Ron Caruthers Profile picture
Financial Morpheus. If you've been lied to about money your entire life, when would you want to know? I teach you the truth about your money and taxes.
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8 Apr
1. Always keep your eyes open for opportunity: Flower Fields edition:

So, the 'World Famous' Carlsbad Flower Fields are right next to my office.

They bloom from March through late April.
2. They started in the 1920's because the area I live in is famous for these flowers and poinsettias

These guys are called rinneculous....I think.

Anyway, they bloom, they die, and then the bulbs get shipped worldwide.
3. When I first moved here, they were free. You could just pull up and start walking through them and of course we took family photos there for years.

BUT, someone eventually decided to start charging to enter them, since they are so popular.

Then, they started giving hay rides
Read 6 tweets
2 Apr
1. Why your 401k, 403B and Traditional IRA's suck Part TWO of 2

With even MORE math.

On Monday, I wrote abouat a client that is 25, makes about $40,000 a year and has been contributing $12,000 a year to her 403b.... the public employee equivalent of a 401k or IRA.
2. And what I pointed out was that at her current tax rate, she was 'saving' $1,957 a year in state and federal taxes,

BUT,

she would have a huge tax bill coming due on the money she deferred AND everything it made that would be in the hundreds of thousands of dollars.
3. And that is JUST on the money that she's already put in there, which is currently worth $50,000.

If you missed that thread, you can read it here:

Read 31 tweets
30 Mar
1. Why your 401k, 403B and Traditional IRA's suck Part 1 of 2

With math.

We have a client that is 25 and she makes about $40,000 a year.

She's currently putting $12,000 a year into her 403b and has $50,000 in it already.

Which is awesome.
2. But moving forward, we're making some changes.

Let me show you why:

She works for a city, so in CA she gets the Public Employees Retirement, which is much better than Social Security.

Because she started young, she'll like retire in her early 50's.

Let's say 55.
3. Now, IF she NEVER puts one more dime into her 403b and it earns 7% net over the next 30 years,

She'll have $380,613.

However, most people don't just pull their retirement accounts out all at once, they pull them over their lifespan.
Read 12 tweets
16 Mar
1. On getting stuff done:

My daughter is currently trying to rework her major at Berkeley and get a double major.

And she's a little frustrated because her academic advisor is not getting back to her, and she has a time sensitive decision.

So, she asked for some advice: Lexi and Me!
2. The specifcs aren't as important as the attitude I've learned to approach things with, which is what I'll lay out here:

She was waiting for ONE advisor to get back to her.

With a 30 second search, I found 3 OTHER advisors that she could reach out to,
3. Including 2 of the first advisor's bosses.

I not only found their emails, but their direct lines as well, AND for one of them, I even found a Zoom link for open office hours starting in 10 minutes, which I told her to get on.

Her question:

Which one should I do?
Read 8 tweets
24 Feb
1. Biggest Tax Myth EVER:

Thinking you'll be in a lower tax bracket when you retire.

This will likely NOT be the case because of the #1 retirement killer:

Inflation.

You will consistently need to receive more money each year JUST to maintain your standard of living
2. At 3% inflation, you will NEED to double your income every 24 years just to keep up.

And, here is something that will blow your mind:

In 1913, the first year income taxes started, the threshold of the lowest bracket was 1% of income up to $20,000
3. Today, in 2020, it is 10% on your first $19,750 of taxable income.

So, the tax is higher and the threshold is LOWER than it was over 100 years ago.

So tax thresholds have NOT kept up with inflation.

Oh, and if you make good money?
Read 6 tweets
23 Feb
1. Joe Biden's Tax Plan:

They're going up.

#shortestthreadever

Kidding.

Well, they ARE going up, so that part isn't wrong, but here are the specifics, as best we can tell....for now*

*subject to change if Uncle Joe changes his mind, so this is hypothetical for now
1b. But, if you want to know what is likely to happen, read on........
2. The maximum tax rate is going up on income over $400,000 a year – from 37% presently to 39.6%. 

Also, you currently don't pay the highest rate until you make $622,000....so the tax is not only going up, but you're getting there sooner.
Read 19 tweets
19 Feb
1. How reverse mortgages work: A Primer.

Reverse mortgages are possibly THE most misunderstood financial instrument out there.

In this thread, I'm going to cover the basics of how they work AND how to use them.

You should pay attention even if you're younger.
2. So, first off: It is a mortgage.

That's it.

JUST. A. Mortgage.

However, unlike a forward or traditional mortgage, this one works, well, in reverse.

So first, let's go over the rules, and then we'll discuss how and when you might want to use this vehicle.
3. To qualify, you can only have one at a time, and it can only be on your main residence, where you reside at least 6 months of the year.

