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Freedom Financial Planning is having a special event!

Join Judy and Mike for a Learn and Lunch Workshop:

“5 Mistakes to Avoid in Retirement”

Wednesday, June 25th  –  12:00pm-1:00pm

First Federal Plaza Conference Center

Lunch and Refreshments will be provided.

CLICK HERE to register


3 things you can do now to improve your taxes in 2014

The old cliché says there are two certainties in life: death and taxes.  Well, here are three ideas to help with one of the certainties.  I suggest exercise and eating right to help with the other.

1)      Maximize your 401k contributions for 2014.  People under 50 can contribute up $17,500 per year into their 401k; people over 50 can contribute an additional $5,500.  Every dollar you put in your 401k is a dollar taken out of your taxable income.

2)      Make your 2014 IRA contribution.  Yes, you can make your contribution in the same year as the tax year.  Too many people wait until the first quarter after the tax year to make their IRA contribution and they miss out on one year of possible growth.  Before you make the contribution, make sure your income levels fall in line to take the deduction.

3)      Think about your investments outside of 401k’s and IRA’s.  Are you invested in assets that produce taxable income?  Remember, qualified stock dividends got much better tax treatment than interest from bonds (unless they are municipal bonds).

What to do with your Tax Refund

Ok, you’ve got it in your grubby, little hands.  Uncle Sam has given back the money he owes you, but what should you do with it?  Here are several options that make sound financial sense:

1)      Pay off credit card debt.  You might think you’re an excellent investor, but unless you are willing to guarantee yourself 18% per year, you need to get yourself out from under the weight of credit card debt.  Paying the minimum each month will only compound the problem over time.

2)      Open up a Roth IRA.  Very few retirement products offer the long term benefits of a Roth IRA.  Assuming you fit the government’s Roth-eligible  financial profile (check with your financial advisor) you can put $5,500/year into a Roth and let that money grow tax-free forever.  That’s right, if you wait to age 59 ½, you will never pay tax on gains or withdrawals from your Roth IRA.

3)      Get ahead on your budget.  If you’re struggling paying bills each month, set aside your refund to pay next month’s bills.  Once you do this, however, you need to stick with it.  Having money set aside to pay next month’s bills will alleviate the stress of scrambling at the last minute.

4)      If you’ve maxed out your retirement options and you’re not in debt, there’s nothing wrong with using your refund for some fun.  Treat yourself to something special and enjoy;  you deserve it.

3 Big Financial Mistakes to Avoid

There is always something to be worried about when it comes to your finances, but here are three big things to stay on top of before something tragic happens:

1)      Being under-insured.  Nobody likes paying insurance fees, but when you need  it, there is no more important financial cavalry than insurance.  Whether it is homeowner’s insurance, life insurance, disability, or auto make sure your coverage is appropriate for your needs.  Nothing is sadder than hearing a father passed away and only had a $20,000 whole life policy.  Is that going to sustain his family for the next 10 years?  College?  Weddings?

2)      When you are in retirement, don’t sustain your adult kids’ lifestyle.  Few things destroy a retirement quicker than giving money to adult children.  There is not enough space here to write about all of the faults with this strategy, so I will just say don’t do it unless you have a thorough understanding of your financial capabilities.  We love our kids and we want what is best for them, but your retirement financial reservoir is only so deep.

Just winging it.  You need to have a plan.  Whether you’re a do-it-yourselfer or someone who relies on professionals, you need a road map that matches your goals with how you are going to get there.  People with no plan are more susceptible to rash decisions based on fear, as well as being depressed because they always feel like they are wandering.

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