Renee Wants to Know

Sailing

Away

How do you rent a boat at the lake?

by Renee Roberson

A group heading out on a boat from Cornelius Pontoon Rentals.

One of the best things about living in a lake area is . . .well, access to a 34-mile long lake with more than 520 miles of shoreline. Even if you don’t live on the water or own a boat, you can join a boating club or rent a kayak or stand-up paddleboard for a little exercise— through local businesses and the Lake Norman YMCA. But what about if you want to actually just rent a boat for a few hours with some close friends or family? What are some things you need to know? I did a little research to figure out the best way to enjoy a day on the water without the responsibility of boat ownership or maintenance.

I reached out to the owners of Cornelius Pontoon Rentals and found out they provide a wealth of information right on their website for anyone interested in renting a boat for the day. Safety first— anyone born after Jan. 1, 1988 must complete and show proof of the NASBLA boating educating course before operating any vessel propelled by a motor of 10 HP or greater. The course is free and available online through boatus.org. Some boat rental places also require you have previous boating experience.

Depending on your needs, there are local businesses in the Lake Norman area that offer rentals for WaveRunners and pontoon boats. You reserve a boat in advance for two to four hours and meet the boat at one of the local boat ramps (such as Blythe Landing or Ramsey Creek Park). In many cases, the boat rental company stocks the boat with coolers of ice and snacks, swimming noodles and directions for places to see on the lake. You simply get in the boat, take off for a day in the sun, and return the boat to the same dock.

Obviously, spring and summer are going to be busier seasons for boating, so make sure to do your research on the different boat rental companies and plan to make reservations well in advance of when you’d like to go on the lake. In addition to Cornelius Pontoon Rentals, Carolina Boat Rentals is also located in Cornelius. Lake Norman Boat Rental and Sales in Mooresville has a variety of boats for rent, plus experienced drivers for an additional cost if you prefer to go that route, plus tube rental kits.

The bottom line is, there are plenty of ways you can enjoy a day out on the lake jet skiing, boating, tubing, docking on an island and swimming to your heart’s desire. I recommend starting at VisitLakeNorman.org and researching which rental company has the best options for your needs. Then make your reservation, suit up in your jacket (required for children under 13 at all times and recommended for everyone else), and enjoy lake life at its finest.

What’s the difference between qualified and non-qualified money?

The financial planning community can be a confusing place even for experienced investors. One of the most common questions we’re asked is the difference between qualified (tax deferred) accounts, and non qualified (taxable) accounts. These are important questions, so let’s review this so you’re better equipped to understand how each account can work for you.

Qualified accounts are most commonly your employer sponsored retirement plans such as 401(k)’s 403(b)’s, 457(b)’s or even your traditional IRA. There are two primary benefits to qualified accounts.

First, contributions to your qualified plan are deducted from your taxable income in the year that you make the contribution.

Second, the growth on the account grows tax-deferred until you take money out. This offers compounded growth on your investments, which offers significant growth potential over time.

But, you trade liquidity and flexibility for the tax advantages. They’re considered retirement accounts for a reason. The government has attached restrictions to ensure you don’t touch them before you retire. If you need money out of your retirement account before you reach age 59 ½, the government penalizes you an additional 10% for taking the early withdrawal (plus the tax owed on the withdrawal).

The second issue is the IRS forces you to begin taking money from these accounts at age 72. They call this your Required Minimum Distribution, and they even tell you how much you have to take. In the event that you don’t meet the requirement, you’ll face a penalty of 50% on the withdrawal and still owe taxes on the distribution.

So the reality of your plan is that you have a 12.5 year planning window where you have control over whether you take money out of your account or not, without penalty.

This brings us to #3 - the future tax implications of your accounts. The tax that you owe on the withdrawal will be based on your tax rate when you take the money out. Guidance tells you that you’re likely to experience a lower tax rate in retirement. We question the likelihood of that. From a lifestyle standpoint, do you think you’ll want to take a pay cut in retirement?

Moving on to non-qualified accounts which don’t receive preferential tax treatment today. No deductions for the money you contribute, and no deferral on the growth you earn. There’s no restriction on how much or how little you decide to invest, and no limitation on what or when you take it out. The money that you use to invest in non-qualified accounts is the money that shows up from your paycheck and ends up in your bank account, so you’ve already paid tax on it.

These dollars that you reinvest establish your “cost basis”. This is the money recognized by your investment company as dollars that have already been taxed, to make sure you won’t be taxed on them again. When you go to take money out of these accounts, you’ll be taxed on the growth in the account, but not on your cost basis.

Finally there’s a third type of account - tax-exempt accounts. These are accounts that offer tax-free distributions. These are your Roth 401(k)’s Roth IRA’s, and HSA’s. There are also provisions in the tax code that exempt certain permanent life insurance from taxes. These accounts can be valuable if you think taxes might be higher in the future, because they can take tax risk and uncertainty off the table.

A properly constructed financial plan should seek to achieve tax-diversification. With proper balance, you have the opportunity to potentially cut your tax bill in retirement - keeping more of your money where it belongs, in your pocket.

If you have questions about your personal tax strategy, we invite you to schedule a 30-minute discovery call by visiting www.twwcall.com.

Derek Bostian, CFP® Professional | Jason Rindskopf, WMCP® Two Waters Wealth Management | 704.275.2500

Investment advisory and financial planning services offered through Advisory Alpha, LLC a Registered Investment Advisor. Insurance, Consulting and Education services offered through Two Waters Wealth Management, LLC. Two Waters Wealth Management is a separate and unaffiliated entity from Advisory Alpha. While tax and legal issues may be discussed in the general course of financial and investment planning, Advisory Alpha does not provide tax or legal services.