Where were you on the Eve of the Millennium? December 31, 1999, was long ago, but like many uber-significant events, it remains unforgettable for those of us who were old enough to appreciate the moment, with the many associated “Y2K” fears. What would happen? Would our cars and planes work? Would the banks reopen? Would our ice cubes melt overnight from blackouts?
As with memories of the Kennedy assassination, the attacks of 9/11, and a few other life-altering events, we retain memories in permanent brain storage. Somehow, reminiscing about important events from long ago tends to render the remaining few days of 2022 seemingly insignificant, and certainly forgettable. But we should remain aware of the opportunities we face currently.
With perfect 2020 hindsight (pun intended), the nation’s economy has been transformed from a prosperity machine into one of uncertainty and doubt. Navigating through the economic (COVID-19-stimulated) rubble, it is easy to understand the primary lesson of the 2020s. Never can I remember a time where self-reliance played a more important role in American life.
As layoffs pile up, prices skyrocket, and interest rates rise, the stock market faces real losses for the year. We need to tend to our own plights. As most Americans are facing zero-to-minus real wage “growth,” one immediate tactic comes to mind. There is no quicker way to save needed dollars than by reducing our tax bills. There’s still time for many to help themselves.
Retirement Planning is a two-sided coin, where Heads we win now, and Tails we win later. When the Individual Retirement Account, or IRA, was introduced, very few people understood what personal responsibility for Retirement Income meant. Being the thoughtful and educated people we are, the IRA caught on like wildfire, and today there is an estimated balance of over $1 Trillion (12 zeroes) in our collective personal IRA accounts.
Much of this cash already served purpose number one, by creating an “above-the-line” tax deduction for contributions. These create the best tax savings, as they have the effect of never being recognized as current earnings. Eligible people should plan to contribute to their IRAs to the extent possible, simultaneously saving taxes and providing for a better future.
With few days left in the year, coupled with slack economic conditions, maxing out IRA contributions by December 31 may seem financially difficult. In a rare user-friendly moment, IRS allows these contributions to be made until Tax Filing Day of 2023, while also providing a 2022 tax deduction. There are more tips and suggestions for late-year tax savings, but none (in my mind) is easier and more important than the IRA. Self-reliance, tax-saving, and Retirement Planning, all rolled into one. It doesn’t get much better than that.
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