If you're married, at least one spouse has to be 62, except in Texas, where both spouses have to be 62.
Read 34 tweets
31 Dec 20
1. Year End Tax Tips:

Yes, there is still time to save money on taxes for 2020....even today.

Here is a list of some of your top options:

A) You can pay your kids up to age 18 up to $12,400 and if they have no other income, they owe NO federal taxes, but YOU get the deduction
2. Next up, you can prepay your expenses up to 1 year, using the IRS Safe Harbor:

This allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS.
3. Qualifying expenses include, among others:

-lease payments on business vehicles

-rent payments on offices and machinery

-and business and malpractice insurance premiums
Read 15 tweets
23 Dec 20
1. Should you contribute to an IRA or a SEP IRA to 'save taxes'?

It's the end of the year, and you can contribute to one of these pretty much right up until you file your taxes.

And, for many of you, this is the ONLY tax advice your accountant will give you.
2. But, like my mom used to say 'just because you CAN do something, Ronnie, doesn't mean you SHOULD.'

(I usually did anyways....and whenever I got called Ronnie, my legal name, I knew I was in trouble).

Anyway, you guys know I like math so let's get to the math!
3. So, let's say you're a single guy or gal making 60k a year.

And you're taking the standard deduction, which is $12,400

Your 'take home' pay will be about $46,835.

That means you're paying $13,165 in taxes (including state and FICA taxes,)

Or, roughly 22% of your income. Image
Read 17 tweets
16 Dec 20
1. How to know when it's time to quit your day job and go full time on your side hustle.

My thoughts.

I got asked this yesterday, and here is the formula I've used with clients that seems to work.
2. First, I recommend that you make AT LEAST 2x your day job income before even THINKING about quitting.

Yes, you can do it on less, but remember: right now, you're getting a steady check while you make side money, so it takes a lot of pressure off of you.

That will change.
3. Also, you are probably going to have to pay more in taxes, and cover your health insurance, so you'll NEED to make more money to take care of those things.

That's why I recommend 2 times your day job income.

Also, unless you work for a start up, you check has been steady.
Read 6 tweets
16 Dec 20
1. Your 401k sucks beyond the match because you are postponing paying taxes on it AND on EVERYTHING THAT IT EARNS.

And, you're postponing the calculation of the tax.

So, what should you do instead?

Here are 3 solid options:
2. First, a Roth IRA is a solid choice.

With a Roth, you do not get a current year tax deduction, BUT...

...your money grows tax -free AND after 59 1/2, you can withdraw it tax-free.

Also, you can access what you contributed without penalty or tax at anytime.
3. You can also pull $10,000 from a Roth IRA without tax or penalty for the purchase of your first home, as long as you've had the account for at least 5 years.

And the definition of 'first home' simply means you have not owned a home in 2 years.
Read 17 tweets
9 Dec 20
1. Will you get audited if you employ tax savings strategies, like @WCarlRussell is concerned about.

It's a pretty rational concern.

In fact, the IRS COUNTS on enough people having this fear so that they do NOT try anything.

However, how real is it?
2. First off, your odds of getting audited statistically DO climb if you add self employment income OR losses.

But, they climb from a .8% chance each year to a 1.2-1.4% chance each year.

In other words, about 8 people out of 1,000 get audited, vs 12-14 that own businesses.
3. So, the odds are WAY in your favor that nothing ever happens.

And there are things you can do like filing at the last minute that seem to improve those odds in your favor.

However, the SECOND point is even more important than the first:
Read 8 tweets
8 Dec 20
1. How to write off your next mattress or hot tub. (yes, hot tub)

First off, this thread is for business owners.

BUT, you should read this even if you do NOT have a business..so you have some idea of what I mean when I say that the tax laws were all written for business owners.
2. With this strategy, here is just SOME of what you can legally deduct:

-air conditioning

-a mattress (those suckers are EXPENSIVE!)

-hearing aids

-a pool

-a hot tub

-vitamins

-weight loss programs,

-etc.

Now, HOW do you do that?

Read on:
3. What you need to set up is a Medical Reimbursement Plan, also known as a 105(b) plan.

It is NOT a typical insurance plan.

It is a legal fringe benefit plan that permits you to claim FULL deductions for reimbursing your employees (including spouse and family) ...
Read 36 tweets
5 Dec 20
1. Have you refinanced your mortgage yet?

Rates are still as low or lower than I've ever seen them.

Recent example: one friend of mine's parents refied their mortgage from 4.5% down to 2.5%.

The payment went from $1,700 a month to $1,300 a month.
2. So even though they added 4 years because their mortgage had 26 years left and they refinanced to a 30 year,

if you run the math, they STILL are saving $61,400.

Even AFTER adding 4 more years to the mortgage.

OR....
3. If they invest that difference of $400 a month at 7% (easily done over a long term with even index funds, though there are better places IMHO)

They will have...

....wait for it.

$487,988.

NOT a typo.

