There are a number of tax strategies that will allow you to increase the funds available to you in retirement, further improve your monthly cash flow by reducing costs, and protect your assets from frivolous litigation and catastrophic illness. You can even help grandchildren with the funds they’ll need for college while reducing your taxes, and get the appropriate tax deductions for certain current health care needs such as prescriptions, eye care, etc.
Create a customized tax plan that includes all of the above. Plus, examine shifting income to lower tax brackets, take advantage of reduced rates on capital gains and qualified dividends, make supplemental or allowable catch-up contributions to retirement accounts, bunch deductions into an every other year strategy in order to make sure you can still itemize, and make lifetime gifts. Also, remember, all qualifying healthcare expenses in excess of 7 1/2% of your “adjusted gross income” are allowable tax deductions.
These days, we have found many retirees want to stay busy during their retirement years. Sometimes, it’s just about staying vital, other times it’s to provide a little supplemental income for the extra vacation or gifts for the grandchildren. You decide to capitalize on your years of professional experience: maybe some part-time consulting or a shift to the private sector, etc.
All goes well, and then it happens. Through no fault of your own, you find yourself in the middle of a frivolous lawsuit instigated by a litigious lawyer. Did you know your income from IRA and city deferred comp plans may be at risk? Even with automobile and homeowner insurance, there are limits and deductibles on most policies, and you are still liable for legal costs to defend yourself. Fortunately, there are some relatively painless solutions.
A personal umbrella policy that contains special liability limits and takes the size of your investable assets into consideration might be an inexpensive solution. Coordinate the umbrella policy coverage with the liability coverage in your auto and home insurance policy. To determine if an umbrella policy is appropriate for you, complete a cost benefit analysis of increasing the coverage on existing policies versus adding an umbrella policy. You may also consider a higher deductible on all your coverage for some premium savings.
However be advised, liabilities incurred with a business, may not be covered under personal liability coverage. You may also want to consider the formation of an LLC (Limited Liability Corporation) if you plan to be quite business-active.