Special teams players are the unsung heroes of the football team. These guys have to be multifaceted and versatile even though the time they spend on the field is limited. We have all seen football games that were won or lost in special teams. If you can’t stop a punt or kickoff return you are in trouble. On the flip side if you can get a couple blocked punts or field goals you have drastically increased your chances at winning.
Managing Your Tax Burden
This falls into two categories, the now and the later. Basically it amounts to whether or not you are paying your taxes on your current income or your future income. A lot of people probably plan to have a lower income when they retire and therefore would prefer to pay deferred tax, in other words they pay tax when they withdraw it from their account when they retire. Deferred accounts are things like traditional IRA, 401(k), and 403(b) accounts. Additionally you can have accounts where you pay the income tax now and they are tax free when you withdraw them, typically you see Roth IRA’s in this category.
In addition to managing your future tax burden you need to be diligent about managing your current burden as well. There are plenty of people who love to get that massive tax return at the end of every year, however, they don’t realize they are really loaning Uncle Sam their money for free. Now you want to make sure you don’t underpay by too much, because unlike you the government charges for you hanging onto their money. Additionally you should be aware of the tax liabilities associated with your investment accounts and other assets. You need to diversify your tax burden across the various types of taxable accounts, it isn’t going to be the same for everyone and if you have a siginificant amount of wealth to manage you should probably look into an estate planner.
Investing for the Future
Investing is not my forte to say the least. To me they are the kicking team, even though it is really the offensive powerhouse on the team. Either way you are going need to look at some form of investing. Most people, my self included, limit themselves to retirement accounts as their main focus of investing. One day I would like to have the cash on hand to be able to start investing using regular taxable account but until then I will keep at it with my 401k.
The trick here is to not let yourself be fooled into not investing at all, many people, like me, are intimidated by stocks, bonds, funds, ETF’s, Forex, Etc. Etc. The truth of the matter though is that the puny APY on your savings accounts or the minimal return on your cd ladder aren’t going to out pace inflation. What this means is that your investments while gaining value will actually be worth exactly the same, or more likely less than when you put them in. This is why long term investing in the stock market is so common place and the excepted norm for retirement accounts.
At the very least start putting into your companies 401k until you max out the matching. Within the plan there should be some target funds that adjust based on your age and risk aversion so just pick out one of those to start with. After you are rolling you can start to research more about what your options are and starting making educated decisions on where to put your money.
Photos: (Monica’s Dad)
What would you put on your financial special teams?
This post is part of a series of posts where I relate personal finance to the game of American Football. Be sure to check out the other posts in this series:
Take it Ten Yards at a Time
You are Nothing without a Good Defense
Special Teams can Make or Break You
It’s All About Teamwork