It is your money is on the table.
We try to keep more of it in your pocket rather than paid in taxes.
Any monies you receive are treated in one of 3 methods.
The more we can move your assets or income to the lower methods, the more you have in your pocket.
First, the basic’s.
A review your sources of income will indicate how they are treated. If you receive a W-2 or 1099, it’s taxed now.
The more we can get away from the 1099’s, the less you will pay in taxes.
Do you have a Florida or Texas residence?
If so, you will not have a state income tax. For example, you live in New Jersey, you have a large State Income tax to worry about. Changing your residency can provide you a considerable difference.
The higher limits of the Federal government have removed this problem for the majority of the nation. If your residence is still in New Jersey, you have Estate taxes starting at $635,000. Meaning the house and savings account alone will probably result in having to pay taxes.
Look at your place of residency. It may benefit you to change it to Florida or Texas.
State Income Taxes
Again, if your residency is Florida or Texas plus a few other states that do not have a State Income Tax, you will benefit.
There are also other states such as Tennessee and Nevada that have no state Income Taxes. Check with your state or one you may want to relocate to regarding taxation.
For most individuals, this is the scenario
Under the heading of Taxed Now you will probably find most of your current investments. Any assets outside of Qualified plans, you will have the long and short term gains to pay taxes on, even though you may have not actually moved them into your checking account.
Then by April 15th, you take money from your checking account to pay the years taxes. So what you have done is to pay taxes on something you are not using. With a value that as we have seen in the years 2000 and 2008 can change in value.
That is Money is taken directly from your pocket and into the Governments pocket.
A better option
Taxed Later – Assets that you are not using for direct income now may be better positioned in an Annuity. Especially if you like Mutual Funds as your investment of choice.
We often choose a Traditional IRA or Roth IRA for the Tax savings. The taxes are deferred until you take them out at ordinary income tax rates. Agreed that the contributions are BEFORE taxes for the Traditional IRA and you do have an advantage with that point.
With an Annuity, you are working with After Tax money. The purchase price (Basis amount) is never taxed. The difference being that you enjoy the amazing benefit of COMPOUNDING INTEREST..
Even Albert Einstein is claimed to have made a comment on the effect of compounding interest. Your heirs can turn the inherited annuity into a lifetime pension or income for life if they choose.
An even better option
2 Better options
(1) Roth IRA’s that give you growth that is forever tax free. Using after tax dollars like the annuity. The growth is free to you. Then they can be passed to your heirs for a Tax Free legacy that can last a lifetime.
(2) Life Insurance. Common knowledge that the death benefit is tax free. Often not considered is the internal growth of life insurance polices. Life Insurance is able to provide you with some tax free income, while still maintaining the death benefit.
Look on the 401k, IRA page. A section with the heading ” playing with the numbers”
More about these 2 items on their respective pages that you can link to.