Taxes – The Price of Financial Freedom

Posted on July 22, 2010 by heritageconsulting

Recently when I at home watching TV I ran across a show about a family purchasing a new home. This couple was buying a condo in New York City for $2,000,000. Of course, the cost of the home was astronomical, but that was not most surprising statistic, it was the $200,000 annually the couple would be paying in property tax that made me shutter. Even if they had paid cash for the condo it will cost them over $16,000/month just to cover the property tax.

As I continued watching the couple furnish their newly purchased home I started thinking about the enormous role that taxes play in our daily lives.
• Income Tax
• State Tax
• City Tax
• Property Tax
• The building of stadiums and airports,
• School Levies
• Sales Tax
• Tax on Gasoline and Cigarettes…

Just to name a few of the most common forms.

One would think that the government would run out of things to tax, but they are extremely proficient at ensuring that there are always more items to be taxed thus more taxes to be paid. But what’s worse is that now not only is the government finding new things to tax, but also they are raising the percentages of the taxes that are already in place! Here is a preview of what is coming soon…

The 10% bracket will rise to 15%
The 25% bracket will rise to 28%
The 28% bracket will rise to 31%
The 33% bracket will rise to 36%
And…
The 35% bracket will rise to 39.6%

The majority of Americans are unaware of the increased tax burden they will be facing in the coming months, and they need to be informed. People need to understand the ever-increasing role that taxes play into their own personal finances while also developing an understanding of the changing role that taxes play on a macro, government level.

We all need to continue to plan for our future by taking new approaches towards freeing ourselves from increased tax burden. Looking for tax-free income allows us to increase our immediate financial flexibility while also stabilizing our plans for the future.

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One foot on the gas, one foot on the brake

Posted on July 7, 2010 by heritageconsulting

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I can remember learning how to drive. My mom had a Chevy Malibu that had a stick shift on the column, of all places. She would take me to All Souls Cemetery so I couldn’t hurt anyone or anything and let me “have at it”. I would let up on the clutch, try to give it gas, go lurching forward, slam on the brake and stall the car. She would explain to me in her calm, patient voice that no matter how much I pressed on the gas, if the other foot was on the brake or clutch, I was going nowhere.

How many people try to go down the road of life with one foot on the gas and one on the brake? If you live with negative beliefs surrounding money, then you have one foot on the brake, but may not even know it. Your beliefs, even when well hidden or unknown to you, can do more to hinder you than any economic downturn, plant closings or sell-off on Wall Street.

So why do so many of us have money hang-ups? I’m not a proponent of victimhood, but we get to blame someone else on this one: our parents. They have instilled beliefs so deeply in us that we don’t always know we believe them until someone brings them to our attention.

Here’s a quick quiz… Money doesn’t grow on ______________! What do you think I’m made of__________? Was this subliminal message one of want or one of abundance?

As we are striving for that well-paying job and a house in the suburbs, we’re also led to believe that “money is the root of all evil” (even though that is a misquote, many don’t know it). And who teaches us this? The people with NO MONEY!! Is it no wonder we’re confused into hitting the wrong pedal?

T. Harv Eker refers to these messages as Wealth Files. When they are negative, they are our brake pedal. We hear them long enough that they get filed away in the belief files in our brain, where they subconsciously effect our every move. While it is not easy, it is also not impossible to change your Wealth Files to those that benefit you rather than inhibit you. They can become your gas pedal.

The truth be told, there is nothing wrong with money, it’s our gas pedal. Money can do too many good things such as: providing us with food and shelter, or providing third world countries with vaccinations and clean water. Even Mother Teresa needed money to fund the needs of the poor of Calcutta. It is the love of money, the misuse of money or the place of importance money plays in ones’ life that can and will cause the heartache and pain.

Isn’t it amazing that of all the financial tools our society offers us, from mutual funds, to online trading to spreadsheets, graphs and reports that all we really need in order to alter our financial path is up here (tapping on head right now)? Our mind is the key to hitting the gas and going where we want to be.

One of the first things we do when we meet with a potential client is to see how well they drive!
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Clarification

Posted on June 21, 2010 by heritageconsulting

In step one of the ID Protection plan I say to write “Ask for Photo ID” on the back of your card. This is IN ADDITION to your signature. If you lose your card and it does NOT have a signature on it, you may be responsible for charges to the card.

Thank you to Michele Willis at the CPCU for pointing out that my message was a little vague!

