Stale Green Light

You can put your money into either a Traditional or Roth IRA for retirement.  A Traditional IRA has deferred taxes, which means you pay taxes on the entire amount when you access the money upon retirement.

A Roth IRA is where you pay taxes as you go along and you don’t have to pay taxes when you access the money upon retirement.  If you think taxes are higher now then they will be in the future than get a Traditional IRA, but if you taxes are only going to get higher then a Roth IRA is the better option.

When you invest in an IRA, there are many different investment vehicles that you can choose from.  You can put your money into CD’s or money market accounts, or you can gamble a little by putting them into stocks, bonds, mutual funds, or indexed funds.

CD’s and money markets are no risk investment plans, but with little risk comes little rewards.   Stocks, bonds, and funds give you the opportunity to make big returns; but you can also lose a lot as well.

For a semi-conservative plan, future retirees should put about half of their retirement money into CD’s and money markets, while investing the other have in index and mutual funds.

For the funds, however, make sure that you choose a diversified portfolio to give you more opportunities in the market.  A diversified portfolio also acts as a safety net so that you don’t lose all of your money if the market dips.

In a diversified portfolio when one company dips, another may surge.  This ensures a certain amount of returns, even when you suffer a loss.

With the economy down, people are staying away from the housing market, which is smart for people in unstable neighborhoods.  If you have a good income and the funds to buy a few income properties, you should take advantage of the low prices.

The housing market is starting to rebound, but home prices are still way down from a few years ago, and there are still millions of foreclosed homes on the market.  That means really cheap offers are being accepted, especially on houses needing some work.

If you have the money to do it, buy these house, do the cosmetic work to make it look nice and increase the value by thousands more than you put into it.  Do this work and then go back to sell it and you could make more money in 2 months than you do all year.

Make sure you find houses in neighborhoods where the value can appreciate, and then budget your time and money so you don’t get stuck in a money pit.  Taking advantage of the low economy by  investing in real estate could be the best investment you’ll ever make.

Doomsayers who claim that we’ll soon be crushed by a bevy of new taxes — including dividend taxes that could skyrocket from 15% to 39.6% — may be exaggerating the severity of the situation. True, some tax rates will inevitably rise, and a few people will feel a greater pinch, but most individuals and companies won’t see much of a change at all.

The thought of losing recent years’ tax cuts would alarm many people—especially those dreading a large hit. Imagine buying a company’s stock, in hopes of enjoying its 7.1% dividend yield for the long haul.

On an investment of ten thousand dollars you’d collect about seven hundred and ten annually right now, with a maximum 15% tax hit on those payouts. Now imagine hearing that your tax bill might soar to over a hundred dollars more per payout in 2011—not something which makes you feel great, but try to look at it in a new way.

Yes, the currently reduced dividend rate is due to revert to citizens’ ordinary income tax rate. That would be 39.6% under the proposed budget, but only if you have taxable income of more than three hundred thousand dollars in 2011.

Furthermore, the Obama administration seems to want to limit the increase in dividend taxes to just five percentage points, from 15% to 20%. That’s a meaningful jump, especially for those collecting a lot of dividends in retirement, but it’s not 39.6%.

Critics are also trying to spread alarm about the estate tax. Unless Congress decides otherwise, it will revert in 2011 from 45% to 55%, with an exemption of one million dollars.

It’s estimated that a one million dollar exemption would lead to just over forty four thousand households owing estate tax in 2011 — and they’d only pay taxes on any value beyond that initial one million. This is an irritation for the wealthy, but those problems can be significantly avoided by simply hiking the exemption, which seems likely sooner or later.

Here are several ways that well-known companies reduce their U.S. tax bills. Forbes recently noted that these companies paid relatively little in taxes in 2009, based on accounting provisions.

Many companies take advantage of lower tax rates abroad. For instance, a well known gas company had an eight billion tax bill globally, but it only paid two hundred million to the United States. A well known electric company was cited for losing money on paper, and therefore not owing taxes in the U.S., while at the same time making lots of money overseas, where tax rates are lower.

A computer company paid almost two billion in taxes –but that represented just 19% of its pre-tax income, thanks to lower tax rates abroad. Companies are using tax losses in past years to shelter current and future income.

A leading bank reported over four billion in pre-tax income, but was able to take advantage of deductions and credits to lower that below zero. It still has tens of billions of dollars in credit losses that will shield it from taxes for quite a while.

A prestigious car company reported three billion in pre-tax income, but only paid sixty nine million, thanks to losses carried over from previous years. Even companies that pay income tax now may get huge breaks later.

Another leading bank paid a solid 30.3% of its pre-tax income in taxes, but investors have reason to smile about the future. The company has a twenty five billion dollar allowance for losses on loans.

When those losses are realized, they will offset tax liabilities. The Government Accountability Office found in 2008 that 55% of U.S. corporations actually reported no federal income tax liability in at least one year between 1998 and 2005.

Suddenly, the thought that changing tax laws might make them pay a bit more to the IRS doesn’t seem so bad. Try to resist scare tactics designed to get you alarmed.

Dig a little deeper into the facts about tax changes, and keep the big picture in mind. Yes, some taxes may go up in the coming years, but most of us won’t be affected.

Besides, our nation is facing massive financial challenges right now. Perhaps a few more taxes might not be a bad thing.