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Taxmageddon
Articles
Kevin Taylor

Tax-smart moves that don’t involve tax deferral

Tax-smart moves that don’t involve tax deferral There are several methods that tax planners can use that are not part of the tax deferral strategy category and that might find new and improved legs as this change happens.   Contribute to your Roth IRA Qualified withdrawals from Roth IRAs are federal-income-tax-free, so Roth accounts offer the opportunity for outright tax avoidance. This strategy looks even more impressive as you can pay income tax at today’s lower tax regime, and mitigate any future taxes that will preserve the gains. Additionally, because the account avoids all capital gains tax this vehicle becomes the most promising to see capital gains on, but avoid the tax consequences of selling those assets. Making annual contributions to a Roth IRA is an attractive option for those who expect to pay higher tax rates during retirement.  Convert to a Roth IRA Converting a traditional IRA into a Roth account effectively allows you to prepay the federal income tax bill on your current IRA account. This account also allows you to see the assets grow tax-free. This method is capable of avoiding ramifications from capital gains and provides the necessary insurance from the rising tax rates. This is the only method that straddles both of the coming complications. Determining the amount to convert (all or partial) should be worked into your financial plan.  Contribute to Roth 401(k) The Roth 401(k) is a traditional 401(k) plan with a Roth account feature added. If your employer offers a 401(k) plan with the Roth option, you can contribute after-tax dollars. If your employer doesn’t currently offer the option, run, don’t walk, to campaign for one immediately. There is likely little cost to add such a program and this might be an oversight on the needs employees should convey to the plan sponsor.  The DRA (Designated Roth Account) is a separate account from which you can eventually take federal-income-tax-free qualified withdrawals. So, making DRA contributions is another attractive alternative for those who expect to pay higher tax rates during retirement. Note that, unlike annual Roth IRA contributions, your right to make annual ‘Designated Roth Account (DRA) contributions is not phased out at higher income levels. Key point: If your employer offers the Roth 401(k) option, it’s too late to take advantage of the 2019 tax year, but 2020 is fair game. For 2020, the maximum allowable DRA contribution is $19,500. Contribute to Health Savings Account (HSA) Because withdrawals from HSAs are federal-income-tax-free when used to cover qualified medical expenses, HSAs offer the opportunity for outright tax avoidance, as opposed to tax deferral. You must have qualifying high-deductible health insurance coverage and no other general health coverage to be eligible for HSA contributions. You can claim deductions for HSA contributions even if you don’t itemize. More good news: the HSA contribution privilege is not lost just because you happen to be a high earner. Even billionaires can make deductible contributions if they have qualifying high-deductible health coverage. Additional Resources for ‘Taxmageddon’ Tax Mitigation Playbook Download Opportunity ZoneOverview

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Healthcare
Articles
Peter Locke

Focusing on the Health in Healthcare Cost

Healthcare Cost hasn’t gotten any cheaper so what are we doing to help clients reduce its expense? InSight was founded on the belief that there is more to financial happiness than being wealthy. People that want to enjoy their lives after their employment years or even during need to be healthy and it starts with how you’re treating your body now. Growing up I was the proud son of a Personal Trainer, my mother. So for me, living a healthy life was always the focus.  But throughout my career of working with individuals and their families, I got to work with some where health wasn’t a big focus and it was in those interactions I learned the importance of health and wellness.   There is a stark contrast between those that exercise daily, eat well and take care of their mental wellness to those who don’t.  Although being in Boulder, CO makes it easy for most of us it doesn’t mean we all can’t improve.  When clients choose to focus on their wellness the results are incredible.  First and foremost, they go to the doctor typically just to get their annual checkups which saves them money, time and over all Healthcare Cost. They get to spend more time with their friends, spouses, kids and grandkids leading to stronger relationships which results in a longer life expectancy.  When they reach the age of 75 they’re thriving instead of deteriorating. They’re playing golf, tennis, hiking, biking, rafting, and exploring this incredibly beautiful state without worrying about if they can do it because it seems difficult.  My grand-father in law is 89 years old and gets up and down from the ground after playing with his great grandkids with pure finesse. Everyday he is exercising for a couple of hours, whether it’s jiu jitsu, walking, or riding his bike he is always moving.  He also focuses on what he puts in his body for every meal as he knows what you put in has an immediate effect on what you get out of it. I worked with a client for about 7 years that played tennis every single day and yet every time he came into the office he had a tootsie roll or ten because that gave him joy.  He wasn’t living a life full of restrictions and rules but a life of joy and gratitude. At InSight, it’s our primary objective to help our clients and their families live a fulfilling life.  We do this by focusing on the two areas that give clients the most difficulty, finance and health.  We want our clients as we like to say, to be Fiscally Fit. When we do this clients reframe their mindset to what is truly important.  They break away from the distractions like shiny objects and erosive behaviors and begin focusing on the more fundamental aspect of happiness.   One of the best series of questions I’ve read about comes from George Kinder and goes like this: I want you to imagine that you are financially secure, that you have enough money to take care of your needs, now and in the future. The question is, how would you live your life? What would you do with the money? Would you change anything? Let yourself go. Don’t hold back your dreams. Describe a life that is complete, that is richly yours. This time, you visit your doctor who tells you that you have five to ten years left to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death. What will you do in the time you have remaining to live? Will you change your life, and how will you do it? This time, your doctor shocks you with the news that you have only one day left to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What dreams will be left unfulfilled? What do I wish I had finished or had been? What do I wish I had done?  [Did I miss anything]? It is here where my co-founder and I have devoted our attention to help support our clients through different events in order to build a stronger community.  From events like cooking classes in order to create healthy eating and drinking habits that are sustainable and fun, group fitness classes or events, trail maintenance with friends and family, yoga and meditation, walks, golfing, planting and gardening, and whatever else we want to do. Healthcare Cost are manageable in our daily lives.  Click on our community events section of our website to join us for our next event! We can’t wait to have you there. 