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Planning on retiring in January? Have you considered a December retirement date?

Posted on June 16, 2010 by heritageconsulting

Come January, many officers have no choice but to retire due to the limits of service while in DROP. What you may want to consider, even if you don’t end up choosing this route, is to retire in December for tax reasons. It is far better to make the choice to retire in January after reviewing your options, than it is to determine that retiring earlier would have been beneficial after it is too late.

Tax planning is often overlooked as officers near retirement. Did you know that tax rates are going up next year? The 10% bracket will be eliminated and a higher marginal tax bracket added. And while tax rates are going up, standard deductions are going down next year. What does that mean to you? It means that more of your income will be taxed next year and will be taxed at a higher percentage.

By retiring near year’s end, you may be able to reduce the taxation on your Sick & Comp time. However, there are other things to consider, such as lost wages, a lost DROP payment, picking up healthcare expenses a month or so early. You cannot make an informed decision without looking at all of the consequences of choosing your retirement date.

One goal when tax planning for retiring officers is to level off your marginal tax bracket. What this means is that you try to avoid a spike in your taxable income in any one year. Having a spike in income may mean that you will slide into the next marginal tax bracket, increasing the taxes due on your next dollar earned. Receiving Sick and Comp time over two years or using a Deferred Compensation catch up provisions are two common ways of avoiding this spike in marginal tax bracket. Of course, you eventually have to pay the piper, so if employing these methods, make sure that it is helping your overall tax picture, not making things worse in the future. Work on your tax “exit strategy” now rather than later.

Finally…by now nearly every retiree knows that Deferred Compensation and DROP may be rolled into an IRA without tax being paid. What several officers don’t realize is that these funds will be taxed on withdrawal. They only avoided the tax on the rollover. As part of a tax strategy, you may want to consider a Roth Conversion to create tax-free retirement income and to eliminate Required Mandatory Distributions.

Don’t know where to start? Blue Line Financial Services, Inc. is a wholly owned subsidiary of the Cleveland Police Credit Union. We can help you with your tax planning needs. Frederick Bartin is on hand to meet with retirees and develop a true tax strategy. He understands the intricacies of your retirement system and can help you make an informed decision. He may be reached at 216-621-4440 or (440) 895-9569. You do not need to be a member of the CPCU to utilize his services.

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There are those who walk the walk…

Posted on June 7, 2010 by heritageconsulting

Good things are happening in Cleveland…and there is proof that each one of us can make a difference. Our very own Jerry Crutchley has been mentoring one of Glenville Academy’s football stars this past year. Over that time, Antwan Crutcher, an 11th grader at Ted Ginn’s Academy, has continued to develop the characteristics that we wish all Cleveland high school students possessed. With a 3.6-3.7 gpa and a sight to behold on the football field, Antwan is going places.

One of our affiliates, attorney Robert Hendrix, has been mentoring at Glenville for even longer. He drives the 2-1/2 hour trip each way from his home in Columbus to see James Gordon practice, play and so much more. James graduated as valedictorian of his graduating class on Sunday, June 6th. He is working for my sister’s company, Business Deposits Plus, Inc. before heading to University of Toledo in August for his freshman year

To watch an interview with Antwan, click here: <a href="http://spartannation.com/Hondo’s_House/flash/ANTWANCRUTCHER060310.html“>http://spartannation.com/Hondo’s_House/flash/ANTWANCRUTCHER060310.html

A text article is also available at:  http://spartannation.com/?p=12231

In a world where people equate value with money alone, we often feel as if we fall woefully short of what we can achieve. We’re often asked for donations, but in today’s economy, feel the pinch in our pocketbooks.
Does giving always have to include money though? Gifts can come in many different forms: time, talent and treasure are the way I categorize them. Treasure is easy to define…simply giving money to a worthy cause.

Sharing your talents is another way to help others. My sister loves animals and helps at an animal shelter, using her talents of soothing scared strays. One of my clients started a sewing group that makes infant outfits and blankets for babies at Metro General Hospital.

And finally, there is time. It is the one thing we can never create more of for ourselves. We only have so much of it in our lifetime. It is precious in that regard. To Antwan and James…we’re so proud of you – do well in this world and be good stewards of the treasures of time that others have given you. To the Jerry’s and Bob’s of the world…thank you – you guys are truly walking the walk.

