest egg you'd need in today's dollars. However, since the cost of everything we buy increases over time, these numbers will have to be increased by at least 3 to 4% each year to keep up with inflation.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
How much income will you need in retirement?
The first step to determining how much you need to save is to estimate your annual income need in retirement. A simple way to do this is to start by figuring out how much you spend each year to support your current lifestyle.
Once you get this figure, subtract expenses you won’t have when retired (like retirement savings and expenses for your children) and then add expenses you might incur (like money for additional travel or increased health care costs).
That should give you a rough idea of what you’ll need to retire in today’s dollars.
How large does your nest egg need to be?
Withdrawals from your nest egg will be needed to cover any shortfall between your retirement spending and any steady income you’ll have from things like Social Security, pensions, fixed annuities, and part-time work. For example, assume you’ll need $50,000 in retirement income and will receive $18,000 per year from Social Security. This leaves an income gap of $32,000 per year.
$50,000 Income Need – $18,000 Social Security = $32,000 Income Gap
To get a rough idea of how large your nest egg needs to be, simply multiply this gap by 25. This will calculate how much you need to have saved to cover the income gap at a 4% withdrawal rate.
$32,000 Income Gap x 25 = $800,000
In this case you’d need around $800,000 to produce the extra income you need assuming you withdraw 4% of this amount per year.
What about inflation?
These calculations estimate how much retirement income and how large of a nest egg you'd need in today's dollars. However, since the cost of everything we buy increases over time, these numbers will have to be increased by at least 3 to 4% each year to keep up with inflation.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Friday, February 11, 2011
Post Year-End Tax Tips
Here are a few tips that might help you reduce your 2010 tax bill.
Tip 1: Contribute to a Traditional IRA
One of the easiest last minute deductions is a Traditional IRA contribution. To claim an IRA deduction for 2010, you need to make the deposit by April 15th and state that it's a contribution for 2010 when making the deposit.
The maximum contribution for 2010 is 100% of earned income or $5,000, whichever is less. If you're over 50 you can contribute an additional $1,000 for a total contribution of $6,000. Also, a nonworking spouse can make an IRA contribution as long as you file a joint return and the working spouse has enough earned income to cover the contribution.
Keep in mind that the ability to deduct the contribution will ultimately depend on your filing status, whether you have a retirement plan at work, and your income level.
Tip 2: Contribute to a Health Savings Account
If you have a high deductible health insurance plan you might be eligible to contribute to a health savings account (HSA). Contributions to HSAs are tax-deductible, money inside HSAs isn't taxed, and withdrawals for qualified medical expenses are tax-free. Another nice benefit of HSAs is that you can roll over your account balances to future years.
Individuals can contribute up to $3,050 and families can contribute up to $6,150 for 2010 as long as the plan’s deductible is at least this amount. Just like contributions for IRAs, contributions to HSAs for the 2010 tax year must be made by April 15th.
Tip 3: Contribute to a SEP IRA
If you’re a business owner, there's still time to set up and fund a Simplified Employee Pension (SEP) IRA. The maximum contribution for 2010 is 25% of your wages up to a maximum contribution of $49,000, so this has the potential to be a huge deduction.
If you have employees you will have to contribute the same percentage to their SEP IRA accounts as you contribute to yours, so keep this in mind when deciding how much to contribute. Contributions to SEPs can be made by your tax-filing deadline including extensions.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
Tip 1: Contribute to a Traditional IRA
One of the easiest last minute deductions is a Traditional IRA contribution. To claim an IRA deduction for 2010, you need to make the deposit by April 15th and state that it's a contribution for 2010 when making the deposit.
The maximum contribution for 2010 is 100% of earned income or $5,000, whichever is less. If you're over 50 you can contribute an additional $1,000 for a total contribution of $6,000. Also, a nonworking spouse can make an IRA contribution as long as you file a joint return and the working spouse has enough earned income to cover the contribution.
Keep in mind that the ability to deduct the contribution will ultimately depend on your filing status, whether you have a retirement plan at work, and your income level.
Tip 2: Contribute to a Health Savings Account
If you have a high deductible health insurance plan you might be eligible to contribute to a health savings account (HSA). Contributions to HSAs are tax-deductible, money inside HSAs isn't taxed, and withdrawals for qualified medical expenses are tax-free. Another nice benefit of HSAs is that you can roll over your account balances to future years.
Individuals can contribute up to $3,050 and families can contribute up to $6,150 for 2010 as long as the plan’s deductible is at least this amount. Just like contributions for IRAs, contributions to HSAs for the 2010 tax year must be made by April 15th.
Tip 3: Contribute to a SEP IRA
If you’re a business owner, there's still time to set up and fund a Simplified Employee Pension (SEP) IRA. The maximum contribution for 2010 is 25% of your wages up to a maximum contribution of $49,000, so this has the potential to be a huge deduction.
If you have employees you will have to contribute the same percentage to their SEP IRA accounts as you contribute to yours, so keep this in mind when deciding how much to contribute. Contributions to SEPs can be made by your tax-filing deadline including extensions.
To learn more about our company - and find out how we are different from other financial advisors - call (210) 587-6433 or visit www.VannoyAdvisoryGroup.com
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