Rancho Del Verde H.O.A.

HELPFUL TAX TIPS (By Andrew J. Carr, CPA)

Mar 14, 2002

Make a 50% Return Without Selling Snake Oil

You have heard it before, ?“If it sounds too good to be true it probably is.?” However, there is a way that you can make a 50% return with little or no risk. How? Contribute to a traditional IRA or your companies retirement account. Lets take the example of a traditional IRA. Assume that you are in a combined federal and state tax bracket of 30% and you receive a small return from Treasury Bills of 5%. You will save $600.00 in taxes on a $2000.00 investment and make $100.00 in interest. That is a $700.00 return on a $1400.00 investment. The reason the investment is only $1400.00 is because you would not have the $600.00 if you had paid Uncle Sam. Now if we take the $700.00 return and divide that by the $1400.00 investment, we have a 50% return.
Why don?’t more people take advantage of one of the best investment opportunities? Your guess is as good as mine. What is even better, you still have until April 15, 2002 to contribute for 2001. If you don?’t have the money to contribute, BORROW IT, credit card companies don?’t even charge this rate of return.
What about a Roth IRA? I would rather make 50% on a traditional IRA or company retirement plan and pay the taxes later when I am retired, in a lower tax bracket. A dollar in the hand is worth ten in the bush. In fact, since the markets slide in 1999, the government has benefited greatly because people paid taxes on their money converted or contributed to a Roth IRA and most lost money at the same time. Uncle Sam?’s hat must be getting taller to stuff all that extra cash in it!
There are certain income limitations for IRA?’s so be sure to contact your professional tax advisor to discuss your situation.