Tag Archive for Retirement Plan

Why The Elimination Of Stretch IRAs Means It’s Time To Update Your Retirement Plan

Wealthfront

On December 20, 2019, President Donald Trump signed the Setting Every Community Up for Retirement Enhancement (SECURE) Act with overwhelmingly bipartisan support. In so doing, the most comprehensive retirement bill since the Pension Protection Act of 2006 became law. Among the SECURE Act’s many provisions comes some potentially bad news for many Wealthfront clients, and it’s important that you’re aware of it.

The law expands opportunities for individuals to participate in efficient employee retirement plans, but it also eliminates stretch individual retirement accounts (IRAs). This part of the legislation is an unwelcome change for some individual retirement savers.

Why it matters
Prior to the passage of the SECURE Act, individuals who inherited a Roth or traditional IRA were subject to required minimum distributions (RMDs) based on life expectancy. This allowed beneficiaries to continue growing the IRA in a tax-deferred manner over the course of their lives. For example, a young beneficiary would have a lower RMD and could potentially stretch the tax-free growth of the inherited IRA over decades — hence the term stretch IRA.
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Written by | Posted in Retirement Planning • Retirement Savings

Self-Employed? 5 Easy Ways To Lower Your Tax Bill

If you’re like most small business owners, you’re always looking for ways to lower your taxable income. Here are five ways to do just that.

1. Deducting The Cost Of A Home Computer

If you purchased a computer and use it for work-related purposes, you can take advantage of the Section 179 expense election, which allows you to write off new equipment in the year it was purchased if it is used for business more than 50 percent of the time (subject to certain rules).

2. Meal Expenses For Company Picnics And Holiday Parties

If you host a company picnic or holiday party–even if it is at your home–100 percent of your meal expenses are deductible. Prior to tax reform legislation passed in late 2017, 50 percent of your business-related entertainment expenses (with some exceptions) were generally deductible. Starting in 2018, however, entertainment-related expenses are no longer deductible. If you have any questions, please don’t hesitate to call.

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Written by | Posted in Self Employment Tax

Saving Taxes On Required Minimum Distributions

Harold Goedde

Taxpayers who have a tax deferred retirement plan (e.g., a 401K, 403B, 457B) or an IRA must take a required minimum distribution (RMD) when they reach age 70 ½ which is reported as ordinary income. In the year you become 70 ½, you can defer the first distribution until April 15 of the following year.

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Written by | Posted in IRA • Tax Savings

Ideas for Retirement Savings Reform

On 1/28/16, the Senate Finance Committee held a hearing on – Helping Americans Prepare for Retirement: Increasing Access, Participation and Coverage in Retirement Savings Plans.  This isn’t the first time for this topic.  There were a few hearings on this in 2014. I’m not sure if anything is driving the renewed attention to this topic now.  While tax reform is challenging in an election year, this important topic seems good for any year.  There is a need for reform of the tax rules for retirement plans to make them more equitable and simple to help more people save for retirement. Read More

Written by | Posted in Individual • International • North America • Retirement • Tax Education • Tax Tips

QLACs And RMDs: Need a Break On Your Required Minimum Distribution? Read This!

I had a number of clients hit the magic RMD age this past year. RMD is an acronym for Required Minimum Distributions, if you are getting close to 70 years of age, you will be hearing that a lot. Even if that magic number is quite a ways down the road for you, this is a post you will want to read & remember.

Read more about RMDs in detail here on my blog post.

For a quick recap about what Required Minimum Distributions are, the Internal Revenue Service (IRS) defines it as “Required Minimum Distributions generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% Read More

Written by | Posted in IRS • Retirement • Tax Tips

Retirement Plan Distribution Pitfalls

When an individual retires or leaves an employer’s service, the individual will be required to take a distribution from the employer’s retirement plan (if the employer had a plan). Depending on the employee’s age and the plan’s terms, a distribution may not be required immediately, but when it’s time to take the distribution there are a number of tax pitfalls that can create some very big tax headaches for the employee. This article will explore those hazards and discuss how to avoid them.

First and foremost, if the employee does not transfer or roll the distribution over into another employer’s qualified plan or an IRA, the entire taxable amount of the distribution will be included in the employee’s taxed income for the year of the distribution. In addition, if the employee is under 59-1/2 years of age at the time of the distribution, the employee Read More

Written by | Posted in Retirement

6 Key Points To Know About Early Retirement Distributions

Some people take an early withdrawal from their IRA or retirement plan. Doing so in many cases triggers an added tax on top of the income tax you may have to pay. Here are some key points you should know about taking an early distribution:

1. Early Withdrawals.  An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.

2. Additional Tax.  If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out. If it was an early withdrawal, you may have to pay an added 10 percent tax.

3. Nontaxable Withdrawals.  The added 10 percent tax does not apply to nontaxable Read More

Written by | Posted in Retirement

IRS Increases Contribution Amounts for Retirement Plans

The IRS announced in IR 2014-99 increases to retirement plan contributions.

Highlights include the following:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.

• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000. Read More

Written by | Posted in IRS • Retirement