Lessons: Saving Your Money

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(Steve Casto).

Americans love to complain that the rich don’t pay enough taxes.

Steve Casto suggests that they stop complaining and learn to use the tricks of the tax trade themselves. Casto, a financial advisor specializing in retirement planning, and is president of Strategic Wealth Solutions, Inc., located in Omaha, Neb. It bothers him that average people pay thousands of dollars in taxes that they could legally and rightfully avoid paying. “Retirees must come up with ways to make their savings last their lifetimes,� he cautions. “One of the best ways is to lower taxes.� 

In his recent book, “Is Your Retirement Heading in the Right Direction?� (Strategic Wealth Solutions, 2005), Casto offers a number of different tax strategies for people to consider: People in the low 15 percent tax bracket pay only five percent in capital gains when they sell off assets. If you can live comfortably for a year on your Social Security and pension alone and keep your income in that 15 percent bracket, that’s the year to sell your major assets and save on capital gains taxes. 

Another option is to make it an annual ritual, every December, to sell any stocks and mutual funds that lost money. Don’t just take paper losses. Sell those losers off and have the IRS share the loss with you. “Consider setting up a ‘gift annuity’ when you sell off a major property,� advises Casto. “For example, if you sell a house worth $100,000 with $15,000 in taxes due, you could contribute the entire $100,000 to your favorite charity as an annuity that pays $6,500 back to you every year. You get an immediate $38,500 tax deduction, your charity benefits, and you generate a source of lifetime income.� 

Casto advises people to plan carefully. Most people simply get their taxes done once a year, he says, instead of sitting down and planning for taxes on IRAs, capital gains, and estates. People need trusted advisors to help them not only with taxes but also with their retirement portfolios. Many “financial planners� earn their money through commissions on sales of stocks, bonds, annuities, funds, and insurance to retirees. This creates a conflict of interest. As a financial advisor to retirees, Casto designed what he calls the “Compass System,� which helps clients reduce taxes, increase income, and make their money last as long as they live. His book presents the entire Compass System. 

“Because we are living so much longer, and because inflation is such a huge problem, we cannot afford to be conservative,� he warns. “Using the wrong strategies means we could outlive our money. These wrong strategies, and the importance of avoiding them, are why I felt compelled to write my book.�

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