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Senior Retirement Tips :: Legal Tax Shelters
Legal Tax Shelters: Keep Your Nest Egg Safe With Tax Shelters that are Legal
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Legal tax shelters will help you keep your nest egg safe from Uncle Sam while you save for your retirement. To learn about tax shelters, keep reading.
Tax Shelters Aren’t Just For the Rich
If you think legal tax shelters are something reserved for the super rich, you’re wrong. In fact, the most tax incentives are offered to the working middle class.
Why? Because they’re the ones who will ultimately stimulate the economy.
You see, tax shelters or tax-advantaged investments as they’re sometimes called are designed to help boost business and therefore create new jobs. And guess what? New jobs create new taxes and in the end, everybody wins.
Some Tax Shelters have Restrictions
Some legal tax shelters may be legal, but that doesn’t mean they’re for everyone. For example, there are special deductions in place for people who are blind or physically disabled.
The elderly also receive a break on their taxes and yes, these are legal, but they’re not for the average working Joe saving for his retirement.
Your 401K is Your Best Tax Shelter
Your 401K is your best legal tax shelter at your disposal and it can’t be beat. You can contribute up to a maximum of $16,500 per year and up to $22,000 per year if you’re 50 or older.
All that money can’t be taxed (at least not until you withdraw it at retirement).
It’s an automatic 33% in savings, depending on your actual tax bracket. Look into a Roth IRA for even better tax-deferred options.
Nondeductible IRAs
Nondeductible IRAs aren’t legal tax shelters right now, but they will be in the future. You can put away an additional $5000 in one and the contribution isn’t tax-free, but all the compounding interest over the years sure is.
Health Savings Accounts
If you’re relatively healthy and have low medical costs, consider opting for a high-deductible health insurance plan and opening a health savings account.
The money you put in a health savings account isn’t taxed and is taken right off your income. It can then be used to pay for medical expenses like co-pays and drug purchases.
The best part? The money you don’t use stays in the account indefinitely. You don’t pay taxes on medical withdrawals and after the age of 65, you don’t pay taxes on any withdrawals.
Say No to Life Insurance
If a financial planner or life insurance agent tries to sell you insurance as legal tax shelters and method of saving for retirement, say no and walk away.
These policies carry hefty fees and can’t offer the kind of returns and tax benefits that an IRA can – they’re simply inferior when it comes to retirement planning.
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SeniorRetireTips.com :: Legal Tax Shelters