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A few weeks ago I received an email from someone I affectionately call Blogger X.

In that email, Blogger X asked me for some ideas on how to reduce his taxable income. I decided to write a post addressing some of his concerns and in that post I listed 3 different retirement plans that allow for self employed individuals to shelter gobs of income:

• The Pros and Cons of a SEP IRA
• The Pros and Cons of a SIMPLE IRA
• The Benefits of Owning a Solo 401(k)

Now, the reason I bring all this up is because earlier this week I received a very thorough email (below) from a conscientious reader, and in that email (as you will see) he references the above articles. So, I just want anyone coming across this post to be up to speed;) My answers to his questions are highlighted in blue.

Without further ado…

Continue Reading “A Reader Question Regarding Self Employment Retirement Plans”

Last week over on Get Rich Slowly I read a post about the recently deceased Hollywood star Heath Ledger.

In that post there was a snippet from the NY Times reporting that Ledger’s will was last updated in 2003. Because he met his girlfriend after that date and had a child years later, sadly, neither were included in his will.

JD goes on to write that even young people need to be mindful of proper estate planning. And I’m here to say that I totally agree, although for most (young people) I’d recommend focusing on the simple stuff, like crafting a will.

You would think I’m about to write about wills and the like… but I’m not going to right now. Though I will say (pun;), if you are married, have just had a baby, or have begun to build wealth, it’s important to have one. Any major changes in your life should have you thinking, “I need to update my will!”

With that said… when I read the Heath Ledger post it reminded me of an article I had seen years earlier - about the massive estate taxes that famous celebrities owed the US government upon their passing.

In memory of them all, I thought I’d share some of the basic tenets of current US estate tax law and list a few prominent Americans that gave much of their net worth back to Uncle Sam in the form of estate taxes.

Continue Reading “Deceased Celebrities and Their Shocking Estate Tax Bills”

A SIMPLE IRA is what I like to call a ‘fall between’ plan.

It has some of the characteristics of a SEP IRA and some of the characteristics of a 401(k); because of the SIMPLE IRA rules, it kind of ‘falls in between’ the two different plans.

When an employer has less than 100 employees and wants an alternative to a 401(k) plan that is simple and less expensive to install, a SIMPLE is worth looking into. Under a SIMPLE plan, both qualified employees and employers can make contributions to traditional IRA’s set up in their name(s).

If you’re a self employed individual you can also have a SIMPLE IRA, but as I told Blogger X (in my email to him) it probably makes more sense to have a SEP or Solo 401(k), because the amount you can contribute to a SIMPLE is capped at a far lower level ($10,500 for 2008) then either of the other plans mentioned.

If you are anticipating growth in your business and want to eventually put away as much as you can, then the SEP and Solo 401(k) allow you more flexibility then the SIMPLE.

Continue Reading “The Pros and Cons of a SIMPLE IRA”

Last week I wrote a post on different ways you can reduce your reported taxable income. Besides offering some tax advice to one of my blogging contemporaries - Blogger X , I listed a few retirement plans (for those with self-employment income) that allow you to sock away large sums of pre-tax money each year.

I’d like to take a closer look at 3 of the plans I mentioned in that post. For the sake of keeping it simple, I’m going to breakdown each plan into an individual blog post. Let’s begin with the SEP IRA, the plan of choice for last week’s subject - Blogger X.

SEP (Simplified Employee Pension) Plan Suitability

A SEP IRA is the way to go if you’re a small employer (typically less than 10 employees and many times just one employee, YOU!) looking for a simple retirement plan that’s easy to install and administer. Most financial institutions will have the plan documents on file and it’s as easy as opening up any investment or bank account.

Continue Reading “Pros and Cons of a SEP IRA”

Dylan Ross is a CERTIFIED FINANCIAL PLANNER(TM) professional and owner of Swan Financial Planning, LLC, a registered investment adviser in New Jersey. Some of you may recognize Dylan from Get Rich Slowly, where he is one of the moderators in the forum there.

In the past I’ve written quite a bit about how I run a “Fee based” advisory business, well Dylan is a member of a growing segment of “Fee Only” Advisors. I was interested to learn more about his approach to the advisory business, and happy to interview him.

Tell us a little more about yourself and your practice Swan Financial Planning?

I started out in the financial industry in 2000 working at a large, full-service brokerage. While I was there, I completed my CFP certification requirements, but eventually became frustrated because of the inability to actually practice financial planning due to industry limitations.

