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First off, I want to take this opportunity to wish you a very happy holiday season! I hope you find plenty of time to celebrate with your friends and family. And I look forward to helping you have your most prosperous year ever in 2009.
Speaking of which, last week I gave you two year-end financial moves to consider. And today I want to show you three more terrific ways to either get tax breaks now or in the New Year.
#1. If you’re donating to charity take note …
An important law has been extended through 2009. Individuals age 70½ and older can still directly transfer up to $100,000 a year from an IRA to qualified charities without having to count those distributions as taxable income. Plus, the transfer still counts toward that person’s minimum distribution.
I also want to point out that you do not have to have the money in hand to donate for a 2008 write-off! You can charge your gift this year and it will still count. It doesn’t matter if you pay the bill in 2009. Similarly, a check mailed in 2008 counts for 2008.
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#2. Get the maximum amount of money into tax-sheltered vehicles …
Given the amount of cash being doled out to failing companies … the myriad problems with Social Security … and Obama’s plan to undertake massive infrastructure projects, you can bet that taxes are only going one way from here on out — UP.
As I mentioned last week, the Roth is a great option. But so are other plans.
For example, if you have self-employment income, I heartily recommend you investigate Solo 401(k) plans. These accounts allow you to sock away very generous amounts of money — as much as $46,000 in 2008 ($51,000 if age 51 or older!). Wow!
Whatever you do, take a little time to research ALL the tax-sheltered accounts that are available to you and your family. Consider not just retirement plans but also education savings accounts like 529 Plans and Coverdell accounts.
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| Use tax-sheltered accounts to keep as much of your money away from Washington as you can! |
Add it all up and you’ll be amazed at how much money you can legally keep away from federal, state and local governments (at least for a decade or two).
#3. Do NOT remove money from retirement accounts if you don’t have to …
I know the impulse to pull money out of your accounts might be strong right now. And some of Obama’s possible moves in 2009 might make it even easier for you to do so. For example, he has suggested allowing workers to withdraw as much as $10,000 from a retirement account penalty-free.
But I do not think such a move would be wise unless you absolutely must have the money for an emergency. You would still have to pay taxes on the withdrawal, and would miss out on tax-sheltered compounding.
If anything, I am hoping that one of Obama’s other proposals comes to pass — a temporary suspension of required minimum distributions for retirees. That would allow some people to keep more money away from the tax man … just the kind of holiday gift us investors hope for!
Best wishes and happy holidays,
Nilus
P.S. If you didn’t sign up to receive the Gala Dividend Superstars 2009 Annual Forecast Issue, it’s not too late! This very special 12-page issue just went to press today, and I’ve decided to extend the deadline to get it at a very special price. Click here to get your copy right now.
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Michelle Johncke, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
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