You can do everything right when it comes to building your wealth: introduce innovative products and services, work hard to achieve your financial goals, and make smart investments to ensure your money grows. However, it’s easy to lose a large amount to taxes if you don’t take steps to protect your hard-earned money.
The good news is that with careful planning, you can reduce your tax liability significantly. Making full use of tax-advantaged programs prevents your earnings from being chipped away by tax expenses.
Your Certified Tax Coach is your partner in the battle to protect your wealth. These experts understand how to maximize use of tax-deferred and tax-free products to minimize taxes. They think outside the tax box, approaching tough problems from a new direction to ensure you pay the least amount possible without running afoul of tax law.
Tax Advantaged Retirement Savings Plans
Leaving the workforce is an exciting opportunity to pursue another lifestyle. You can travel, spend more time with family, and take up hobbies that you haven’t been able to find the time for while working. Of course, your ability to live your desired lifestyle depends on how well you prepare financially. The good news is that you can achieve the goal of generating adequate retirement income while also protecting your wealth from taxes.
A variety of retirement plans are available to reduce your tax burden, so you can build your savings more quickly. Tax-deferred programs like 401(k)s, specific annuities, and traditional Individual Retirement Accounts (IRAs) allow you to set money aside with pre-tax dollars. You don’t pay taxes until you withdraw your funds, which for many means a lower tax bracket.
Tax-free programs like the Roth IRA, some types of annuities, and certain life insurance products take contributions with after-tax dollars. When you eventually take distributions from the account, no tax is assessed, no matter how much your investment has grown over the years.
Education Savings Programs
Saving for your own education or that of a family member is a massive undertaking. For many, it is second only to saving for retirement. Fortunately, there are plans available to protect the funds you set aside for this purpose. You use after-tax dollars to fund the account, and when you withdraw for eligible education expenses, you have no tax liability.
All of your earnings are essentially tax-free, which means you keep more of your hard-earned money.
Healthcare Savings Plans
In the current environment, a medical emergency or diagnosis of a serious illness can spell financial doom. Even if you have medical insurance, you could face large bills for your care. You can protect your financial health and your physical health at the same time when you leverage tax-advantaged programs designed to encourage consumers to save money for health-related expenses.
The Health Savings Account, for example, offers three types of tax advantages. All contributions are made with pre-tax dollars, and you don’t pay taxes on interest or earnings that accrue in your account. Finally, when you withdraw funds to cover eligible medical expenses, you don’t pay taxes on any part of the distribution.
In short, simply earning more money isn’t the solution to building wealth. It’s critical to protect what you have from unnecessary taxes. With the help of a Certified Tax Coach, you can maximize use of tax-advantaged programs to minimize your tax liability.