Financial Hide and Seek: Finding the Stealth Taxes that Congress Missed

Good afternoon!

The financial sector greeted 2013 with a collective sigh after spending a nail-biting few weeks unsure of how the potential Fiscal Cliff would affect us all in the new year.  I received many emails and phone calls during this tenuous time; most clients wanted reassurance that their investments were safe.  Keep in mind, the Fiscal Cliff sounds confusing because it is.  While the most obvious premises of the deal are more easily researched, there are stealth taxes that could be costing you money at this very moment.

As a Retirement Income Specialist, it’s my job to seek out these hidden taxes that could potentially hurt my clients.  I want to provide you with a brief synopsis of these stealth taxes, but to learn more you can set up an appointment to discuss current financial trends and how they affect your personal finances.  Set up an appointment by visiting us at www.warrenelkin.com.

There are two provisions that were previously dormant from the 1990 tax increase that, as of this week, are re-enacted.  The Pease and PEP will now limit deductions and exemptions for taxpayers in a higher income bracket.  Those who make above $250,000 will potentially suffer the steepest tax increases under this new law.

Of that bracket, married couples with two kids could see a 4.4 percentage point rise in their marginal tax rate.  Americans with incomes topping $1 million could lose up to 80% of itemized deductions, which includes mortgage payments, healthcare, local and state taxes, and charities.

While missing from the main coverage of the Fiscal Cliff deal, Congress has allowed the Social Security Payroll Tax Cut to expire.  Over the past two years, wage earners have enjoyed a 2-percentage-point-cut in the payroll tax.  By allowing this to lapse, that percent now returns to 6.2%, earning the government about $115 billion a year in revenue.  This means the average taxpayer now loses approximately $740 a year.

There are also other stealth taxes that are not covered by the Fiscal Cliff deal.  Things like Phantom Income Taxation, Social Security Taxation, and IRA losses you can’t deduct.  Have you ever heard of Phantom Income Tax before?  Are you paying taxes on your Social Security?  Do you have losses in your IRA?  These are great indicators that you could benefit from a simple review process.

All of these stealth taxes have variances, depending on income bracket, etc.  Don’t start 2013 in the dark about tax policies.  Meet with Warren before going to see your CPA or completing your tax return to learn what questions to ask your CPA to cut your taxes now and avoid tax problems in your future.

Make sure you have all the facts necessary to make the right decision with your financial future by calling us today! Speak with us now at 877-476-5051, email Warren at warren@warrenelkin.com, or go to www.warrenelkin.com to learn more about Warren Elkin and his unique process to make sure your financial decisions are made in your best interest.

Have a great day,
Warren Elkin

Photo courtesy of: www.smartgivers.org

Is Your Money Slipping Through the Cracks?

Around the holidays, money is one of the largest topics on anyone’s mind.  Whether you’re lamenting the sum total of your holiday gift expenses or outlining your budget for 2013, end of the year finances are an important subject.  I’m no stranger to these money concerns, as I’ve built a business on helping clients conquer their money fears and learn to get the most out of their investments.

As a Financial Advisor, I’m responsible for a lot of big-ticket financial worries.  People come into my office looking for long term investing solutions, but the long term is only part of retirement planning.  It’s important to look at the places in your life where money could be slipping through the cracks.  Money that could help boost your retirement. Here are a just a few things that might be slowing stealing your hard earned income:

  • Mutual funds can seem like a great investment to aid your retirement, but the fees associated with managing mutual funds can eat away a great deal of your returns. Investment advisory fees, 12b-1 distribution fees, and administrative costs can really add up. So check your expense ratios on Morningstar or use the FINRA Fund Analyzer. If they’re pushing 1.5% or 2%, it may be time to reevaluate your investment.
  • Planning for retirement can take so much thought and effort that people often overlook the biggest place they can save money every year: taxes. I’m not talking about the big income tax fight going on right now, but rather the “stealth taxes” that are sneaking by while the focus is directed elsewhere. Medicare payroll tax and the taxation of Social Security are bad enough, but the biggest hit will come from the new 3.8% Medicare tax on investment income. With all these changes happening, it’s time to take a good hard look at your taxes and investments to make sure you’re not losing out on thousands of dollars because of these silent money killers.
  • If you have cash in your money-market fund then you’re probably only earning a measly 0.01%.  This means for every $10,000 you have in savings, you’re only getting $100 in returns.  Savings accounts aren’t much better with the best rates not even reaching 1%. With inflation increasing at an average of 2.42% a year over the last decade, leaving money in these accounts is a recipe for money loss.

Staying aware of where your money is and how you’re spending it can shield you from these costs.  Don’t be complacent with your savings, and always make sure you’re staying on top of what is the best option instead of what is most convenient.  Let me help advise you in all of your investment decisions. The biggest gift I can give my clients is the financial knowledge necessary to be the most savvy consumer and investor in the marketplace.  Happy Holidays!

Make sure you have all the facts necessary to make the right decision with your financial future by calling us today! Speak with us now at 877-476-5051, email Warren at warren@warrenelkin.com, or go to www.warrenelkin.com to learn more about Warren Elkin and his unique process to make sure your financial decisions are made in your best interest.

Photo courtesy of: http://global.networldalliance.com/new/images/blog_editor/money_slipping_throughcracks_1.jpg