Don’t you just love it when you slip on your jacket, check the pockets and find $20? Who doesn’t, right? One of the favorite parts of our job at The Retirement Guys is to help people find money when it comes to their investments. Finding money for clients is a two-part process that involves looking at the money going out and looking at the money coming in. Once we get started, money can usually be found in a lot of different ways.
Here are just a few ways that you, too, can find money.
Money going out
1. Buy the right investments in the right accounts. Consider holding tax-favored investments in taxable accounts. Many times, we find investors who own fully taxable accounts have investments that are 100 percent taxable each year. Instead, if the investments were shifted to a tax-free municipal bond, tax-advantaged real estate investment trusts or energy investments versus fully taxable strategies, less would go to taxes and more could be kept by the investor.
2. Get life insurance policies that leverage money and provide long-term care benefits. Health care costs can wipe out the average family and even those with millions of dollars shouldn’t pay dollar for dollar for health care costs. Instead, leverage your money with insurance.
3. Cut investment fees and expenses. Sometimes it takes some work to add up all of the fees and expenses that are both disclosed and undisclosed in investments. Yet, once the effort is put in, wasted fees and expenses can be eliminated.
4. Eliminate debt. We talk with people all of the time who have a mortgage, credit card or car loans that cost anywhere from 4 percent to 15 percent; yet, they also have large balances in accounts that are earning less than 1 percent. By paying off the debt, they get to keep more of their hard-earned money.
5. Max out Roth IRA contributions. Roth IRAs offer the opportunity to get 100 percent tax-free growth and income for life. Roth IRAs aren’t just for young kids; they are a great option to consider for investors of all ages.
Money coming in
6. Old annuities. Minimum guaranteed rates in many older fixed annuities are much higher than what the average investor could get in other current safe accounts. Be sure to review how surrender changes could apply if any money is added into older annuities before you invest.
7. Life insurance policies that focus on maximum cash value can be a great approach. Insurance policies not only offer guarantees but indexed universal life insurance policies allow the account owner a higher potential return than most other fixed investments. Consider policies that don’t lock up your money.
8. Save in a company retirement plan. According to Aon Hewitt, 46 percent of American workers age 20-29 who have access to a pre-tax 401(k) retirement plan do not participate in the plan. Not only is it a mistake to not save for retirement, but the employee could also be missing out on free money if the company offers a matching contribution.
9. Pay attention to yield. Most investors focus mainly on the performance of their account. Although performance is important, the average investor has little control over the performance of the stock market in the future. Instead, focus on what can be controlled by concentrating on which yield can be increased by the proper investment selection. More yield from dividends and interest means more annual income.
These ways to find money do not consider your particular situation or risk tolerance. They should be used as a starting point in getting a comprehensive review done prior to making any changes. What we often find is that the average person is able to find money in several ways. So check out these nine ways with your money. Then visit us at ToledoFreePress.com and share with us some other ideas on how you have been able to find money.
Insurance guarantees are based upon the claims-paying ability of the insurance company. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distributions must take place after 59 ½ or due to death, disability or first-time home purchase ($10,000 lifetime maximum). Depending upon state law, Roth IRA distributions may be subject to state taxes.
For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysnetwork.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550
