Health & Fitness
3 Smart Financial Moves I’ve Made
Since day one, my compass for financial advice giving has been sharply focused and easy to read. When making recommendations for a client, I consider what would I do in their situation. If it was an older client, I would ask; “what would I do if those were my parents?” Therefore, it should come as no surprise that my clients generally use some combination of the same vehicles that my mother and I use.
Here are 3 of my personal best planning moves ( I love the significant tax advantages!)
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1. ROTH 401k – About ten years ago I started making contributions to a ROTH 401(k) rather than using tax-deductible, traditional 401k contributions from my paycheck:
- This means I pay the income tax now (not tax-deductible) and will not have to pay tax in retirement when I take the money out.
- It also means that I won’t be forced to pull money out at age 70 1/2 and my wife or kids will inherit what I don’t spend income tax-free.
- I have saved tens of thousands of dollars in premiums (probably $6k per year)
- It allowed me to fund a Health Savings Account with tax-deductible contributions that saves me current income tax on the $6,400 I contribute annually.
- I get to invest the money in that account so that I should end up with over a six figure account to tap into for medical expenses now or later in life
- The growth on the investment is tax-deferred and money used for approved medical expenses can be withdrawn tax-free.
- It provides my wife and kids a lump sum death benefit to replace my income should I die young.
- The policy has a “cash value” that I tapped into and used to help fund an addition for our home.
- The income tax-free death benefit will be the main asset we transfer to our kids allowing us to spend the interest AND principal from our investment accounts during retirement.
- If I need long-term care in my old age, I can borrow what I need from the death benefit (tax-free) to pay for my care. Whatever I don’t need with pass on to my heirs income tax-free.
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10 Ways Budgeting Saved My MarriageFor more information about these strategies visit Life Planning Today.