Sexton Advisory Group's Tips on How to Achieve a Tax-Free Retirement

Financial Consultant Steve Sexton Shares Timely Tax-Related Advice

Sexton Advisory Group

While the tax deadline just passed, it’s never too early to look ahead to the 2020 tax year filing season, including the impact of the recent coronavirus economic stimulus bill on how Americans will file next year. Steve Sexton, financial consultant and CEO of Sexton Advisory Group, shares four simple tips to work towards a tax-free retirement.  

  • Fund a 401(k) or Roth IRA – If you are able, continue to fund your 401(k) or your Roth IRA every month, which offer tax-free growth on contributions and earnings. The coronavirus economic stimulus bill allowed people to withdraw money from their 401(k) or IRA without penalty; individuals who did this should keep in mind they have up to three years to include the income on taxes or pay back the withdrawal. These considerations need to be factored into both short- and long-term financial plans. 
  • Fund a life insurance contract – Proper tax planning takes into account reducing your taxes while you’re alive, as well as after you pass away. Funding a permanent life insurance contract can help many individuals accomplish both. First, life insurance allows you to build up tax-deferred growth of cash inside the policy. Second, a life insurance contract also allows individuals to transfer assets to beneficiaries tax-free, no matter how big the death benefit is. 
  • Utilize investments that provide a qualified dividend – A qualified dividend is a dividend that falls under capital gains tax rates that are lower than income tax rates on ordinary dividends. Qualified dividends are taxed as capital gains at rates of 20%, 15% or 0%, vs. higher rates of 10-37% for ordinary dividends. Because of this discrepancy in rate, the difference between ordinary and qualified dividends can be significant when tax time rolls around. 
  • Understand how things are taxed – Basic knowledge of how things are taxed and how one can set up investments to receive tax breaks is crucial. For example, certain real estate investments allow individuals to write off depreciation, which deducts the costs of buying and improving a property over its useful life and lowers taxable income in the process. “Overtaxed: Six Powerful Tax-Free Investment Strategies” by Ali Hashemian, CFP, is a great primer for those looking for a straightforward breakdown of how taxes work. 

For more information on Sexton Advisory Group, please visit www.sextonadvisorygroup.com

Source: Sexton Advisory Group

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Categories: Personal and Family Finances

Tags: 401k, estate planning, financial advisor, financial planning, investing, money, retirement planning, Sexton Advisory Group, Steve Sexton, taxes


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