Spring I Here – Time For A Financial Cleaning


In your younger years your income is suppose to be what you live on now and your savings is suppose to take care of you in your retirement.  We have been trained to place money into a pension plan, a 401(k) or some type of retirement plan for our future.  But how are your tax benefits working for you.  It is time for spring cleaning your finances.  Let’s take a serious look at where we are and where we are going.

Most of us have an employer’s retirement plan or a self-employed plan (SEP), a ROTH IRA or a rollover IRA, a multiple of taxable accounts.  All investments are not taxed the same.  Some are subject to ordinary income rates ( your should protect your retirement from this one).  Your collectibles are taxed at 28%.  So let’s break this down a little.  Ordinary income rates are going to effect your cash, mutual funds, bonds and any stock held less than one year.  It will also effect high-yield stocks and stock funds.

So what do we need to do?  Look at your time horizon.  How long are you holding on to this money.  If you’ve got a long time before retirement start with the most tax-inefficient investments first.  So you’e got $140k in stocks and $60k in bonds.  You would look at putting the $60k in bonds in your retirement first.  You are looking at five to ten year time horizon to capitalize on income.  You would look at putting $105k in stocks for a time horizon of ten years for growth and $35k in your taxable account for less than five years.

Let’s also look at your age factors.  Age 55 and you are ready to retire,  move your employer’s 401(k) first.  then at age 591/2 you can move  your Traditional IRA.  Since you pay taxes upfront on your ROTH IRA and you have your cash you can use them any time.  Your HSA’s wait until you are 65 years of age.  Remember HSA’s are subject to ordinary income rates unless the mone is used exclusively for medical reasons.

Needless to say we are going to be taxed.  The ultimate goal is to learn to invest wisely and pay a minimum of taxes or hire a financial professional that does tax planning as well as your tax preparation.  I cannot stress the importance of getting as much education you can on your money and what is going to work best for you.  The more you know the less you will lose in fees paying someone else do the investing for you.


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