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Boot Camp on your VA Benefits

Posted on May 27, 2010 by heritageconsulting

Every person that has served in the military had to go through basic training. No matter what branch of the service you were in, you had to learn how to fire and clean your weapon because it could be the only thing that may save your life when you need it. You had to understand how to use it and how it worked, because knowing it inside and out could literally be the difference between life and death.
Well that same training holds true today for veterans after you have left the service. Knowing what your VA benefits are inside and out is worth knowing because the benefits could save your physical life, and make a difference in your financial life. You have earned them. Look to someone that can answer questions about your benefits. Programs like the Aid and Attendance Benefits, nursing home facilities and burial services can make many veteran’s final days ones of dignity.
Your VA benefits are like the medals that you wore on your uniform. Remember what it took to earn them and your right to wear them. It’s the same way with your VA benefits. Be proud that you have earned them, use them when you can. Too many times I hear veterans say they think they may not qualify for the benefits or they are only for vets that are down on their luck.

With Memorial Day just around the corner, and everyone talking about the price of everything going up, don’t let us forget what the price of freedom cost us – for many vets the cost was too high. Take time to thank a vet when you see one. They fought for the things you and I have. They haven’t forgotten what they did – you shouldn’t either.

Gerald Crutchley
SEP 4, Army, 1969-1970
Crew member on Huey (slick)

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But I want it NOW!!

Posted on May 18, 2010 by heritageconsulting

But I want it now…

It all starts when we’re babies, really.  You throw your bottle on the floor…you want it now…mom picks it up, wipes it off (washes it for baby #1) and hands it to you.  You’re hooked.  Instant gratification is now part of our human makeup. 

It’s 35 years later and you’re going through the mail.  It’s here…the credit card bill.  You know what day it’s due, but it sits on the counter, unopened until the very last minute.  When you finally open it, it’s to look at the minimum payment due.  Looking at the transactions is just too painful, so you don’t.  Write the check, stick it in the mail or go online and pay (you can wait till the last minute that way).  Whew…survived another month.

Anyone with a credit card balance knows how increasing interest rates can impact your family’s budget.  Minimum payments can prolong your repayment for 30 years or even longer.  The cost of an item put on credit can easily double or triple by time you add interest to the cost.

Then the credit card companies step in and pretend to be your friend.  They’ll let you transfer balances at 0% interest for six months or more.  However, does that really mean that you won’t pay a dime?  Better read the fine print, because somewhere in there is something about fees.  See, they’ll refer to it as a transfer fee, a percentage of the balance above a certain minimum and up to a certain dollar limit,– that way it doesn’t count as interest.  They know odds are you won’t pay it off in the amount of time allotted and now they’ve gotcha!  Interest rate goes up and…well you know the rest of the story.

Do these expenses represent items over which you have control?  If so, then the first step is in learning how to save for things and how to handle impulse buys.

Did you get blindsided by something you couldn’t have foreseen, without having enough rainy day money set aside?  Now you have two jobs:  get out of debt and build your savings back up.

Everyone knows the problem…but who knows of a solution? 

Regardless of the cause, the next step is to eliminate the debts as quickly as possible, reducing the draining effect of paying massive amounts of interest while building savings.  If you are serious about seeing how to do this without debt consolidation, then The Cleveland Police Credit Union is pleased to introduce the most innovative and remarkable cash flow and debt management tool you have ever seen. We will show you how to unlock the secrets of interest cash flow and that smart investors and banks know but never teach.  To learn more go to http://cpcumma.eventbrite.com/ and enroll for our online webinar or in person seminar on May 26th 11:30 a.m. to 1:00 p.m.

Who knows…maybe you’ll start sleeping like a baby again.

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Despite all your preparations, it still happened – you’re lost!

Posted on April 22, 2010 by heritageconsulting

Despite all your preparations, it still happened – you’re lost!

I love the GPS dashboard device that my wife bought me for Christmas a few years back that tells me where to go and when to turn! I still carry a real, actual, good old paper Rand McNally road map in my car, but my GPS gets me from point A to B without any headaches.

If only planning for our retirement could be so easy! Just select a destination and sit back while you listen to the little woman inside your GPS tell you where to go. But wait, what about that gravel road and then dirt trail that suddenly ends? Do we dutifully followed the GPS directions while the navigation system re-plots a new route based on coordinates that are now miles from the intended destination? Yikes! Even the best navigation system in the world makes mistakes.

