Financial Planning Resources
Below are summaries of some basic principles you should understand when evaluating an investment opportunity or making an investment decision. Rest assured, this is not rocket science. In fact, you’ll see that the most important principle on which to base your investment education is simply good common sense. You’ve decided to start investing. If you’ve had little or no experience, you’re probably apprehensive about how to begin. It’s always wise to understand what you’re investing in. The better you understand the information you receive, the more comfortable you will be with the course you’ve chosen.
Don’t be intimidated by jargon
Don’t worry if you can’t understand the experts in the financial media right away. Much of what they say is jargon that is actually less complicated than it sounds. Don’t hesitate to ask questions; when it comes to your money, the only dumb question is the one you don’t ask. Don’t wait to invest until you feel you know everything.
Taxes can take a big bite out of your total investment returns, so it’s helpful to look for tax-advantaged strategies when building a portfolio. But keep in mind that investment decisions shouldn’t be driven solely by tax considerations; other factors to consider include the potential risk, the expected rate of return, and the quality of the investment.
Tax-deferred and tax-free investments
Tax deferral is the process of delaying (but not necessarily eliminating) until a future year the payment of income taxes on income you earn in the current year. For example, the money you put into your traditional 401(k) retirement account isn’t taxed until you withdraw it, which might be 30 or 40 years down the road! [Read more…]
It’s nice to own stocks, bonds, and other investments. Nice, that is, until it’s time to fill out your federal income tax return. At that point, you may be left scratching your head. Just how do you report your investments and how are they taxed?
Is it ordinary income or a capital gain?
To determine how an investment vehicle is taxed in a given year, first ask yourself what went on with the investment that year. Did it generate interest income? If so, the income is probably considered ordinary. [Read more…]
You’ve worked long and hard for years, saving diligently through your employer-sponsored retirement savings plan. Now, with retirement on the horizon, it’s time to begin thinking about how to tap your plan assets for income. But hold on, not so fast. You may need to take a few steps first.
Step 1: Evaluate your needs
The first step in any retirement income plan is to estimate how much income you’ll need to meet your desired lifestyle. [Read more…]