How Do You Invest? What’s Your Asset Allocation?

Looking through the lens of the mega wealthy, see how their assets are allocated for their estates. Property, Equities and Bonds ranked 1,2,3 respectively.  While you might not have $100 million in assets what can you learn from this approach to mega wealthy investing.

Once you are in a position of having income producing assets:

  • What % of assets should be invested in real assets?
  • What % of assets should be invested in stocks and bonds?
  • What % of assets should be income generating?
  • What % of assets should be used to hedge inflation?
  • What % of assets should be liquid?
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    Retirement Plans – What Are The Different Types?

    There is a lot to know about retirement plans. It’s good to have a ‘big picture’ view of all the possible retirement plans. So, I wanted to take a moment to categories the different types of plans that are available to private employers and individuals in the United States.


    Qualified Plans

    These plans are subject to Code 401 (a) and are subject to more rules and controls by the government than other plans.

    • Defined benefit pension plan
    • Cash Balance pension plan
    • Money purchase pension plan
    • Target benefit pension plan
    • Profit sharing plan
    • 401(k) plans (Roth and Traditional)
    • Stock bonus plans
    • Employee stock ownership plans (ESOP)

    Tax Advantaged Plans

    These plans have less burdensome than qualified plans and offer good tax advantages but there are more limits in terms of total tax savings.

    • SEP IRA
    • 403b plans

    Non-Qualified Plans

    These plans are less tax advantaged but there is more control as to which employees you can select to participate.

    • Deferred Compensation Plans
    • 457 Plans

    Let me know if you’re interested in hearing more about these plans and how they might apply to your business or personal situation.

    So Your Taxes Are Done! How Did You Do?

    Tax Brackets ChartWe all think about tax day and primary goal is always, to file taxes. Many people measure their success on tax day based on how much they get back in taxes.  “I got back $X so I am going to get a new <insert new must have consumer purchase>” said the happy tax filer.

    It’s Been Your Money All Along
    Keep in mind, it’s been your money all along.  If you’re using the IRS as your savings account that can be acceptable, but just because you now have your money doesn’t mean you have to spend it all at once.

    The better way to evaluate how well you did
    There is a much better way to evaluate how well you did on your taxes.  And that’s to understand and track your effective tax rate.  I am not referring to you margin tax bracket that is often discussed in the news or at cocktail party conversations, but the actual percent of taxes paid relative to Adjusted Gross Income or AGI which is total income minus some deductions and exceptions.

    Do you know your effective tax rate?

    In 2012, President Obama had an adjusted gross income of $608,611 and paid $112,214 in federal income tax, an 18.4 % effective tax rate.
    To compute your effective tax rate

    Effective Tax Rate = (Federal Income Tax Paid / Adjusted Gross Income)

    To manage your annual tax liability

    So, to manage your annual tax liability don’t focus on the amount of return and get lost in the debate about spending that return or not.  Focus on your effective tax rate by looking how your Adjusted Gross Income is computed and what your effective tax rate is year to year.