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Articles
Kevin Taylor

Real Estate Investing and More in your Retirement Accounts

Yes, you read that correctly, you can own real estate, land, private businesses, notes, precious metals, livestock, crypto currencies, equipment and more in your retirement accounts. We love telling clients of InSight that there is an investing world beyond what CNBC & Jim Cramer. Your retirement nest egg can be invested in more than stocks and bonds and you don’t have to be uber rich to do it. Anyone and everyone can. Our clients at InSight want to Invest in what they know, are passionate about, and understand, not just what the news or latest article or podcast tells them they should invest in. For many, yesterday, today, and tomorrow’s stock market can be intimidating, frustrating, and quite frankly annoying. By Peter Locke CFP® and Kevin T. Taylor AIF® Now, while doing this on your own is possible, there are a lot of ways to screw up and disqualify an investment opportunity by not knowing the rules so we recommend you use a third party professional before you do this. Let’s shed some light on what the clients at InSight are talking about and investing in. Over the past decade, I worked for a large brokerage firm. I wasn’t given the tools to help clients with self-directed IRAs. Unfortunately, I couldn’t even refer them to a third party that could. Advisors at these large firms like the one I used to work at aren’t given the opportunity or even allowed to refer clients to do something they want to do because it wasn’t in the best interest of the firm. What I mean by this is that if your expertise is in residential real estate and your financial advisor is only pitching you to sell your properties and invest in their diversified stock and bond portfolio then are they acting in your best interest? Sure, maybe all your net worth is in real estate and diversifying into non-correlated assets is a good idea. In that case, yes. However, this is not the case I am referring to. I am referring to the case where you know real estate and you want to use the funds you’ve saved in your retirement accounts to buy an investment property or a business that you heard about (key word here is investment not personal). Your advisor will most likely sell you on why you shouldn’t and that you should invest in stocks and bonds instead. Or they will tell you that you can’t depreciate an asset that’s in an IRA and therefore not great for tax incentives, or that it’s too expensive. And they’re right about depreciation but wrong about the tax incentives. If you buy a property in an IRA and the rent pays for your mortgage, the income just like a dividend isn’t taxable when it’s inside the IRA, and neither is the sale when you want to get into something else. When you turn 59.5 you can take that rental income which would be ordinary income inside an IRA or 401(k) but if you bought it in a Roth, then it’s tax free. That advisor doesn’t want you to invest in a property because that means no compensation for them. At InSight, a core part of our business is enabling our clients to use the tools at their disposal to get to where they want to go. We help our clients make these types of investments a reality. We’re only fiduciaries when we’re using everything that is available to us and is in the best interest of the client. If a client has a high required rate of return, but hates the day to day fluctuations in the stock market, then riskier investing isn’t appropriate. This would be a case where we’d look at alternative investments and find another way to capture that rate of return required to get them to that goal. A client’s home and 401k are typically their two largest investments. But if your 401k is 4x your home value, then spreading your investments out into things you feel more comfortable with and gives you capital appreciation and income then real estate may be an option for you. If interest rates are low, then real estate is probably an even better option. As I stated before, you can easily mess this up and therefore you need to make sure you surround yourself like we always do with the right People, Processes, and Policies to hold you accountable. Be sure to read the Rules of Self-Directed IRAs and make sure it fits in your InSight-Full® plan.

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