As the end of the year approaches, many people are looking for ways to make last-minute tax moves to save money on their returns in April. But the simplest way to cut your tax bill is to avoid procrastinating in the first place and getting one smart move done as soon as you possibly can.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, talks about the value of getting money into IRAs, 401(k)s, and other retirement accounts as quickly as possible in 2014. Dan notes that while most people wait until the last minute to set money aside for retirement, putting money into IRAs and 401(k)s at your earliest opportunity avoids tax pitfalls. As Dan points out, one category of potentially high-tax situations involves investing in acquisition targets, and he uses Micron Technology (NASDAQ:MU) and iRobot (NASDAQ:IRBT) as examples of how owning shares outside a retirement account can be costly if takeover rumors become reality. Meanwhile, Dan also points to dividend stocks, using the example of Frontier Communications (NASDAQ:FTR) and its recent acquisition of assets from AT&T (NYSE:T), to show the value of having high-yielding dividend stocks safely stowed in tax-deferred retirement accounts. Dan concludes that it makes sense to start as soon as you can when the New Year begins to make the most of your retirement accounts.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends iRobot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.