Breakthrough: Seven Strategic Moves to Consider Now
1. Shelter up to 25% of your pay (up to $45,000) from 2007 taxes using a SEP IRA if you are a small business owner or self employed. The 2007 deadline is
2. Deduct up to $5000 per person if you’re at least 50 years old ($4000 under age 50) for 2007, using a traditional IRA. 2008 contributions can also be made now. Limits for 2008 have increased to $6000 if you’re at least 50 years old–$5000 under age 50. The deadline for 2007 contributions is
3. Invest tax-free using Roth IRAs. The same limits as traditional IRAs apply. You won’t get a deduction, but gains are tax free in the future if you hold it five years or wait until you’re 59.5–whichever is longer. 401(k) contributions do not limit the amount you can contribute to a Roth IRA. The 2007 tax deadline is April 15th, 2008.
4. Take advantage of 0% federal capital gains taxes. Under current tax law, taxpayers in the 0% to 15% marginal brackets can enjoy 0% long-term capital gains and qualified dividends taxes for years 2008 through 2010. This applies to singles with taxable income less than $32,550 or married filing jointly with taxable income less than $65,100. Consider early tax loss harvesting and cost-basis resetting.
5. Rebalance your investment portfolio. Depending on your current investment mix, it may be a good time to consider taking some of your gains in foreign stocks over the last several years, and reinvest in US stocks. You may also want to increase your small cap value exposure if you have underweighted this asset class. I also believe the price of short duration bonds will outperform intermediate and long term bonds over the next few years.
6. Read a good financial book. Good investment books will equip you with principles based on scholarly research that will improve your investing results. Much of the financial media hype we read and hear today will not. This month, I want to recommend Nick Murray’s Simple Wealth, Inevitable Wealth. This book presents a simple but compelling case for stock funds to reach long-term goals. Visit www.nickmurray.com/bkwealth.htm.
7. Continue receiving this Breakthrough newsletter. In the future, this concise, informative, timely, action-oriented, free newsletter will be distributed monthly by email. To remain on the list, email me at travis@efsga.com, with the words “subscribe me”.