With fiscal cliff talks stalled in Washington, investors are in limbo wondering how the outcome – deal or no deal – will affect their money.
That's why we've put together the following fiscal cliff investing strategies, thanks to Money Morning Global Investing Strategist Martin Hutchinson, so you can be prepared for whatever happens.
While Hutchinson thinks a deal is likely, it might not come until the early New Year. In the meantime, here's his fiscal cliff investing strategy overview, straight from a recent report for his Permanent Wealth Investor subscribers.
- Fiscal Cliff Investing Strategy No. 1: Put Dividend Stocks in IRAs and 401(K)s
Since capital gains will continue to be taxed at a favorable rate, growth stocks are at less risk from possible tax rises. Hence your true dividend stocks should go in tax-free accounts.
- Fiscal Cliff Investing Strategy No. 2: Maximize Your "Roth Conversions" in 2012
There are two types of individual retirement accounts: regular IRAs (in which contributions are tax deductible but withdrawals are taxed), and Roth IRAs (in which contributions are not tax-deductible, income and capital gains are tax free, and withdrawals are not taxed).
Since taxes are going up in 2013 and are likely to trend higher thereafter, you want most of your money in Roth IRAs unless you are very sure your income after retirement will be low enough to be in a low tax bracket. You can't make Roth IRA contributions directly unless your income is less than $100,000, roughly.