Last year, a new client and I were reviewing her expenses. I pointed out that her largest expense (by far) was her Federal/State income tax liability at nearly $20,000 a year. In fact for many people, their largest lifetime expense is income taxes. She looked at me quizzically and exclaimed “But I always get big refunds!” I wanted to weep. Generally when you get a refund, it is because you paid in more than you actually owe. Most taxpayers pay their tax liability throughout the year in the form of tax withholdings. Your employer withholds tax from your paycheck and sends it to the government during your working years. In retirement tax can be withheld from …
Capture Those Dollars!
Recently, in a meeting with clients, we realized their car loan would be paid off in two months. I rang the and said “That’s terrific and now I recommend you…” and they finished my sentence shouting in unison, “capture those dollars!” I guess they’ve heard me say that before….probably many times! It’s my standard response to increased cash flow. Why am I so fixated on capturing dollars? Because unless you win the lottery or inherit a big pile of money* you must spend less than you earn in order to build wealth. *Note: I don’t recommend playing the lottery and inheritances don’t always materialize…. Capturing …
Good News for Savers in 2023
Year end is a great time to review your 401k contributions -- or 403b/457 plan contributions if you don’t work for a private company. I like these plans for a lot of reasons. Most plans these days have some decent investment options. Some have both pre-tax and Roth contribution options. Your employer may match a portion of your contribution. Many plans allow you to set up an ‘auto-increase’ on an annual basis. You set your contribution to increase by a certain amount (usually a percentage of salary) each year. One of my clients set up auto-increase to coincide with her annual raise. After several years she hit the maximum! But best of all, the money is …
How Will You Pay Your Taxes in Retirement?
A client once asked if there is an upper age limit for paying taxes. Answer: No, there is no upper age limit on paying taxes. If you have enough taxable income you must file and pay even if you are a 100 years old. In fact, it’s likely that someone will still be dealing with your tax concerns after you pass away. Death and taxes – two of life’s certainties. After retirement, many people are not sure how taxes will work. Nothing in the tax code is simple, but I hope to shed a little light on post-retirement taxes. Today, I am focusing on Federal taxes. Your state might tax none/some/all of your retirement income. First, let’s take a look …
Four Years Later – Micro Investing with Acorns
Four years ago, I wrote about my lifelong passion (some would say obsession) for spare change. This dates back to counting the spare change and “egg money” in my grandmother’s chipped gravy boat in the 70’s. Today, this is the spare change stash in my office: But here in the 21st century, I don’t have too many cash transactions, and therefore not a lot of physical spare change. Enter the micro investing app Acorns* which invests your digital spare change. Four years ago, I signed up for Acorns and linked my checking account. The checking account is my “funding source”. Then I linked my credit card. You can link more than one card including debit …
