The CEO Forum – July 2019

When planning for retirement, you need to look at multiple sources of income and be sure that some of the income sources are tax-free. The more, the better. So, how do you plan for a retirement income stream that minimizes overall taxation?

Four Instruments that Provide tax-free Retirement Income

Here are four great ways to provide yourself with tax-free.

1. Roth IRA is a great retirement investment that can result in a steady stream of tax-free retirement income as long as they are considered qualified. However, you must qualify for an IRA and the requirements are adjusted year by year as is the amount eligible for savings. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

If you do qualify, money put into a Roth IRA is taxed when you receive it, so it is not taxed again when it is withdrawn. In 2018, the eligibility requirements are:

1. Single or head of household, earning less than $120,000 to fully contribute to a Roth IRA.
2. Married filing jointly or a qualified widow(er) earning less than $189,000 to fully contribute to a Roth IRA.
3. Married filing separately earning less than $10,000 to fully contribute to a Roth IRA. (Note that those married but filing separately can use the limits for single people as long as they have not lived with their spouse in the past year)
4. Municipal Bonds and Funds provide income distributions not taxable by the federal government though they are may be subject to state income tax. Because they are not subject to federal income tax, interest paid on these bonds is typically less than taxable bonds.

There is no income limit to investing in tax-free municipal bonds and funds.

3. Health Savings Accounts (HSAs) are available if your employer offers health insurance using an HSA. Combined contributions by the employer and employee to this account as of 2018 can be as high as $6,900.00 for qualifying plans.

Following the rules about which expenses are reimbursable, no taxes are paid on withdrawals.

In addition, the HSA funds and earnings can be held until retirement then uses to provide tax-free income by reimbursing the holder for past and current allowable expenses which include Medicare premiums.

4. Roth 401(k) or 403(b) allow Roth contributions inside these accounts making those contributions and their subsequent retirement earnings, tax-free. These accounts are not subject to income eligibility limits but they are subject to taxes in the year that contributions are made.

Making the Most of Your Home

Another way to make a smart investment for your retirement is to pay off any mortgage that you have on your home before you retire which allows you to live in your home for the cost of property taxes and home insurance alone.

For many retirees, this is a huge reduction in their monthly expenses allowing the money be used elsewhere.

Discover how working with a financial planner can make a big difference in your investing journey. Learn about investing through our beginner's guide to top investment blogs.

 

For many, investing seems like a daunting venture. Navigating through the intricacies of the financial world can be overwhelming, especially when you're just starting out. But beyond the stock market fluctuations and intricate charts, it's essential to grasp your financial aspirations.

 

 

Warren Buffett wisely said, “Don't save what is left after spending, but spend what is left after saving.” This highlights the importance of financial planning and goal setting when it comes to investing.

 

 

 

 

As emphasized by Jeff Motske, CFP® at Trilogy Financial Services,  understanding your financial “why” is just as pivotal. Are you eyeing retirement? Or maybe that dream home or a new startup? These goals should shape your long term investment journey.

To help beginners transition into the investment realm, here's a two-fold strategy:

 

 

1. Consult a Financial Planner or Advisor

 

Engaging with a financial planner or advisor is akin to having a personalized coach for your financial journey. Just as you wouldn't start an intense workout regimen without gauging your physical limits, investing without a clear vision of your financial goals and investment decisions is risky.

 

 

A financial planner will assist in evaluating your risk tolerance—an essential element in devising an investment strategy. As Peter Lynch, a renowned investor, once remarked, “Know what you own, and know why you own it.” This stresses how important it is to be informed and understand one's investments.

 

 

 

 

 

 

2. Discover the Top Investment Blog Posts for Beginners

 

In Personal Finance, staying on top of your investment portfolio starts with understanding continuous learning is a key ally in the world of investments. Here are some top investment blogs for beginner investors that can offer invaluable insights:

 

• Investopedia: A comprehensive platform offering a plethora of articles, tutorials, and educational content on finance and investment.
• The Motley Fool: A trusted source renowned for its stock recommendations and investment advice, catering to both novices and seasoned investors.
• Seeking Alpha: A blend of free and premium content, providing in-depth research, articles, and analyses on various stocks and investment strategies.
• BiggerPockets: The go-to resource for real estate investment enthusiasts, packed with guides, resources, and community discussions.
• NerdWallet's Investing Section: Simplifies complex investment topics, making them digestible for beginners.
• Nasdaq News + Insights: Get insights from a big stock exchange. Covers market trends, stock market news & analysis, and investment strategies.
• Morningstar: This blog is a trusted source for investment research. It provides analysis, ratings, and information on stocks, mutual funds, and ETFs. This makes it important for both new and experienced investors.

 

 

 

Conclusion

 

Stepping into the investment arena can evoke a mix of emotions. But as you start investing with a clear understanding of your financial goals, expert advice, and regular insights from top investment blogs for beginners, you're on a solid path.

 

 

As Benjamin Graham, known as the “father of value investing,” once said, “The individual investor should act consistently as an investor and not as a speculator.”

 

 

 

 

At the end of the day it's important to ensure you make informed, strategic investing over impulsive decisions. Check out how to avoid Mistakes When Choosing a Financial Planner in our other blog post.

 

Keen on diving deeper into investing? Connect with our top financial planners or explore more articles on our investment blogs for investment strategies.