 As we face a “likely" climate where taxes are going to be higher, I wanted to share a couple of optimal planning ideas to avoid - what I call “Tax Torpedoes”. What is a tax torpedo? It’s when your effective rate on certain portions of your income is higher than the statutory tax rate (in essence, the legal tax rate for each bracket of total income).
While every strategy will not be applicable to you, there is at least one idea that regardless of where you are in life, should be considered to potentially reduce your taxes and increase net income. 1. Increase Contributions to Roth IRA Accounts. At any age (since they removed the age 70 ½ ceiling), Roth IRA contributions and conversions are an optimal tool to potentially reduce future taxes. By paying taxes at a “reasonable” rate up front, you can enjoy tax free growth on earnings for distributions down the road.
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