Can you feel my sense of bewilderment? I did everything I was supposed to do, and look at what happened? Can you imagine when the destination is your retirement instead of a road trip? Could you imagine doing everything you were supposed to do, but not ending up where you were told you would be? Many Americans are feeling that frustration these days.

It would be nice to know in which direction to head, to know if there is a detour ahead, and to have a Plan B in case your original plan…The Plan…can’t get you to your destination. In fact, the right plan could let you know to call ahead and let everyone know that you’ll be late.

There are typically three categories of future retirees:
• People who don’t have a plan, and perhaps don’t want one
• People who are still using yesterday’s ideas and concepts
• People who will get to where they want to be by knowing where the roadblocks are and allowing their GPS to reset and guide them to their destination.

Is your roadmap obsolete or GPS re-plotting your route? How will you prepare for the future and what will you tell your children and grandchildren? Stay alert and watchful so you can adjust your destination, if needed, and avoid the roadblocks that will inevitably pop up along the way. Unfortunately, a GPS or a college degree won’t guarantee you a smooth trip or happy ending. In your journey through life, a little humor, a lot of common sense and practical honest advice will help!

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Is there a tax lien on YOUR retirement?

Posted on April 8, 2010 by heritageconsulting

“If everyone else was jumping off a bridge would you too?” asked the child’s mother as I eavesdropped.

That one line brought me back in time 30 years.   Every parent has asked that question; every child has winced at the words.  That question is usually reserved for when, as children, we are about to do something that is not in our best interest.  It is usually the result of peer pressure.

So on the edge of what bridge are most police officers standing?  Tax-deferred retirement plans.  Many people are out there trying to convince you that you will be better having the tax dollars work for you NOW, creating a larger balance in the future.  However, mathematically, it doesn’t add up.  If tax rates stay exactly the same, (which is a huge IF considering the amount of our country’s debt and the huge amount of money spent on bailouts, healthcare and getting into the auto and banking industries), there is NO benefit.  The only benefit comes from having lower taxes in the future.  Everyone is yelling “Jump, jump, jump!”

I am not opposed to people saving in a retirement vehicle that is tax deferred, if that is their one and only choice, or if there is a sizable match to compensate for future taxes.  However, police officers do not get a match in Deferred Compensation!

Here’s a quick example.  Let’s say you had two choices to make:  one is to earn $1,250 in taxable income and to make a Roth IRA contribution.  The other is to earn $1,250 and invest in a traditional IRA and pay no tax on the money now.   We’ll assume a 20% tax rate.  Let’s also assume a 6% growth rate for 25 years with no future deposits.  At the end of 25 years, your Roth IRA would be worth $4,049 and would be tax free.  Your Traditional IRA would be worth $5,061, but you would only receive 80% of the value upon withdrawal, which magically equals $4,049. 

So where is the benefit?  Perhaps you are thinking that you will be in a lower tax bracket when you retire.  Not to burst your bubble, but I have yet to see that happen when every dollar of your pension is taxable and if every dollar you withdraw is also taxable.  Even if marginal tax brackets remain the same, you will no longer have the deductions you may have now, such as your pension contribution, your deferred comp contribution, deductions for your children and mortgage interest. 

Let me ask you a question…do you think taxes are going to go up?  Stay the same?  Go down?  For every 1% increase in your marginal tax bracket, you will lose $50 more from your tax deferred account!  Nobody told you the rest of the story, but they are hollering “Jump, jump, jump!”

I’ve saved the worst for last.  Look into the future a few years.  Picture yourself at age 70-1/2.  Quick, can you tell me the month and year of when you turn 70-1/2?  I hope so, because if you fail to take a mandatory distribution from your tax-deferred retirement account, the IRS has saved it’s largest penalty, FIFTY PERCENT, just for you!  Are you starting to turn a deaf ear to those hollers yet?

Is there hope?  Of course there is!  Call today to 216-621-4440 and schedule an appointment today with one of our representatives at Blue Line to discuss your options for creating tax-free income.  Roth IRAs, Roth conversions and alternative tax-free income options exist for all income levels.  If you need to see the tax impact, we have a tax-preparer on staff.  Now, aren’t you glad you listened to your mother?

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Hello world!

Posted on March 11, 2010 by heritageconsulting

Welcome to WordPress.com. This is your first post. Edit or delete it and start blogging!

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