Most people mean well, but often make terrible financial mistakes simply because they are not fully informed. Here are 3 common mistakes that you want to avoid during your retirement. Avoiding these will leave more money available for you during your retirement and/or more money left over for your heirs.
1) Do NOT sell a highly appreciated home (one that is worth substantially more than you originally bought it for). Tax rules do allow you to escape tax on the first $250,000 of gain if single or $500,000 if married (personal home only), but any gain over that may be subject to capital gains tax. If you want/need some cash out of a property, often the best way to access it is with a mortgage loan (Forward or Reverse Mortgage). This benefits you three ways; money received via a loan is not taxable, you continue to own the home so you continue to participate in any increase in value and avoid any capital gains tax.
If you hold the property under the correct title, you may completely escape any and all capital gains tax upon selling after the first spouse passes. But again, you must hold title in the correct manner (I have a free, detailed report on this, just ask for it). This strategy saved a couple in Laguna Beach over 1 million in taxes alone.
2) Do Not add your child to the title of your home. This is a common mistake and bad for two reasons. Adding your child to your home exposes you to unnecessary risk (if they were to get sued, your home may now be in jeopardy of loss) and you will destroy your child’s ability to get a ‘set-up in tax basis’ potentially exposing your child to a much larger capital gains tax liability than if you give your home to your child/children upon your death (through a trust, probate or other means of transfer upon death).
3) Do NOT incur large tax liability. Every extra dollar you owe in tax is one more dollar that you don’t get to spend on yourself or give to your heirs. Therefore, managing this liability is very important. IRAs, 401Ks, 403bs, etc. are all taxable upon distribution to yourself or your spouse. With a little proper planning, you may be able to significantly reduce your income tax liability, while still having the proper amount of money you desire each month. This will result in less tax, more money for you and you will reduce the risk of running out of money before you pass. Obtain our free report on “How to reduce your Income Tax Liability” to learn how.
