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Missed Fortune – The Income You Didn’t Know You Had

Posted on | May 13, 2012

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A Simple Shift In Thinking That Expands Your Nest Egg

For most of us, taxes are only on our minds for a tiny portion of the year. We tend to focus on them in April when the deadline for filing our tax returns comes around, but taxes can have a greater impact on our lives than many people realize.

For instance, if you’re part of a married couple earning over $70,000 or you’re a single earner making over $35,000 a year, satisfying your tax burden takes virtually everything you earn for the first 3-4 months of the year. If you’re making in excess of those incomes, your marginal income tax rate is somewhere between 30-35% depending upon where you live.

A competent tax strategist can sit down with your tax return or your financial statement and usually within a couple of minutes can pinpoint areas where you may be unnecessarily paying more in taxes than you’re legally required to pay.

Let’s say, for example, that the average American pays somewhere around $4,000 a year more in taxes than is necessary. Or perhaps they receive a tax return of $3,000-$4,000 a year which they go out and spend. The bottom line is that that a few thousand dollars a year really adds up over time.

What if there was a way to direct otherwise payable tax money into causes you support rather than into the taxman’s coffers? Let’s be perfectly clear, this is not about evading taxes, it’s about knowing how to pay exactly what you are required to pay, and not a single dime more.

The remarkable side effect of people redirecting otherwise payable tax money into more productive causes is that it actually increases tax revenue for the government by promoting greater corporate and business growth. In other words, these tax strategies actually help boost government revenue rather than hinder it.

Just consider what an extra $4,000 a year could accomplish if you disciplined yourself to set it aside and then properly applied it to your retirement nest egg.

It doesn’t really matter where you’re at today or even what you begin with. What matters, in the long run, is what you end up with in your retirement savings.

Redirecting otherwise taxable income and subjecting it to the power of compound interest could mean a difference of several hundred thousand dollars at retirement.

The key is to put that extra money to work today, so you can enjoy it in the future.

The Advantages of a Strategic Rollout

If your serious retirement money currently resides in an IRA, and you’re waiting until you’re 70 ½ to start taking minimum distributions, you may wish to reconsider. There’s a good chance you’ll end up paying much higher taxes than you originally thought.

Remember that Uncle Sam is waiting to take his share in taxes the moment you start accessing your money. Given the continuing out of control federal spending, there is also a distinct likelihood that taxes are going nowhere but up. We’re also facing the likely expiration of the Bush tax cuts at the end of this year.

Now is a good time to consider doing a strategic rollout that will shift your money from your current IRA into a vehicle where it can grow tax-free from today forward. The ability to pay the applicable taxes now, and then to generate tax-free income from then on will make a dramatic difference in how much you’ll be able to save by the time you reach retirement. There’s also the added benefit of that money remaining tax-free when you ultimately pass on and leave it to your survivors.

The only thing that prevents most people from putting this strategy to work is that they don’t yet know what they don’t know.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment

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