The FIRE Movement

A radical new approach to working, saving, and retiring.

 

Provided by Michael R Snow

 

Retire before 50 and live your best life. That is the message of the FIRE (Financial Independence, Retire Early) movement, which is drawing interest worldwide.

 

Adherents of the FIRE movement contend that many young adults can pursue financial freedom and retire in their 40s (or 30s) through sufficient commitment, investment, and resourcefulness. Detractors think this idea is not only radical, but also radically unrealistic for many.

 

Is it really possible to retire so young? Actually, yes – there are people who have done it, and their stories often appear on financial websites. These early retirees tend to have some things in common.

 

They lived well below their means in their 20s and 30s. They spent far less than their peers did, and that gave them extra cash, which they could use to pay down their debts and invest.

 

They invested enthusiastically, with a focus on building their net worth. They started the effort early in life and kept at it.

 

They retired with purpose. They were motivated to do something extraordinary with their lives; they had a dream to realize, a calling to answer, and a reason why they did what they did.

 

Those who dream of retiring before age 50 might want to emulate these behaviors.

 

Of course, some people have more of a head start on realizing the FIRE dream than others. Read enough FIRE stories, and you will probably notice three other common characteristics about these unconventional retirees.

 

They sold a company or had a career in a “hot” industry. Early entrepreneurial success or “right place, right time” often applies.

 

They are single and/or child-free individuals. Raising children implies greater household spending for many years to come, and FIRE is about adopting frugality today in exchange for prosperity tomorrow.

 

They are in good health. Most people get their health insurance through employer-sponsored plans. Early retirees face the prospect of paying for their own coverage. Anyone with a chronic (or for that matter, suddenly serious) medical condition could face a financial strain in a FIRE scenario; those who lack health coverage need to be prepared to pay for their own medical expenses.1

 

Do you think you might be FIRE material? Do you have dreams or life goals that you want to realize within 10 or 20 years, including retiring from your business or employer? Now is the best time to financially strategize for those ambitions. Whether you retire before or after age 50, an early start on your strategy might be instrumental in the pursuit of your objectives.

 

Michael Snow* may be reached at 316-765-7738 or info@tower-strategies.com

http://www.towerstrategies.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser 125 N. Market ST, Suite 1603, Wichita, KS 67002. (not registered in all states) Tower Financial Strategies Corp. is also a licensed insurance agency.

 

Citations.

1 – cnbc.com/2019/05/02/if-near-age-65-what-you-should-know-about-medicare-no-its-not-free.html [5/2/19]

 

Red Flags for Tax Auditors


Here are six flags that could make your tax return prime for an I.R.S. audit.

 

Provided by Michael Snow

 

No one wants to see an Internal Revenue Service (I.R.S.) auditor show up at their door. But in 2018, the I.R.S. budget is roughly $1 billion less than it was 8 years ago, down from $12.1 billion in 2010 to $11.2 billion. And even though the number of audits has dropped 40 percent from 2010 to 2017, an I.R.S. tax audit remains a fear for many individuals.1

 

The I.R.S. can’t audit every American’s federal tax return, so it relies on guidelines to select the ones most deserving of its attention. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

Here are six flags that could make your tax return ripe for an I.R.S. audit.

 

The chance of an audit rises with income. According to the I.R.S., less than 1% of all individual taxpayer returns are audited. However, the percent of audits rises to over 1.5% for those with incomes between $200,000 and $1 million who attach Schedule C and is over 4% for those making more than $1 million annually.2

 

If this year’s 1040 deviates greatly from last year’s, that could raise a red flag. The I.R.S. has a scoring system called the Discriminant Information Function (DIF) that is based on the deduction, credit, and exemption norms for taxpayers in each of the income brackets. The agency does not disclose its formula for identifying aberrations that trigger an audit, but it helps if your return data is within the range of other taxpayers with similar incomes.3

 

If your business passes for a hobby, you could be scrutinized. Taxpayers who repeatedly report yearly business losses on Schedule C increase their audit risk. In order for the I.R.S. not to consider your business as a hobby, it typically needs to have earned a profit in three of the last five years.2

 

Not fully reporting your income boosts the chances of an audit. The I.R.S. receives copies of all of your 1099 and W-2 forms. Individuals who overlook reported income are easily identified and may provoke greater scrutiny.2

 

Alimony discrepancies between exes can raise eyebrows. When divorced spouses prepare individual tax returns, the I.R.S. compares the separate submissions to identify instances where alimony payments are reported on one return, but alimony income goes unreported on the other party’s return. Keep in mind that The Tax Cuts and Jobs Act repealed the alimony deduction after December 31, 2018.2

 

If you claim rental losses, you had better be a real estate professional. Passive loss rules prevent deductions of losses on rental real estate, except in the event when you are actively participating in a property’s management as a developer, broker, or landlord (the deduction is limited to $25,000 and begins to phase out when adjusted gross income exceeds $100,000) – or devoting more than 50% of your working hours to this activity. This is a deduction to which the I.R.S. pays keen attention.2

Michael Snow* may be reached at 316-765-7738 or info@tower-strategies.com

http://www.tower-strategies.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

*Financial Advisor offering investment advisory services through Tower Financial Strategies Corp., a Registered Investment Adviser. Tower Financial Strategies Corp. is also a licensed Insurance agency (not licensed in all states).

 

Citations.

1-  washingtonpost.com/business/economy/your-chances-of-an-irs-audit-are-way-down-but-keep-it-on-the-up-and-up/2018/04/06/cb6c5794-3779-11e8-9c0a-85d477d9a226_story.html?utm_term=.77485a954004 [12/27/18]

2 – kiplinger.com/slideshow/taxes/T056-S001-red-flags-for-irs-auditors/index.html [12/5/18]

3 – cpapracticeadvisor.com/news/12418908/how-to-prepare-your-clients-for-an-irs-tax-audit [6/29/18]