by Rick Staszak

Many business owners are finding it difficult to stay afloat in today’s volatile economy. There are countless aspects making it harder for them to find profit and stay competitive in the market.  Areas that are impacting many entrepreneurs include:

➢   The changing economy

➢   Taxes and insurance needs

➢   Qualified/dependable employees

➢   Employee benefits and retirement plans

➢   Competition from outside the country

It is common for business owners to grow uncertain about what they should/could do to prepare themselves for the unknown future.  Many aren’t confident about what the value of their business will be when they retire or decide to sell. Should they anticipate more volatile economic times in the future? How can their business thrive both today and tomorrow?

More than ever, business owners are re-evaluating where they have their cash and investments sitting (banks and brokerage firms), and they are searching for a financial strategist/planner who has been successful in growing clients’ investments during negative markets.

The United States has accumulated a large amount of debt and the government is broke after the trillions of dollars spent in the past 14 months on questionable stimulus and TARP programs. Taking this into consideration, many of the top economists believe that taxes will increase dramatically in the next few years.  After December 31, 2010, President Bush’s tax cuts will expire, and from all indications, President Obama’s administration will increase taxes in 2011.

As it stands now, federal income tax rates are at the lowest levels since the Great Depression.  However, the government has the ability to raise income tax rates at any time.

The country’s financial deficit will force taxes to increase moving forward. If people do not act now, they will lose a large portion of their hard-earned money to the government. Furthermore, many entrepreneurs do not understand what investment vehicles provide tax-free growth in this market environment. Most are saving for retirement by utilizing a 401 (k), 403 (b), 457 plan or IRA, and each of these carries their own set of consequences as it relates to taxation.  These retirement saving plans are slowly becoming tax time bombs, waiting to explode.

Now is the time to take control of your investments. Consider the below strategies for safeguarding savings against future tax hikes:

•   Find a licensed financial planner, with multiple designations, who has a successful track record of investing in 2001, 2002, 2008 and 2009. Your financial specialist/planner should also be able to choose from the universe of investments available today.

•   Research the tax implications associated with your retirement account (401 (k), 403 (b), 457 plan or IRA), to decide if your current savings vehicle is the best fit for your individual situation.

•   Seek out a financial specialist who can offer you an actively managed account. This will eliminate paying for numerous high commissions and, at the same time, provide you with someone who is frequently reviewing/monitoring your account throughout the year and making changes when warranted.

•   Protect 40 to 70 percent of investments from federal and state income taxes by utilizing the correct defensive investment strategies, investment tax management tactics and unbiased investment choices (ones that have performed well in past negative markets).

•   Convert an IRA to a Roth IRA without an early withdrawal penalty in 2010 to let your money grow income tax-free and provide you with several years to pay the taxes.

It’s not about how much you make. The amount you pay in taxes, paired with the net sum of the money you keep, is more important than how much you make in a year. By acting now, you can protect your nest egg from current income taxes and any future increases and better control your tax liability.  The more education and research, the better you and your business will do in today’s economy. With this said, it is imperative to have a solid financial plan intact today in order to thrive tomorrow and increase your success rate for meeting retirement goals.

Rick Staszak is a RFC, CEP and ChFEBC  with Financial Network Investment Corporation, located in Pittsburgh, Pa.. To contact him call 412-928-4999 or 412-969-4409.