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Top mistakes when investing in a retirement plan

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Image source: moneysense.ca A lot of people make mistakes when investing in their retirement plan. Such an endeavor takes decades to fulfill, and small missteps can have major repercussions on your life savings. Keep in mind that every job, every deposit, every effort you put into your retirement plan leads to you having a comfortable life after your professional life. With that in mind, here are the top mistakes people make when investing in their retirement plan. Investing on a plan with outdated assumptions If you are working with a relatively old insurance company, be sure to make sure that you update your retirement plan using a variety of market returns assumptions. Your savings, no matter how big they are, are still subject to real-world market conditions like recessions. Even small changes in the economy can easily derail your retirement plan. Always check the computations if there is a significant change in the market. Image source: moneysense.ca Reti
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Commonly missed tax deductions and how to address them

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As a citizen, you must ensure that you pay your due taxes.   At the same time, you must, of course, ensure that you pay only what you are legally obligated to pay.   What often complicates things is that you find yourself too busy to notice and declare various deductions you are actually entitled to.   Among the most common deductions, most Americans miss filing are student loan interests, expenses incurred from moving and searching for jobs, refinancing costs, contributions to various charities, IRD estate and state sales taxes, and prior state tax liabilities. There are fine-print rules that some don’t bother or fail to read and study, causing undue stress as they labor to obtain rightful tax deductions.   You can still insist on the do-it-yourself route or rely on various tax software now available, but the best and most hassle-free solution is still to hire a certified tax professional or CPA.   With the aid of CPAs, you’d be able to efficiently trace all tax d
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A comparison between Roth and traditional IRAs

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Roth and traditional IRAs share a lot of similarities, with the fundamental difference between the two involving the payment of taxes.  Image source:   mymcmedia.org In a traditional IRA, individuals take their contributions out of their pretax income and the investment grows with the incurred taxes deferred until money has been withdrawn.  On the other hand, Roth IRA, which was named after former Senator William Roth who authored the Taxpayer Relief Act of 1997, is funded after an individual’s salary has been taxed. Contributions are not tax deductible and qualified distributions when withdrawing from the account is tax free.  Because of this difference in tax treatment, contributors would have to consider carefully which account to use.  The tax rate is shifting continually. If they believe that the rate would be higher than it is now, they should consider opting for a Roth IRA because future withdrawals are tax free and they would not have not deal with hi
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Index And Municipal: Comparing Bonds

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Some employees nearing the age of retirement start to really think about the future. The first thing that comes to mind is what to do after retiring. A close second is if they have the means to do what they want to do. Image source: madailylife.com Retirement should be prepared for. In the past, retirees could depend on 401ks as their employers offered retirement benefits that could hold them until old age. However, with the inflation rate of the past decades and increase in taxes, it seems that retirees would hardly survive on a 401k. It’s a good thing there are alternative investments. For this article, we’ll focus on index and municipal bonds and their key differences. Index funds are quite popular among investors. They have amazing tax advantages and don’t require that huge a capital compare to other alternative investments. Index funds also allow investors to incorporate a buy-and-hold strategy, which makes them safer than most. They also have a
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A Few Hard Truths About Certificates Of Deposit

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More conservative investors will normally use certificates of deposit or CDs. This should not come as a surprise to seasoned investors and finance experts since CDs are well-known for being safer than other investment options. CDs are also not connected to the stock market, which means the risk is incredibly low. However, critics of CDs argue that the investment causes investors to lose money because of inflation and taxation. The harsh truth is that over the past seven years, the average six-month CD rate has never exceeded 1 percent. Also for the past seven years, CDs have never yielded a positive “real” return. Image source: blogspot.com As with all investments, doing a bit of research goes a long way. With a bit of calculation, investors can see just how much they stand to lose (in terms of purchasing power) when they invest in CDs, especially when they consider the effect of inflation and taxes. A lot of banks never discuss these hard facts with investo
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A Beginner’s Guide To Setting Up An Individual Retirement Account

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Individual retirement accounts, or IRAs, are essentially savings plans. People set up IRAs to defer paying taxes on earnings as their savings continue to grow until they decide to withdraw the money. Remember that there are different types of IRAs, each with its own tax eligibility and tax implication as established by the IRS. Image source: investopedia.com Having an IRA has many advantages. A traditional one, for example, will allow you to claim a tax deduction when you contribute to it. It helps reduce your taxable income, as you don’t pay income tax for the money you’ve put on there. Also, as your savings grow, they continue to be tax-deferred. In short, there’s no need to include any of your dividends, capital gains, and interests when computing your annual tax return. The first step in setting up your IRA is to decide on which IRA type best suits your needs. You should study closely if a traditional IRA or, say, a Roth, is what you need. You then will h
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Tax planning: Steps and strategies

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Tax planning is widely known to be the manner of forecasting one’s tax liability and creating ways and methods to reduce it. This involves analyzing one’s financial situation from a tax perspective, with the goal of tax efficiency. Here are some steps for businesses to perform this crucial exercise in financial planning.  Image source: Pinterest.com        Start early : The tendency for most people is to do taxes in March or April when the deadline for settling tax returns is already looming near. Start earlier to have more time to estimate one’s investment gains and losses, as well as income.  C alculate tax liability : Know these liabilities and work toward them. This need not be a difficult thing to do if one has a relatively fixed income and salaried employees. Engage the services of a tax expert if you find yourself in the dark when it comes to computations.  Profile risk level : Here, find a good level of investment risk that one’s current financial sta
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