YOU CAN REDUCE TAXES BY:

1. Taking advantage of new tax laws
2. Owning stocks instead of mutual funds
3. Planning for family wealth building
4. Investing for retirement

1. The new tax laws ease saving for retirement and education

Educational IRAs let you put up to $500 per child each year and avoid taxes on the income and growth of that money. At payout time, the advantages continue if used for education.

Roth IRAs let you save taxes forever, the way the new law is written. You avoid taxes on the income and growth of the IRA and when you draw money out it is not taxed. You have a limited time to transfer current IRAs into Roth IRAs but the decision is not easy because you have to pay taxes on your old IRA gains to do that. I can show you excellent web sites or financial firms that give you help with such decisions at no cost to you.

Some examples: First, newborn Jessica receives nearly $200 in cash from family, and an offer from Grandparents to buy a government bond for $50. A few more bucks roll in. Jessica’s parents ask Grandparents for a check payable to Pax World Fund instead of government bonds (no need to tell them government bond revenues go toward war machine and multinational collusion to rob humanity) and with $250 start a Pax World Fund Educational IRA in Jessica’s name and social security number. If they add $22 a month, and Pax continues to perform as it has this past quarter century, Jessica’s $30,000 will be tax-free for education upon completing high school.

Second example: Your 10 year old does odd jobs in your community that produce nearly $700 a year income. Your child puts 1/3 of it with your equal contribution in self-employed IRA, you declare taxable income for your child on an IRS form, and do this as long as child is your tax dependent. When that child grows up and eventually retires, he or she can draw out each week for life, the amount you put in once a year when they were your dependent.
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2. Stocks are better than mutual funds

Stocks are better than mutual funds because you have much greater control (a) over taxes and (b) the quality of what you own.

Mutual fund gains are taxed even if you never sell your fund shares (except IRAs). Taxes can be expensive. Any fund or even your own portfolio will have a "loser" from time to time. When a fund sells a loser the tax benefit is lost with the gains they take. But if you sell a losing stock you get money back on your taxes. Up to $3,000 a year. And you pay no tax on the "unrealized appreciation" on the "winners" you keep.

When you are a stockholder and you learn a certain company no longer behaves according to your ethical standards, you can write to them and say what you like and don't like about corporate conduct. If you want to be more of an activist, you can let your opinions be known in "news groups" and even start shareholder resolutions to counter the unethical behavior in question. Finally, you can always sell your shares if they fail to respond as you like. You have no such clout with a mutual fund.
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3. Family wealth building helps reduce taxes

Reducing taxes gets easier if you plan on family wealth building. By making some decisions (as best you can) before major expenses for your children come along, you can use the tax code to your advantage. For example, I know that I will not buy a car for my youngster, ever. She will have to earn that. But I will give her trips to visit relatives around the country and that will mean airline tickets in the future. She's nearly 3 and her first time alone on a plane will be about ten years hence. If I had bought one plane ticket worth (say, $300) of stock of this ethical company, Southwest Airline, at any point in its history when the stock price was no more than 15 times its earnings, and held the stock ten years, it would have appreciated enough to buy six tickets at the tenth year. If I could wait one more year, until she is 14, under current law, she has a favored tax rate for the profits. And she could take a friend along on three trips for my cost of one ticket a decade earlier.
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4. Invest for retirement

When you set aside money for retirement it is a good idea to have savings in addition to an IRA. This gives you flexibility as laws change and increases the assets available to you later. Retirement accounts are easy to establish. The new Roth IRA even promises to let you have its earnings tax free.
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