Grandparents attending graduation ceremonies are a wonderful family tradition. Now a coming tax law change will create another meeting of education and retirement, this time affecting two tax-free savings plans. (Photo by RDNE Stock project) Many of us face a dilemma when it comes to two of the biggest reasons for saving, retirement and education. Do we split our extra income between the two? If so, evenly or with one account getting a boost? Or do we defer one for the sake of the other? The answers will depend on your personal financial and family situations, as well as your... Read more →
Retirement
Photo by Juan Ramos on Unsplash May is graduation month. It's also graduate gift giving time. Money is always tight for the new diploma recipients (and their families), regardless of whether they've completed high school or college. That's why financial gifts are always welcome. One of those graduate gifts for students looking to continue their school days is a contribution to their 529 plans. And one source of those contributions could be, for older savers, their required minimum distributions. Quick 529 overview: These savings plans, named from the Internal Revenue Code that created them, originally only covered higher education expenses.... Read more →
Photo by Gustavo Fring Millions of Americans are worrying about the damage to their retirement accounts if the United States (aka Congress) defaults on the country's debt. But there's another retirement fear that could put federal and state governments on the hook for trillions more dollars. Many Americans aren't saving enough for retirement, and new research says that if the trend continues unabated, the country could by 2040 face a retirement savings gap and resulting economic burden of almost $1.3 trillion. The federal government would bear the bulk of the saving shortfall, $964 billion. The remaining $334 billion burden would... Read more →
Image by www.epictop10.com via Flickr CC Now that Tax Day is over for many of us, it's time to make some moves for the 2023 tax year and beyond. Well beyond for many is retirement. The Internal Revenue Code offers a variety of tax breaks for savings designated for post-work years. One of the most popular is the individual retirement arrangement, or IRA. IRAs come in two versions, traditional and Roth. Pre-tax money goes into a traditional IRA, and in some cases the contribution is tax deductible. But when you get into your 70s, you must take required minimum distributions... Read more →
Photo by Nicola Barts If you turned 72 last year and didn't take your first required minimum distribution (RMD) by Dec. 31, 2022, you have a few days to take the mandatory withdrawal. April 1 is your deadline to take out the specified amount from your tax-deferred retirement savings account(s). This year, however, is the last one for the age 72 RMD trigger. The latest retirement law changes in the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 changed the RMD starting age to 73. However, there's been a bit of confusion about the change. Some people have... Read more →
Blinders may work for horses, but they're terrible for taxpayers who might miss out on some tax savings. (Photo by Graham Ruttan on Unsplash) The Tax Cuts and Jobs Act's expansion of the standard deduction amounts means even more taxpayers are using that filing method. Most think that since they don't itemize, they don't need to worry about tax breaks. They're wrong. There are the above-the-line deductions, officially known as adjustments to income, that anyone can take (if they qualify), regardless of whether they take the standard deduction or use Schedule A. Then there are some tax credits, again available... Read more →
If you're in your seventies, it's time to start preparing for nest egg withdrawals, some of which are required by federal tax law. A couple of new retirement laws over the last few years, collectively known as the Setting Every Community Up for Retirement Enhancement (SECURE) Acts, have made a lot of changes to retirement plans and the collection of associated taxes. One revision was the bumping up the date when most older owners of tax-deferred retirement accounts must start taking some money from these savings. Starting in 2023, required minimum distributions, known by the acronym RMDs, don't kick in... Read more →
March is supposed to come in like a lion and go out like a lamb, at least according to the old weather saying. Feline ferocity also could help when it comes to taxes. We need that predatory focus since we only have around six weeks — less due to that dang hour we'll lose this month to Daylight Saving Time! — until our federal (and state, for some folks) returns are due. That aggressiveness also could pay off long after the annual tax deadline, thanks to tax breaks that can help add to your post-work savings. So let's not waste... Read more →
We're just a couple of weeks into this new year, and I've received three 1099s and a donation thank-you letter. I am not alone. Official tax forms and statements are filtering into mail boxes, both curbside and electronic, across the country. The exact tax-related documents differ from taxpayer to taxpayer, but we all share one thing. We need them in order to accurately fill out annual tax returns. They include W-2 forms for folks with wage-paying jobs, 1099-NECs for freelancers, and 1099-MISC and DIV documents for those who have investment earnings. It is, after all, called an income tax. But... Read more →
The tax year is over. Long live the tax year. Taxes are, if nothing else, persistent. Sure, there are a few (or more) changes every year, even if it's only inflation adjustments. But even in years when the changes are negligible, they are back, starting to add up on the first of every January. That's why 2023 is the first By the Numbers honoree of this new year. The transition from an old to a new tax year is also the focus of this post. It's a look at six tax matters that affected or at least fascinated us in... Read more →
