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Author: unintelfool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Totally Confised Fool Date: 5/15/2001 6:09 PM
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Folks,
I and my wife are in the high income bracket (38% tax rate) and are 30 years old. I would like to start saving for our retirement, reduce my tax bill, and also save for our infant (5 month) daughter's education. I spent about 2 days reading a lot of books and another day on ur web site. What I gathered is that
1. IRA is not an option as a tax saving benefit for us because of the tax bracket
2. I should start investing in a index fund.
3. Does an Educational IRA make sense?
4. I do not want to use a financial advisor (AmEx charges $2500 for creating an investment plan).
5. I have MSFT Money. Will it be useful to input the numbers into this tool and look for advise.

Thanx
unintelfool
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Author: PMcMullenCT Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29723 of 75383
Subject: Re: Totally Confised Fool Date: 5/15/2001 7:03 PM
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1. IRA is not an option as a tax saving benefit for us because of the tax bracket

I don't believe there are Traditional IRA restrictions based on income unless you are eligible for a plan at work (401K). Even so, you can always contribute after-tax money to a Traditional IRA for tax deferral. If you earn less than $150,000 you can contribute to a Roth IRA for tax free growth.

2. I should start investing in a index fund.

This is a very tax efficient option for accounts outside of tax shelters.

3. Does an Educational IRA make sense?

The limit is currently $500 per year, but legislation is likely to change that starting next year. The Senate's latest version of the tax bill increases that to $2,000. I believe the bill also removes the restrictions on making contributions to both a Coverdell Education Savings Account (Ed. IRA's are being renamed) and a state sponsored 529 plan in the same year. 529 plans are a great option as well. You don't have control over how the money is invested, but there is no cap on annual contributions.


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Author: Charlie48K Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29724 of 75383
Subject: Re: Totally Confised Fool Date: 5/15/2001 7:28 PM
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MSFT Money

I have Quicken Deluxe and it's very useful for tracking my investments as it can be set to automatically download all my stock and fund values. It doesn't give specific investment advice but it helps you calculate if you're going to have enough money to do so. I don't think MSFT Money gives advice either.

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Author: tsouth Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29727 of 75383
Subject: Re: Totally Confised Fool Date: 5/16/2001 7:35 AM
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I and my wife are in the high income bracket (38% tax rate) and are 30 years old. I would like to start saving for our retirement, reduce my tax bill, and also save for our infant (5 month) daughter's education. I spent about 2 days reading a lot of books and another day on ur web site. What I gathered is that
1. IRA is not an option as a tax saving benefit for us because of the tax bracket
2. I should start investing in a index fund.
3. Does an Educational IRA make sense?
4. I do not want to use a financial advisor (AmEx charges $2500 for creating an investment plan).
5. I have MSFT Money. Will it be useful to input the numbers into this tool and look for advise.

........................

You don't give the particulars of your income and current investments. The easiest way to save money on your taxes is to contribute the maximum allowed to 401k plans for both you and your wife (if you are both working at companies that have 401ks). If you are self-employed, open a SIMPLE IRA for tax savings.

If your Adjusted Gross Income is over $160k or you file separately, you won't qualify for the Roth IRA (phaseout is between $150k and $160k). If you don't qualify for the Roth IRA, you also don't qualify for the Education IRA. If you do qualify for the Roth IRA, you should contribute as much as you are allowed, up to the $2000 max for both yourself and your wife (after you max out your 401k). This will save you the taxes on future earnings on this money.

Check out the information at http://www.irs.ustreas.gov for specifics about what deductions and credits you can take on your taxes. I've found that reading the instructions for the 1040 Schedule A is very helpful in planning next year's taxes for minimum bite. Unfortunately, for high-income households the government starts taking some of the deduction and credit benefits away as your income increases in the $150ish range.

After you've minimized your tax bite with 401ks, Roth IRAs, and itemized deductions, I'd invest any extra long-term savings in a regular Mutual Fund Account, such as a 500 Index Fund. In fact, we'll be setting up a 500 Index Fund in our names for college savings for our coming child.

You should also start to keep a budget to track income and expenses and pay down any high-interest loans. If you can reduce some of your expenses, you might eventually get to a point where you need to earn less income in order to live the same lifestyle.

I hope this helps!

Teresa

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29728 of 75383
Subject: Re: Totally Confised Fool Date: 5/16/2001 8:48 AM
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You can always contribute to a Traditional IRA, no matter what your income is, no matter what your filing status, no matter if you're covered by a plan at work.

The only thing those affect is the deductibility of your contributions. (For people who are eligible, the money is taxed when you are paid, then you put it in the IRA, and at the end of the year the government gives you back some of the taxes you already paid.)

For more information on 529 plans, see
www.savingforcollege.com

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Author: bench275 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29818 of 75383
Subject: Re: Totally Confised Fool Date: 5/21/2001 4:01 PM
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I concur with Teresa but I would open a Keogh Money Purchase and/or Profit Sharing Plan if you are self-employed. Under these plans you can salt away up to 20% or $30,000 per year whichever is less.

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