It’s tax day, sort of. This year we get an extension until April 18.
Since taxes are on most people’s minds today, I thought I’d take a break from materials handling and weigh in on the budget debate. I have a simple idea I’d like to throw out to the government, in case the powers that be in DC read my blogs. It’s neither a Democratic nor a Republican proposal, but it would make my life simpler. Here goes.
When my accountant does my taxes, he jokes that I’m the one client for whom he has to check all of the available boxes. “You take advantage of every break there is,” he tells me. This is not to imply that I have any money or that my income is that big. I don’t and it’s not. Only that for a variety of reasons, I’ve got a bunch of tax advantaged savings accounts that have to be tallied up when I do my taxes. For instance …..
Way back in the 80’s, I opened an IRA when they first became available. When Roth IRAs were introduced, I converted my conventional IRA into a Roth.
Because I am self-employed as a writer and occasionally have a windfall, I opened a SEP IRA, which allows me to contribute more money towards retirement than I can in the Roth.
Because my wife and I own a retail store and want to put away more towards retirement than in the Roth, we have SIMPLE IRA’s through the store. They work just like a 401K.
Because I purchase my health insurance on the private market, I have a tax advantaged health savings account.
Because we have a child, I opened an Ed IRA when they first became available to save for college. And, when 529 plans became available, I stopped saving in the Ed IRA and began saving in the 529 plan. But, since I couldn’t withdraw the money until she started college, I maintained two types of college savings accounts.
That’s a total of six different types of tax advantaged savings programs for one individual. Each has its own set of rules that determine how much can be deposited every year, what kind of tax break I do or don’t get and how, when and under what conditions the money can be withdrawn without penalty. Each has to be tracked and managed by me. And, since not every financial institution offers every type of account, I’m spread across four different financial institutions – Merrill Lynch, Schwab, Fidelity and Home Federal Savings.
Wouldn’t it be simpler, more efficient and cheaper to roll all of these programs into one tax advantaged personal savings account with the flexibility to use the savings for qualified health care, college and retirement expenses?
Will it solve the deficit? No. But I think it would encourage personal savings for big life events. And it sure would make my accountant’s life easier.
Now, get those tax returns in the mail.