The Very High Cost of Waiting to Save for Retirement & Some Great Vehicles for Business Owners and Employees to Reduce TaxesSubmitted by Beacon Financial Planning of Cape Cod, Inc. on January 24th, 2017
At speaking engagements I often jokingly ask, "RAISE YOUR HANDS IF YOU WANT TO PAY MORE TAXES." Unsurprised by still arms in the audience, we move towards a discussion of how investors may reduce their state and federal taxes by contributing to retirement plans. I'm often shocked when people don't realize how fabulous a benefit this may be and how it may have minimal impacts on their take home pay. And for you business owners-- there are a number of great retirement plans to help you reduce that always daunting tax bill.
Please view our 2017 Key Financial Data sheet to see how much of your income is eligible for retirement plan contributions. If you would like to explore your specific situation and needs, we welcome the opportunity to educate you more on the retirement planning options available to you because really, RAISE YOUR HANDS IF YOU WANT TO PAY MORE TAXES!
Let's walk through an example.
Say your GROSS pay each month is $6,500 and you contribute 10% of pay to your retirement account.
For each dollar you contribute to a traditional retirement account you avoid Federal and State taxes.
On that $650 per month you avoid the following taxes: $162.50 Federal and $32.50 State for a total of $195 in tax savings. So rather than that money go to taxes, it becomes an investment in yourself. (Tax bracket assumed based on Gross pay.)
Just think, that's $195 per month before that money is invested and potentially makes more money. Still not convinced? Check out the above video that shows a real life example of two friends and why the time to save for retirement is NOW
For compliance purposes, we remind you we are not accountants. Please confirm any tax savings with your tax professional.