Thank you for watching. Stay safe and TGIF!
Kerrie
Video: 401k Tip and a Cautionary Story
Tag: 401k
The 401k Trap
The real title of this edition is: The 401k Trap – Have a 401k Strategy.
It has become clear that there is more to saving in a 401k than…simply saving in a 401k. Last year, amidst no travel and not being able to see clients and friends face-to-face, two colleagues and I took 5 months to write an actionable guide to the critical need – due to potentially higher taxes in the future – for a strategy around 401k saving TODAY. For Everyone. The name of the paper is: The 401k Trap.
For those who are just getting started saving in a company 401k or 403b, the strategies we suggest could make a huge difference in 10 years and beyond; for those who have been saving in a 401k for 15-20 years or more, a strategy may be even more urgent.
The key reason is taxes. It is true that no one knows for sure where tax rates will be in 5-10-20 years from today. But with history as a guide and the fact that tax rates on the federal level are near all-time lows, the conclusion can be drawn that tax rates will only be higher in the intermediate- and long-term future. This state of affairs will punish those who have done the hard work of saving large balances in pre-tax 401k and IRA accounts.
Here is the Table of Contents – please email me at kdebbs@msfsolutions.com for a copy of the paper.
- Oh, How Times Have Changed!
- Longevity
- 401k Today
- Risk of Increased Government Spending
- An Aging Population
- Dirty Little Secret
- Historic Tax Brackets
- Surprise
- The Earlier the Better
- The Debt Clock
- The Wake-Up Call
- Bonus Checklist
Thank you for reading, stay safe and TGIF!
Leap of Faith
These are trying times. Despite the strains of pandemic, home schooling, work furloughs, and entire families sitting at dining room tables on laptops… there are still BIG decisions and “leaps of faith” to be made. Namely,
- Annual Healthcare Enrollment (deadlines looming)
- 401k contributions by year-end amidst a year of zany cash flows
- Kids’ high school enrollments (these have changed for lots of people)
- College semester enrollment and tuition payments
- Home improvements like, “Do I add a home office?”… and more.
- Don’t even get me started on – “Do I know who my beneficiaries are?” or “When do I start taking Social Security?”
This is nuts!
2020 Year End Tax Planning Tips
As we approach the end of the weirdest year ever, nearly everyone wants 2020 to be O-V-E-R (unless you love birthdays, and your birthday is between now and December 31st).
The year-end countdown has begun, and soon it will be too late to make certain positive changes to your 2020 tax situation. Several of these items, if addressed now, could make a big or small difference to your 2020 tax filing, AND add to your savings.
Tax Traps, Part 1
Talking taxes on a Friday is a lot easier than talking taxes on a Monday! Believe it or not, at this time of year it is smart to be talking taxes no matter what. Preparation and planning are the name of the game.*
The issue of higher FUTURE taxes is critical to clients of all income levels – especially those in higher tax brackets – and all ages. You will hear me repeatedly hammering home this “tax trap” issue – with the research and collaboration from my sources to back it up.
Here is some “good” news when it comes to taxes and tax strategies: the Roth IRA, Roth IRA conversion and Roth 401k are alive and well for now. The “good” part is that for nearly ALL reading this, you ARE eligible for both the Roth IRA conversion and the Roth 401k (if your company offers a Roth 401k) even if you are in the higher/highest income brackets or own a business! And these strategies can be employed NOW for 2020 and 2021.
Photo by Karolina Grabowska on Pexels.com
Tax Time Groundhog Day
Now that the calendar has turned from April to May there will be in effect a “Tax Time Groundhog Day” on July 15th, which is the new 2019 Federal (and most States*) filing deadline for 2019 taxes.
A number of people reading this note may already have signed and filed their 2019 tax returns^ in order to turn the page and move on to 2020 spending, budgeting and saving. However, if you are in the camp that is stretching out your 2019 filing until the July 15th date, then consider a few last-minute items:
A Couple of Practical Suggestions
Very short note today as we do our best to stay strong amidst the Coronavirus crisis.
In talking to clients, friends, neighbors, and “kids” of all ages, the questions come down to, “Is there anything financially proactive we can be doing at this time?”
Tax Law Changes That Matter For You
As the year turned from 2019 to 2020, there stealthily rolled in several of the most sweeping reforms to retirement and tax legislation in a decade or so (outside of the 2017 Tax Cuts and Jobs Act, or TCJA). The recent changes apply to IRA, 401k and other retirement savings accounts. If any of these apply to you then please read on:
- Inherited IRA
- Turning 70½ this or next year
- Own a business with or proposing a 401k plan
- Working for a small company and do not have access to a 401k plan
- Need an early distribution for reasons of qualified birth or adoption
2020 Contribution and Gift Limits
A handful of updates for 2020 IRA & 401k contribution and gift limits:
- For Traditional IRAs and Roth IRAs the 2020 contribution maximum remains the SAME in 2020 as in 2019: $6,000 (plus $1,000 to total $7,000 for those age 50 and over).
- REMEMBER!! IRA account contributions can be made all the way up until April 15th for the previous tax year.
- That means that you have until April 15, 2020 to make an IRA contribution for 2019.
Time is Running Out
There are just twelve business days remaining in December. If you are realistic about the number of days remaining to transact actual business, it is more like eight days. Use these eight days wisely!
