Plan…For Good Things
Life has many roads. To make the most of your future, plan now to achieve your goals and realize your dreams.
By planning today, you have the advantage of shaping your future with well-informed decisions on what will benefit you and your family best. Planning ahead also helps prepare you for life’s milestones – home remodeling, children, college, wedding, vacation home, travel. There are a number of ways to save and invest that will enable you to enjoy the big moments without affecting your retirement.
Make Savings Automatic – Plan out your paycheck. Deposit a specific amount into your savings account or other instrument dedicated to savings. If you have difficulties with this, your bank or employer can set up a method of depositing it automatically. This is a convenient method of saving and keeps your contributions continuing on a regular basis. Even if you start with a small amount, be diligent and establish a routine. You can increase your contribution as your income grows.
Choose the Right IRA – Individual Retirement Accounts (IRAs) come in several forms that can fit almost any need. A traditional IRA allows for tax-deductible contributions and earnings that have no tax impact. Withdrawals at retirement are taxed as income. Roth IRAs are made with after-tax assets so withdrawals are typically tax-free. A SEP IRA allows a small business owner or self-employed individual to establish an account in his or her own name rather than using a pension fund account in a large company’s name. There are also SIMPLE IRAs that function much like a 401(k) plan but are less expensive due to lower administration costs.
Invest in Your 401(k) – There are several advantages to contributing to your employer sponsored 401(k) plan. If you make salary contributions on a pre-tax basis, your contribution is deducted before taxes are computed so you are not taxed (immediately) and your taxable income is less. You can defer your income tax payments on saved money until you withdraw them. You have the additional benefit in a participant-directed plan because you can specify your stock, bind and money market investments to diversify your portfolio. Many companies will match a percentage of your contributions, which is in effect a high-yield interest on your investment.
Good Insurance for the Future – When evaluating life insurance plans, consider that many companies offer a participating policy (also called “with profits”). This allows the insured to participate in the insurance company’s profits while maintaining an active life insurance policy. This is a wise way of having life insurance coverage while making long-term capital growth.
Average Annual Cost of College Education
College tuition increases at an average rate of 6.3% per year for public schools (5.9% for private). Although a great expense, it is also a great investment. College graduates average a much higher salary than people with only a high school diploma/GED certificate (men – 69%, woman – 73%).
The most common methods of paying for an education are:
- Student loan: Enables the student to pay back the loan after graduation.
- Pay-as-you-go: Eliminates the obligation and added expense of repaying a loan, but generally involves a strong financial sacrifice at the time.
- Advance investment: Parents invest money in a program dedicated to college expense. It involves advance financial commitment but generally appreciates in value. IRAs may be used to pay for education without early withdrawal penalties, though taxes may still be due.
Don’t overlook another method of defraying educational expense – scholarships. A surprising variety of academic, athletic and other scholarships exist, some with quite reasonable qualifications.
Last, be sure to investigate the tax deduction possibilities:
- School expenses: Up to $4,000 per year, depending on tax bracket
- Student Loans: Up to $2,500 in interest
- Employer assistance: Employer can deduct up to $5,250 per employee (Section 127)
The Price Tag on the American Dream
- 1990 – $95,500
- 1995 – $112,900
- 2000 – $139,000
- 2005 – $219,600
- 2007 – $222,600
Purchasing a home is a good investment because it builds equity over time. However, to base spending on perceived equity is a bad idea – equity is not tangible until it is released! You should never refinance your home for the purpose of making an investment.
Thank You for reading our blog. We hope that you find this information to be helpful. Real Estate can be a great investment especially now. Home Prices are low and mortgage rates are also still low. The market is becoming stronger and eventually, the prices will rise. Call me today to find out if you qualify for the newly approved Tax Credit. (704-968-1965).