Planning

Understanding Tax Implications for Investment Accounts

Understanding the different types of retirement accounts and their respective tax statuses is fundamental for effective financial planning and tax planning. This article offers a comprehensive overview of the four primary tax categories for different accounts each having distinct implications for investment growth and withdrawals.The reason understanding these terms is important as they impact how contributions, distributions, and earnings are taxed as well as other important considerations regarding the account.The four primary account tax categories are:Taxable AccountsTax Deferred AccountsTax-Free AccountsAfter-Tax Accounts  Taxable Accounts Contributions = Not Deductible Tax Deferred Growth = Depends Withdrawal Taxation = Gains Withdrawal Flexibility = Most…
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Withholding Taxes from IRA’s and 401k’s

In my role as an advisor and financial educator, I take time to explain financial concepts that people do not often think about or know to think about. While there are some very easily understood concepts out there, sometimes I am reminded that not all topics make sense at first blush.  Taxes on My Taxes!?! An often confusing aspect of withholding for taxes from an IRA or 401k is that the tax withholding itself is also subject to income taxes. That's right, if you withhold taxes from your IRA or 401k, the withholding itself will be taxes. Taxes on a…
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Should You Use a Debit Card or Credit Card?

Debit Cards and Credit Cards are two easy ways to pay for everyday expenses. Nearly all businesses accept both in similar fashion but is there one that shines above the other? This article will explore the reasons why credit cards often provide more advantages than debit cards, making them a preferable choice for many consumers. Fraud Protection Debit Cards A fraudster who gets access to your debit card has access to spend all of the money in your checking account. While banks will typically reverse these charges, it can take some time to do so leaving you low or out…
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What is the IRA Aggregation Rule

The IRA aggregation rule is an IRS rule that stipulates that all traditional, SEP, and SIMPLE IRAs owned by an individual to be treated as one for tax purposes when calculating the taxable amount of an IRA distribution or conversion to a Roth IRA. This rule becomes particularly important during the Roth conversion process, as it dictates how the pre-tax and after-tax amounts in your IRAs are considered.The IRA Aggregation Rule has two primary implications:All Traditional, SEP, and SIMPLE IRA's are totaled for the purposes of distributions.Each distribution is a pro-rata distribution of pre-tax funds and basis. Cream in the…
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The Cardinal Rules of Travel Hacking and Other Guidelines

Maximizing the benefits of credits cards, aka Travel Hacking, can be an alluring activity. From the large sign on bonus' to the promises of free flights, free hotel nights, exclusive access to lounges, and more has spawned a generation of those looking to take every last opportunity to maximize the benefits they get through their credit cards. While there are certainly some benefits of travel hacking, it can also be done incorrectly leading to a worse financial situation. Credit cards lead to certain behaviors that, if not controlled, can leave people indebted at high rates jeopardizing their financial futures.  Cardinal Rule…
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When That Tax Document Will Arrive

Here is a quick list of when in the year you will receive certain tax documents:  Form Title Description Source Typically Received By Form W-2 Reports annual wages and taxes withheld from paychecks, including compensation such as bonuses. Employers Jan 31 Form 1099-MISC For reporting payments to freelancers, independent contractors, and other non-employees. Payers who have paid $600 or more Jan 31 Form 1099-INT Form 1099-DIV Form 1099-Composite Documents interest income earned during the year. Banks and other financial institutions Feb 15 Form 1098 Reports mortgage interest (and possibly other mortgage-related expenses) paid during the year. Mortgage lenders Jan 31…
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What to Include in Your Will: Understanding Key and Supplementary Provisions

The drafting of a Last Will and Testament (or just a Will) is a fundamental aspect of estate planning, serving as a guiding document through which a person, known as the testator, delineates the manner in which their estate should be distributed upon their demise. A Will is considered a legal declaration that ensures the testator's wishes are executed in accordance with their precise instructions. To maintain the integrity and enforceability of this document, certain essential components must be incorporated.  This article explores 5 Key Elements of a Will and 5 Optional Elements of a Will that could be included.If you…
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