Northstar Financial Planners, Inc.
Chief Operations Officer
Steve Tepper joined Northstar in May, 2007 as COO after 20 years in the corporate world in a variety of capacities, including Financial Planning and Analysis, Audit, Human Resources and Software Development. He runs the operations of Northstar, with responsibility for all back-office operations, compliance as well as long-range planning. In addition, he also assists the other advisors in monitoring, maintaining and rebalancing client portfolios. Just about everything except sales and marketing fall under his auspices. He has a Master of Business Administration degree from Florida International University and an undergraduate degree in Liberal Arts from Miami University in Oxford, Ohio.
Steve has called South Florida home since 1985. His daughter Lian graduated from University of Central Florida and lives in Cocoa Beach. His son Jake is a junior in high school. Steve spends his spare time writing, playing guitar and bass, mourning the latest Cleveland professional sports team disappointment, and traveling.
According to irs.gov, because you are covered by a retirement plan at work, the tax deductibility of contributions to a traditional IRA are not deductible if your joint modified AGI is greater than $119,000.
A couple questions to help clarify your goals and develop a plan:
You say you want to grow your wealth. For what? For retirement which might be 4 decades or more away? To purchase a house within 2 years? If you are looking for long-term growth, stay away from CDs, which will very likely fail to outpace inflation. Look into low-cost, broadly diversified stock and bond funds to begin building a retirement nest egg. Vanguard has a lot of good options. If your financial goal is more short-term, invest a larger portion of your money in bonds to reduce the risk of a large loss from a market downturn right at the time you need to withdraw the money.
Is there a retirement plan offered through your employer? If so, it might be a better option to build your retirement nest egg through payroll deduction (pretax dollars) into your employer's plan, once again looking to invest in broadly diversifed funds. If your employer offers any kind of match (100% match of up to 3% of salary, or 50% of up to 6% of salary for example), then you want to take advantage of that by contributing at least enough to get the full match.
If there is no retirement plan through work, and if the money is for retirement, then you have three main account types to choose from:
1) a regular brokerage account. You deposit money - no limit on how much - and it grows over time. You pay taxes on gains when you make trades in the account, but not when you withdraw money.
2) a regular IRA (individual retirement account). The money you deposit - up to $5,500 per year - is tax deductible in the tax year it is deposited. There are no taxes due when you make trades, but when you make withdrawals, you pay income tax on the whole amount. If you withdraw money before age 59 1/2, you also pay a 10% penalty.
3) a Roth IRA. Money you deposit now - also up to $5,500 per year - is not tax deuctible but when you make withdrawals after age 59 1/2, you pay no tax, either on principal or on gains. As with the regular IRA, trades in the account do not result in taxable gains.
Your choice of which account type to select depends on what is most important to you: If your current tax bracket is high, the regular IRA might be a good choice, but if not, look at the Roth. If you can invest more than the annual limit of $5,500, open a brokerage account as well.
Your understanding is correct. In the given scenario, the sale basis of your home for determining capital gains would be $374,900 minus $10,000, so there would be no capital gain on the sale. Good luck!