By J.P. Dahdah, Founder & CEO of Vantage
For basketball sports fans, the term March Madness refers to the excitement of the NCAA Division 1 Tournament. Sixty-four college basketball teams battle it out on the hardwood for the pride and glory of being named National Champions. For investors, it relates to the stress and panic of organizing your financial affairs before the tax-filing deadline of April 15th. Some thoughts running through your mind may be: Have I saved enough this year to accomplish my family’s financial goals? What retirement plan best fits my family’s needs? Are we saving enough money for my child’s college education? Have my recent real estate investment deals created an additional tax liability for my family?
This process can be stressful and maddening. In an effort to help you put your financial house in order before April 15th, please find a few helpful tips below that should guide you down that right path.
Choose the most appropriate type of retirement plan. To determine which type of plan is best for your family, you need to answer several simple questions:
- How much can I afford to contribute towards my plan based on my current financial situation?A monthly cash flow analysis (budget) can help you determine this figure. If the amount you can afford is $5,500 ($6,500 if you are over the age of 50) or less, a Traditional or Roth IRA would make the most sense. These accounts are easy and inexpensive to set up. Keep in mind that Roth IRAs have annual income limitations that make you ineligible for annual contributions if you make too much money and they are also taxed differently than Traditional IRAs. Traditional IRAs allow you to make pre-tax contributions, while Roth IRAs are after-tax contributions. Make sure you consult with your tax advisor on which one would be most advantageous for your current tax situation.
- If you are self-employed, Uncle Sam allows you to choose from a longer list of retirement plans! These plans include SEP IRAs, Simple IRAs, Individual 401(k), Profit Sharing Plans, etc. The main advantage to establishing these kinds of plans is that they have higher contribution limits. Therefore, if your annual budget allows you to save more than $5,500 a year, you should consider establishing one of these plans. Be aware that if you have employees, these accounts also come with additional employer requirements which could add higher financial responsibilities to you. Again, consult with your tax advisor to determine what the additional financial impact may be and if it still makes sense.
So remember, first determine “how much” money you need to save to accomplish your financial goals. Secondly, analyze your monthly budget to figure out if you can afford it based on your income and expenses. Lastly, choose the retirement plan that aligns your financial needs with your goals and your investment appetite. It’s as easy as 1, 2, 3!
For basketball sports fans, the term March Madness refers to the excitement of the NCAA Division 1 Tournament. Sixty-four college basketball teams battle it out on the hardwood for the pride and glory of being named National Champions. For investors, it relates to the stress and panic of organizing your financial affairs before the tax-filing deadline of April 15th. Some thoughts running through your mind may be: Have I saved enough this year to accomplish my family’s financial goals? What retirement plan best fits my family’s needs? Are we saving enough money for my child’s college education? Have my recent real estate investment deals created an additional tax liability for my family? This process can be stressful and maddening. In an effort to help you put your financial house in order before April 15th, please find a few helpful tips below that should guide you down that right path. Choose the most appropriate type of retirement plan. To determine which type of plan is best for your family, you need to answer several simple questions:
- How much can I afford to contribute towards my plan based on my current financial situation? A monthly cash flow analysis (budget) can help you determine this figure. If the amount you can afford is $5,500 ($6,500 if you are over the age of 50) or less, a Traditional or Roth IRA would make the most sense. These accounts are easy and inexpensive to set up. Keep in mind that Roth IRAs have annual income limitations that make you ineligible for annual contributions if you make too much money and they are also taxed differently than Traditional IRAs. Traditional IRAs allow you to make pre-tax contributions, while Roth IRAs are after-tax contributions. Make sure you consult with your tax advisor on which one would be most advantageous for your current tax situation.
- Am I self-employed? If you are self-employed, Uncle Sam allows you to choose from a longer list of retirement plans! These plans include SEP IRAs, Simple IRAs, Individual 401(k), Profit Sharing Plans, etc. The main advantage to establishing these kinds of plans is that they have higher contribution limits. Therefore, if your annual budget allows you to save more than $5,500 a year, you should consider establishing one of these plans. Be aware that if you have employees, these accounts also come with additional employer requirements which could add higher financial responsibilities to you. Again, consult with your tax advisor to determine what the additional financial impact may be and if it still makes sense.
So remember, first determine “how much” money you need to save to accomplish your financial goals. Secondly, analyze your monthly budget to figure out if you can afford it based on your income and expenses. Lastly, choose the retirement plan that aligns your financial needs with your goals and your investment appetite. It’s as easy as 1, 2, 3!