Tag: RMD

Part 2 – Tax & 401k Info for ALL Ages

Part 2 of “under the radar” tax law changes. These changes lead to a needed discussion of current, related tax topics applying to ALL ages of savers with 401k accounts – and possibly IRA accounts too. There is still a decent amount of time remaining in 2023 to make a difference in 401k saving.

Remember that Roth 401k plans have slightly different income requirements than Roth IRA accounts:

  • Roth 401k accounts (which run alongside regular 401k accounts) have NO income limits.
  • Roth IRA accounts DO have income limits.
Roth 401k monies have NO RMDs under current tax law. Traditional, pre-tax 401k monies have RMDs and create taxable income in the future.

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Double-Edged Sword of Aging

Clearly another topic with multiple sequels, aging has its positives and not-so-positives. Recently a slight positive – from the IRS.

Its Life Expectancy Tables, otherwise known as the “IRS Uniform Life Tables I, II and III”, have adjusted the American life expectancy UP by approximately two more years. That means that RMD amounts, or required minimum distributions, from IRA, 401k and other retirement accounts will be slightly lower when calculated. These RMDs count as taxable income so even a small break will be welcome!

Increasing longevity is a compelling reason to develop or maintain a well-laid out long-term savings plan.

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Year-End Tax Planning Tips 2021

Tax planning is important stuff. Perhaps not as exciting as the markets but saving money on taxes can still be exciting! Mid-November begins the countdown to year-end. The following is a handy Tax Planning Checklist.*  Some of these items, if done now, could make a big difference to the 2021 tax year AND add to savings.

1. How close are you to maxing out your 401k? The max is $19,500 for those under age 50 and an extra $6,500 for those age 50 and above. The deadline is December 31st and lots of 401k and 403b plans allow contributions of as much as 25-30% or even 100% of pay. Contribution rates can be lowered again in the new year.

There is still time remaining in 2021 to accomplish tax-deductions and/or create new savings vehicles!

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The Biggest Winners

It is only fair that if there was an edition two weeks ago titled “Biggest Losers” there be an accompanying edition, “Biggest Winners.” Because there are A LOT of winners out there. But the financial and news media do not sell advertising talking about winners.

Here are the most obvious Winners, especially financially speaking:

Several of my clients and I painfully combed through their spending as part of the financial planning process. In most cases, these people came out with a greater awareness of who and what is most important to them.

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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:

COVID_Cares-Act
Call me with questions or curiosities related to temporary changes related to 401k plans, IRAs and RMDs.

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