Having a career that brings personal satisfaction and financial success places many demands on your time and energy. But no matter how busy you are, there’s one task you shouldn’t put off—planning for your financial future.
Smart Investing—A Key Factor
Whenever appropriate, consider using tax-advantaged investment strategies to help you reach your goals. Tax-deferred investing allows your investment to work harder for you. For instance, the tax rates on long-term capital gains and qualified dividend income are generally lower than the rates on ordinary income. Taking advantage of the difference could help you realize investment growth potential. Consider holding interest-bearing and other investments that generate taxable income at higher rates in a tax-deferred retirement account and keeping investments that produce qualified dividends and long-term capital gains in a taxable account.
If employee stock options are part of your compensation package, your professional financial planner can explain the tax implications of exercising your options and help you integrate them into your investment and estate plans in a tax-efficient way.
Retirement Savings: An Essential Ingredient
Tax-advantaged retirement plans present another opportunity to grow and preserve wealth. If you participate in an employer-sponsored plan at work, such as a 401(k) or 403(b) plan, you have a solid head start on saving for your future. You and your spouse can also contribute to a traditional individual retirement account (IRA). And if appropriate, the Roth IRA offers qualified distributions of earnings that are tax-exempt after five years from the contribution date and after age 59½.
If you’re self-employed, you have additional options for tax-deferred retirement saving, including a Keogh plan, a Simplified Employee Pension (SEP) plan, or a Savings Incentive Match Plan for Employees (SIMPLE).
Estate Planning—A Vital Component
You might already have a will, a living will, and a health-care power of attorney. But, if you have considerable assets, you may need a detailed, comprehensive financial plan to help control estate taxes and preserve your wealth for your heirs.
One way to reduce your taxable estate is to make gifts of cash or other assets to family and friends during your lifetime. Making charitable gifts, either during your lifetime or in your will, can also help reduce estate taxes. If you make charitable gifts during your lifetime—through a charitable remainder trust or a family foundation—you can also reduce your estate’s tax burden.
If you’re a business owner, having a business succession plan in place is essential. Funding a buy-sell agreement with life insurance guarantees a smooth transition. Having long-term care insurance and disability income insurance can help ensure that your assets remain intact for your heirs should you become permanently disabled.
Financial planning is a complex process. The approaches mentioned here provide an overview of some of the options available to you. It is not intended as investment advice and is not a recommendation for retirement savings. Feel free to reach out to us for a deeper explanation of the various strategies discussed here, and other recommendations for preserving, protecting and enhancing your wealth.
The content of this material was provided to you by Lincoln Financial Advisorsfor its representatives and their clients. This article may be picked up by other publications under planner’s bylines.
Curtis Krietzberg, David Krietzberg, and Felicia Garland are registered representatives of Lincoln Financial Advisors Corp.Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice. Krietzberg Wealth Management is not an affiliate of Lincoln Financial Advisors.