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For the past 40 years or more you have paid into the Social Security system with the promise that someday when you retire, you will receive a guaranteed monthly income for the rest of your life. Along the way, your employer has kicked in a matching contribution equal to 100% of your contribution.
At the end of your working life there should be a giant pile of cash with your name on it. And there is (figuratively speaking anyway). But it comes with a giant string attached.
In this case, the catch is that up to 85% of your monthly benefit is considered taxable income once it’s paid out to you. What’s more, depending on the state you live in, you may owe state income tax on those benefits as well. (Bad news fellow Minnesotans. We live in one of those states).
The following post will explain how much of your benefit is taxable and what, if anything, you can do about it.
IRA mistakes are expensive and often irreversible.
Imagine inheriting a large IRA and “rolling” it over into your own IRA only to find out that the IRS has a very specific protocol regarding inherited IRAs and that you got it ALL wrong.
Worse still, the financial advisor you worked with and got paid to help you, he got it wrong as well!
Oh and this mistake, it can’t be fixed.
Or how about these scenarios…
It’s March. The time of year when the early tax filers start to see their tax refunds in the mail. Marketers, sales people, car dealers and just about everyone with a product or service to sell knows this and are out to separate you from your money.
The IRS estimates that the average tax filer will receive a refund check of about $3,050. Here in MN, taxpayers can expect an average tax refund of $2,430.
That kind of money won’t change your life, but what you choose to do with it now can make a big difference over time. Rather than spending it on more stuff that you don’t need, consider leveraging your tax refund for even greater benefit in the future by using this easy hack:
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According to the National Philanthropic Trust (NPT), Americans donated over $389 billion in 2016. Most of that money, 72% to be exact, came from individual donors like you.
I imagine that most of those donations went directly to qualified 501(c)3 charitable organizations. However, more and more people are using donor advised funds as their charitable vehicle of choice.
If you plan to make a charitable gift before the end of the year, you may wish to consider a gift to a donor advised fund as well.
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Paying less in Federal income tax means you get to keep more of your hard-earned income for yourself, for your family and to share with others. You benefit, your family benefits and the economy as a whole benefits.
At least, that’s the way it’s supposed to work.
The new tax proposal is being pitched as a “tax cut for the middle class”. As with every tax overhaul there are winners and losers, but taxpayers need to be careful what they wish for.