Solutions 4 Financial Independence: 12/11/18

Published: Dec. 11, 2018 at 7:17 AM EST
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Question: As the end of the year approaches, are there any financial tasks that I need to complete before 2019? I make $250K a year, what should I do with is?

John Halterman Answer: That's a great income, but my worry with people who make a great income is they don't save enough money. A lot of my clients make good incomes, and especially professional practitioners, and what I notice is they make relative to a percentage, they are not saving enough, so if there is one thing that I would like to see you do this year, and that is max out your contributions to your plan. Whether that is that you have a 401K, cause if you do have a 401K, you could put $18,500 in there. Now if you think about that though, that still does not equal 10% of what you make. Another thing I would consider doing, is doing a backdoor Roth, because a lot of you don't realize, you could put money into a non-deductible IRA, normally you don't qualify for a Roth, because you make too much money, but then you can convert that money, and make it into a Roth, and then all money in the future is tax-free. So, if you did those two things, now, granted, you have until April 15th to do the backdoor Roth, but you need to get the contribution max in now. The other thing I would consider is tax planning, because anytime that people make a lot of money, they have a tendency to pay a lot in taxes. So, definitely sit down with your advisor, whether it's an advisor or CPA, and work with them on things you should do to lower your tax burden. So, those would be two smart things.