Why You Should Spend Everything You Earn and Not Save a Dime.
Yes, I realize that’s a picutre of a penny, not a dime, but before I get too much off track, Slate has an interesting article,
Spend Every Dime!: Why U.S. tax policy makes saving a sucker’s game, obviously timed to coincide with tax day. What is the author, Henry Blodget, talking about? Here’s an excerpt.
If I said to you, “You can have $10,000 to spend now—or $9,500 to spend in 10 years,” which would you choose? Probably the $10,000 now. And in doing so, you would be making the same choice many Americans make when deciding whether to save or spend their hard-earned cash.
The problem is how we tax investment gains.
If you’ve been reading TR for a while, you know I would still encourage you to save for retirement, but I found the article interesting. The article does say that long-term investing in stocks does avoid some of the problem, as he sees it, but it’s not for everyone.
Unless you’re in your 20s or 30s and saving for retirement, stocks are too risky to represent your entire portfolio. So, given current tax policy, it’s no wonder we’re not saving anything.
Mr. Bloget does offer some suggestions for fixing the tax code to encourage more savings, but I’ll let you read them in the full article.
Many Don’t Take Advantage of “Saver’s Credit” When Doing Their Taxes
A recent survey found that many people aren’t aware of a “tax credit designed to help low- to middle-income Americans build their retirement nest eggs” typically called the Saver’s Credit. Officially, it’s name is the Retirement Savings Contributions Credit. One important way to know if you’re not taking advantage of it is if you’re using the Form 1040EZ to file your taxes. Form 1040EZ doesn’t allow you to take advantage of it because it can “only be claimed using the Form 1040, Form 1040A or Form 1040NR (along with the accompanying Form 8880).” Even if you’re already contributing to your company’s 401(k) play, the Saver’s Credit may still be able to be claimed.
Read the article on the survey here and check out the U.S. Government’s site about the Saver’s Credit here.