Don't miss out on any tax breaks as you put together your retirement plan. That includes claiming the Saver's Credit if you're eligible. Some retirement savers got an early Christmas present. On Dec. 23, President Joe Biden signed into law the $1.7 trillion omnibus package that keeps the federal government running and more. Among the more was a revision of retirement provisions known as the Setting Every Community Up for Retirement Enhancement (SECURE) Act. And one of those changes is the eventual conversion of the Saver's Credit into a matching contribution tied to workplace plans and IRAs. That's a good... Read more →
Merry Monday Holiday After Christmas on Sunday. Happy Boxing Day. Joyous End-of-Year Tax Tasks to Complete Week. Yep, the start of the last week of 2022 has a lot of identities. But it's that last designation that you need to pay close attention to, since the end of the tax year is critical when it comes to many tax moves. Here are eight you need to consider and, if they apply to you, complete by Dec. 31 — or actually by Friday, Dec. 30, in some cases since it's the last business day of 2022. 1. Take your required minimum... Read more →
To ensure your golden years truly shine, you need to save now. Changes in the SECURE Act 2.0, which has been added to crucial year-end legislation, could help. (Photo by 401k2012 via Flickr CC) You might have noticed that as 2022 has been winding down, there's been an unofficial theme for the ol' blog's posts. Many of them have focused on tax laws' effects, good and bad, on retirement savings. Part of that is personal. I like what I do for a living, but with each passing day, I (and the hubby) think increasingly about retirement. We're in good shape,... Read more →
Yes, you've got a lot to think about during the holidays, but add this tax task, too, if you're older and have a tax-deferred retirement plan. Don't miss the Dec. 31 RMD deadline. If you read my December tax moves post a couple of weeks ago, thank you. Now I'm here to reiterate one of those end-of-year actions. Take your required minimum distribution. That sentence makes sense to older readers who used tax-deferred retirement accounts, such as a traditional IRA or traditional 401(k) workplace plan, to save for retirement. But Uncle Sam doesn't want to wait forever to collect on... Read more →
Photo by Pixabay Health and retirement are inextricably linked, and not just when we talk about staying in good shape in order to enjoy post-work years more fully. The link also is evident in the tax code, notably with the tax benefits of health savings accounts, or HSAs, that I blogged about last week. An HSA starts as a way for high deductible health plan enrollees to save tax-free for medical expenses, and then can morph into retirement funds when the account owner is older. In doing research for that HSA post, I ran across another retirement connection to the... Read more →
Life today demands multitasking. That includes taxes. And the champion here is the health savings account, or HSA. It offers three tax advantages. First, contributions to an HSA are made before taxes are assessed on the money. This lowers your taxable income a bit. Second, HSA funds grow tax-free. Third, when you use HSA money to pay eligible medical expenses, those withdrawals are tax-free, too. A flexible, multiple, and mobile savings option: But wait. There's more. There's no use-or-lose with an HSA. The full amount in the account simply rolls over from year to year. Plus, an HSA is quite... Read more →
Photo by Guneet Jassal on Unsplash It's December! Are you ready for all the decorating and shopping and cooking and parties and tax moves to make? Yep, tax actions need to be added to your already very long holiday to-do list. You only have 31 days to take advantage of some Internal Revenue Code provisions that could save you money. That's always a welcome gift from Uncle Sam, but especially at this time of year. Plus, if you take relevant tax steps sooner in the month, you'll also free up time for more traditional festivities. So let's get to it.... Read more →
Women are making some advances in workplaces, but still face challenges when it comes to saving for a secure retirement. (Photo by Christina @ wocintechchat.com on Unsplash) I've spent most of my professional life writing and, for the most part, I've enjoyed it. But I've also, for the most part, looked forward to tapping away at a keyboard because I want to, not because I have to. That's part of the reason I shifted to freelancing. The freedom of being an independent contractor is, (one more time) for the most part, the best thing about the arrangement. So that I... Read more →
The Tuesday after Thanksgiving has become a popular donation day. The charitable boosting effort, dubbed Giving Tuesday when it was initiated in 2012, is now the unofficial kick-off of the annual end-of-year charitable season. Most people don't give to good causes because they get tax breaks. Thank goodness for that, since the 2017 tax reform bill made it more difficult to claim a charitable deduction for donations. And that brings us to the first of this post's six charitable donation tax tips. 1. Itemizing required: The only way to get a tax deduction for your donations is to claim them... Read more →
Photo by Mikkel Bergmann on Unsplash We're into the Thanksgiving weekend and still noshing on leftover turkey. (Or, in my case, pumpkin pie.) But here's a Tax Turkey you shouldn't let linger. Don't wait to look into converting, in full or partially, your traditional IRA to a Roth IRA. Individual retirement savings options: IRAs, or individual retirement arrangements (although most of us read the A as account), have long been a popular way for individuals, with or without a workplace retirement plan, to save for their post-work year. The original version, now known as a traditional IRA, debuted in 1975,... Read more →