So, I left the brokerage industry altogether and started Swan Financial Planning as a New Jersey Registered Investment Adviser firm, in late 2005. Initially, I worked only on retainer and then added an hourly option last year to make my services more accessible.

I also joined the Garrett Planning network around that time. Now, most of what I do is on an hourly basis, and I limit the number of retainer clients I have.

Continue Reading “An Interview with Dylan Ross”

Last week I received an email from a fellow blogger (we’ll call him Blogger X) letting me know that he was going to file his taxes soon, and he asked if I could offer him any last minute suggestions?

I responded to his email and offered a few pieces of advice, along with a few alternatives that I thought he could explore further. (It’s worth noting, I believe 2007 was the first year Blogger X earned an income from his blog.)

A mild disclaimer

I plan on detailing the gist of what I wrote to him in this post, but before I do, I want to say in big letters I AM NOT A CPA and before making any tax related decisions please consult your accountant and do your own due diligence.

With that said, and at the risk of sounding redundant, here’s an excerpt from my email response to Blogger X…

Continue Reading “How to Reduce Your Taxable Income”

For the average investor, the keys to investing success, over the long-term, are diversification and portfolio re-balancing, pretty straight forward.

But before you can even diversify and re-balance your investments, you need to choose the type of investments to make up your accounts, and I’ve written a lot about that, as well.

Here’s where you need to listen up!

Before you choose your investments you need to understand what you CAN and CAN NOT control. I think investors for the most part, have this all wrong.

What am I talking about?

A lot of investors are under the notion that it’s their duty to control the performance of their investments. I say forget about doing this, this is completely out of your control, for the most part. Thinking that you can control your investment performance is the first critical mistake the average investor makes. I would suggest ridding your brain of these thoughts and focusing on what you CAN control.

Continue Reading “The Single Most Important Thing You Can Control (when it comes to your investments)”

Back on January 24th I wrote a piece called Easing into the Golden Years - the 60’s and Beyond.

That post was part of a writing project sponsored by the M - Network and friends, where 16 different bloggers got together and covered “Money Matters For All Ages.”

There was a tremendous amount of positive feedback from the series, (including being featured on MSN Money) so all the bloggers involved agreed to re-distribute the series in the form of a FREE eBook.

This way all the articles would be archived for all of eternity, and more importantly, all in one place. I think you’ll find MMFAA is an easy read and a handy reference, no matter what phase of life you’re interested in learning more about.

Before you download the book (below) I would like to thank everyone involved, especially David from My Two Dollars, Pinyo from Moolanomy and Mike from Quest For Four Pillars for all the hard work they put into making this eBook a reality. Thanks!

Download the free Money Matters For All Ages eBook!

One last thing!

Since I’m in the thanking mood - I’d like to thank Jeremy at GenerationX Finance for allowing me to guest post over on his blog last Friday. If you missed it, I wrote a post called 3 Effective Option Strategies to Soften The Blow in This Volatile Market that I think you may like!

George W Bush recently signed off on the 168 billion dollar economic stimulus rescue package.

What does this mean for the average person?

It means that 128 million American households will begin receiving economic stimulus checks from the federal government starting in May. I’m not going to go into all the details but here’s the gist of it: If you’re single and make less than $75,000 you will be receiving a check for $600. And if you’re married (making less than $150,000) you will be getting $1200, plus an additional $300 for each child you have.

Americans are incredible consumers

The purpose of this whole economic stimulus package is to give people some cold hard cash to pump back into our drooping economy, giving it a nice shot in the arm. The government thinks, since it’s likely we’re headed for a recession, this would be a good way to get things going back in the right direction.

I’d say they are also acutely aware that once American consumers get their hands on these mighty (or not so might these days) greenbacks they will feed the addiction ‘to spend, spend, spend and spend some more.’

Continue Reading “How to Spend Your Economic Stimulus Rescue Check”

When I first started writing this blog in no way did I have the word frugal on my brain.

I knew what the word meant, but it wasn’t until I became a part of the PF (personal finance) blogging world that I really started to appreciate and understand the significance of this simple word.

Here’s a part of the definition Wikipedia offers up for Frugality:

“Some of the main strategies of frugality are the reduction of waste, changing costly habits, suppressing instant gratification by means of fiscal self-restraint, seeking efficiency, avoiding traps, defying expensive social norms, embracing free (as in gratis) options…”

A deeper meaning

I think that definition is pretty accurate. I also think it’s kind of ironic how I used to attach a negative connotation to that word (which I think most of the general public still does) and how I now look at it in a completely new light.

Continue Reading “5 Easy Ways To Apply Frugality to Your Investment Decisions”