Or.....
Read 11 tweets
3 Dec 20
1. Since it is year end, now is the time to check the beneficiaries of your stuff....life insurance, brokerage accounts, trusts....things like that.

Making sure your ex-wife/husband is NOT the beneficiary of your life insurance is step number one!
2. I'm not a lawyer, and I don't play one on TV, so you should seek competent legal advice and not listen to really anything else I say in this thread, etc, etc

BUT, if you choose to stick around, here are some things to watch out for.

You know, from your non-lawyer friend Ron.
3. So first off is to make sure who you want is correctly listed.

And usually that should NOT be your minor children.

In most states, a minor child can only inherit between $5,000 and $10,000 directly without involvement from the court.
Read 11 tweets
29 Oct 20
1. Little known IRS relief just for the asking!

If you're new in business, it is really, REALLY easy to get behind on taxes.

However, there is a little known rule called 'first time abatement' where they will waive the penalities IF you ask:

No reason required!
2. Here is how it works:

If you get behind on filing your taxes, they can assess you up to 25% in additional penalties

AND ANOTHER 25% for failing to PAY the tax.

However, you can request a 'First Time Abatement' without giving a reason as long as:
3. This can apply to Failure to File, Failure to Pay AND Failure to Deposit (if you have employees).

You can request this simply by making a phone call to the IRS and requesting First Time Abatement, and it will most likely be granted if you meet the following criteria:
Read 5 tweets
24 Oct 20
1. <sigh> Chadwick Boseman, the Black Panther star if you don't get out of the house much, died without a will.

Guys, SERIOUSLY, please go get a will (and a trust, if you need one) TODAY.

Here are the top 3 reasons why you need this:

A. So what YOU want to happen, happens.
2. Without a will, the state gets involved and makes decisions FOR you. (Bastards!)

B. Making your family go to court for this SUCKS. A trust can avoid a lot of this, and is an act of LOVE for those you care about, because it makes less work for them.
3. Finally,

C. It keeps things from getting messy.

Look, people are ASSHOLES when someone dies.

Greed brings out the WORST in people.

I've seen families fight over $3 cans of tuna and want that deducted from a person's 'share' because someone got hungry and made a sandwich.
Read 5 tweets
23 Oct 20
How to Spot a Scholarship Scam:

As the cost of college tuition continues to increase, so has the demand for scholarship money.

Now scam artists are preying on college students, and their parents, with phony scholarship offers that promise money, but only deliver debt.
Last year students lost more than $100 million to scholarship scams.

The Federal Trade Commission and the Department of Education have teamed up to fight this growing type of fraud.

In 2003, the FTC received 670 complaints of scholarship fraud.
In 2004, that number shot up to 4,486.

I wasn't able to find more recent data....sorry.. but I'm sure it's even worse now.

Here are seven ways to protect yourself:

1. Beware of identity theft.
Read 12 tweets
23 Oct 20
1. What is THE unpardonable sin in an IRS audit?

Suppose you just received that lovely letter from the IRS telling you that you are the subject of an IRS audit.

What ONE record receives special attention?

What ONE record can create a nightmare for you if you did a sloppy job?
2. What ONE record makes the IRS suspect that you are the keeper of lousy records?

Think of the record people MOST hate keeping.

That’s the one I'm talking about.

You have probably guessed what that record might be.

And it's a huge red-flag for the IRS Examiner
3. Once your audit examination begins, the examiner likes to see this record.

If the record is missing or lacking, the IRS examiner knows that your other records probably are lacking, too.
Read 20 tweets
22 Oct 20
Parents: Are AP classes a waste of time....or WORSE?

Thread:

If you have a kid going to highschool, then please pay attention to this.

I first wrote about it in 2005, and it was my most requested article for reprint EVER.

Pay attention:

👇
First, let me tell you what I see a LOT of:

kids getting loaded up with 3, 4, or in some cases 5 AP classes in one semester,

and they’re doing mediocre in ALL of them….which ultimately KILLS their chances of getting in to a top college.

Why?
Usually, it’s because ONE of the classes is completely over their heads, and they have to struggle so much to keep up in that class that they can barely keep their heads above water in the other classes.
Read 18 tweets
16 Oct 20
Thread: Why I hate bonds and what I use for my clients instead.

One of the most common financial 'rules' is not to have all your money in the stock market.

And, to break your money down into something like 60/40 stocks to bonds.
Now, if you're completely unfamiliar with either, here is the basic difference

(If you already know, you can skip down a couple of tweets for the good stuff)

A stock is where you OWN a portion of a company, and so you participate in both the gain of their stock,
AND, you can receive dividends if they pay them (essentially passing along some of their profit to their shareholders.)

A BOND is where you LEND money to a company and they pay an interest rate and promise to pay you back at a set time, like 5 or 10 years.

BUT....
Read 94 tweets