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Just over a month ago, countless Americans were scrambling—As deadlines approached they tried their darndest to decrease tax liability. New year, same story. It could be this perennial stress fest is all too familiar. And while last-minute IRA contributions can bring some immediate tax relief, they can leave you with far-reaching doubts.
While the annual tax race only puts off serious planning 'til another year, tax planning should be an ongoing, continual process. A comprehensive financial strategy—e.g. taxes, retirement contributions, charitable giving—works best when infused throughout your year. Because ultimately, this isn't about saving a bit upfront; instead we're talking about long-term benefits, a secure financial future.
And just as a building's foundation will often determine its overall strength, your everyday budget does much to shape long-term financial plans. What else comes into play? Focused debt reduction frees up cash that can be put towards retirement savings. And as you truly begin to focus on the future, investment goals and objectives will shift. Short- and long-term retirement strategies will be in the mix. Add in annual tax planning and regular financial assessment and you're in good shape.
As we're talking about your best tax options, we can't help but project forward. And if you're worried about saving on taxes now, then priority number one should be understanding how taxes can dig into future retirement earnings. Unfortunately though, we've noticed a general lack of investing in tax-free retirement income. This is true of both beginner and long-time investors. And given the tumultuous state of affairs in the pension, social security and healthcare scenes, a reliable source of tax-free income during retirement is a must.
So stay open to your options. For instance, The Small Business Jobs Act of 2010 allows for Roth IRA contributions to government deferred compensation 457(b) plans, and also provides for conversion of existing 401(k), 403(b) and 457(b) plans into Roth accounts. If you haven't already checked into the benefits of a Roth IRA—how it can be an ideal way to secure tax-free income during retirement—maybe now's the time.
In today's ever-changing world, taxes sure have a strong foothold—They can follow us far into retirement. On the other hand, some of the support systems we held to be pillars now seem to be on shaky ground. It's pretty clear that we need a back-up plan. So instead of focusing on short-term benefits, let's look ahead and channel any fears or worries into positive action. Let's take responsibility and build knowledge. Along the way, we'll get ourselves in shape financially, and leave the yearly scramble behind. Let's own this.