I’m almost certain that — no matter what you and I think about it — overall tax rates are going to continue creeping higher in the years ahead so I strongly urge you to consider taking advantage of every legal means you can to shelter your wealth and watch it grow with as little interference from Uncle Sam as you can. Words: 1035

In further edited excerpts from the original article* Nilus Mattive (www.moneyandmarkets.com/) goes on to say:

Three Cheers For These Four Ways to Pay Less Taxes

#1. 401(k) plans
Most employers offer these retirement accounts, and they’re a great way to keep money away from Uncle Sam. That’s because whatever you contribute is taken out of your pre-tax earnings. Not only does that mean you are deferring taxes on the amount contributed, but you also might be bumping yourself into an overall lower tax bracket.

For 2010, most people can put away as much as $16,500 – and if you’re over age 50 you may be eligible to contribute an additional $5,500 in catch-up money!

Meanwhile, your investments grow tax-free until you cash out during retirement. Add in the fact that many companies are willing to match some of your contributions and you can see why I think 401(k) participation is a complete no-brainer.

I would also note that self-employed folks should take a serious look at a special class of these accounts, called Solo 401(k)s. They carry MUCH higher contribution limits (as high as $49,000 for high earners under age 50).

#2. Individual retirement accounts (IRAs)
Whether you have access to a 401(k) or not, you can also contribute to an individual retirement account every year. The only provisions: You must have earned income and it must fall within a certain threshold (see the table in the original article* for the details).

For both 2009 and 2010, investors can contribute up to $5,000 annually to their IRA accounts. If you’re at least 50 years old, you can also take advantage of a special catch-up provision and stash away another $1,000.

Just note that you cannot max out both a regular and a Roth IRA in the same tax year. Your total contributions to all IRA accounts (not counting rollovers and such) must fall within the ranges I just cited.

Which is the better choice — a Roth or a regular IRA? Only you can decide based on your eligibility, age, goals, etc. but I will say that the Roth IRA has a few advantages including no required withdrawals, no age restrictions, and no more taxation of any money earned in the account … EVER!

#3. Coverdell Education Savings Accounts
If you have a child or grandchild you’d like to help out, this type of account is a nice little tax-shelter for them. You can put in $2,000 every year for the minor’s education (up until their 18th birthday).

Coverdells operate much like Roth IRAs (they were formerly known as Education IRAs). As long as later withdrawals go to qualified education expenses, your original contributions and any investment returns are not taxed.

The beneficiary of the account has until age 30 to use the funds. After that point, they must either withdraw the money and pay taxes plus a 10 percent penalty or roll the funds into a new Coverdell account for another beneficiary.

#4. 529 Plans
Again, these are great for parents, grandparents, or anyone else looking to help put a child through college. Like Coverdell accounts, they allow contributions to grow tax deferred. Plus, distributions will be tax free as long as they go to qualified education costs (in this case, it’s only post-secondary education purposes).

In addition, depending on the plan, the future student is not the only one who reaps tax benefits … the contributor can too! 529 plans are sponsored by individual states and some will allow residents to write-off the money they put into a plan against their income taxes. Considering that some 529s accept as much as $300,000 in contributions over the life of the account, your tax benefits can be extremely significant.

Dividends
Also remember that dividends will still get you a major tax break through 2010! Most dividend payments continue to get taxed at a much lower rate than other investment earnings because of the Jobs and Growth Tax Relief Reconciliation Act of 2003.

For most people, the tax rate on qualified dividends is now just 15 percent. Investors in a lower income bracket actually pay no tax on their dividend income and both these advantages will remain in place at least through this year.

The advantage of this tax break to a taxable income portfolio can be considerable. Say you have $100,000 invested in dividend-paying stocks with an average yield of 4 percent. That’s $4,000 in dividend income every year. If those payouts were taxed at your ordinary income rate, you could end up giving back as much as $1,400 in taxes (based on the highest bracket of 35 percent). In contrast, under the lower rate, you would owe only $600. That’s an additional $800 in your pocket! Based on our country’s current fiscal condition, I won’t guarantee that this unique advantage will continue beyond this year.

I’m almost certain that — no matter what you and I think about it — overall tax rates are going to continue creeping higher in the years ahead so I strongly urge you to consider taking advantage of every legal means you can to shelter your wealth and watch it grow with as little interference from Uncle Sam as you can.

*http://www.moneyandmarkets.com/three-cheers-for-tax-shelters-38730?FIELD9=1 (Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. To view archives or subscribe, visit http://www.moneyandmarkets.com.)

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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51 percent of US households are now considered at risk of not having enough money to sustain their standard of living in retirement. Words: 369

So reports Humberto Cruz at Boston.com and in further edited excerpts from the original article* Michael Myers (www.retirementcrisisinvesting.com) goes on to say:

That’s the case even if they work until 65 – two years beyond the current average retirement age – and take a reverse mortgage on their home and use all their assets, including the mortgage proceeds, to buy an inflation-adjusted lifetime annuity to maximize their income.

In 2004, about 43 percent of households were considered at risk, based on the center’s analysis of a triennial Federal Reserve survey of consumer finances. In 2007, the number rose to 44 percent, the center now estimates, based on that year’s Fed survey. Without waiting for 2010 survey, the center’s researchers decided to update the index in response to the recent recession and economic crisis.

Admittedly, the new 51 percent figure is based not on actual Fed survey results but on the center’s projections of what they would have been in the second quarter of 2009. Since then, financial conditions have improved. The index does not factor in possible income from work in retirement.

Still, while stocks are bouncing back, home prices are unlikely to shoot up again. With people living longer, the Social Security full-retirement age increasing gradually to 67, and low interest rates keeping annuity payouts low, the analysis “clearly indicates that this nation needs more retirement savings,’’ the center’s report says.

“We are clearly facing a retirement crisis – one that will continue to grow as younger workers age,’’ said Alicia Munnell, director of the center. “To overcome today’s retirement challenges, people need help understanding financial topics so they can make reasonable financial choices throughout their lives.’’

Many Americans are reacting to the economic downturn not by resolving to save more but by no longer actively planning for retirement. “That’s exactly the opposite of what they should be doing,’’ said Paul Ballew, senior vice president at Nationwide Insurance.

*http://retirementcrisisinvesting.com/retirement-planning/many-americans-disengage-from-planning-for-retirement

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
- Sign up to receive every article posted via Twitter, Facebook, RSS feed or our Weekly Newsletter.
- Submit a comment. Share your views on the subject with all our readers.
- Buy the book below from Amazon. It’s pertinent to this article and inexpensive too.