This tax season, taxpayers across all income levels looking to reduce their tax burden may overlook opportunities that they or their advisors are unaware of.
Required minimum distributions first. Taxable accounts next, followed by traditional IRAs and 401(k)s. Roth IRAs and 401(k)s last. That’s the standard sequence for tax-efficient portfolio draw down during retirement. The overarching thesis is to be sure to tap those accounts where you’ll face a tax penalty for not doing so (RMDs) while hanging on to the benefits of tax-sheltered vehicles for as long as possible. Because Roth assets enjoy the biggest tax benefits–tax-free compounding and withdrawals–and are also the most advantageous for heirs to receive upon your death, they generally go last in the withdrawal-sequencing queue.
BlackRock, the world’s largest money manager, recently asked a group of Americans in defined-contribution plans, such as 401(k)s, how they’re fixed for retirement. Most said they’re on track to kick back in comfort. Are they crazy?
While the era of “alternative facts” dawned in Washington last week, experts from across the ideological spectrum gathered in the capital for a review of real facts about our two most important retirement programs: Social Security and Medicare.
Under the original rules for Social Security, workers became eligible for a benefit upon reaching their full retirement age of 65, with a slight increase in benefits if the worker delayed until as late as age 70. However, full retirement age itself has always been a moving target. It was pushed from 65 to 67 in 1983, and Congress frequently raises the specter of pushing it even later — which, if acted on, could diminish the utility of a retiree delaying his/her Social Security disbursal. What follows is a look into how to navigate the knowns, and unknowns, of Social Security payouts.
If you are one of the millions of Americans with a retirement-savings account, three of the most important letters in your financial life might be these: RMD.
In 2015, the Internal Revenue Service audited only 0.84% of all individual tax returns. So the odds are generally pretty low that your return will be picked for review. That said, your changes of being audited or otherwise hearing from the IRS escalate depending on various factors.
Congress has periodically looked at the idea of simplifying tax-sheltered savings, but for now investors have to wend their way through a dizzying maze of tax-advantaged investment wrappers: multiple types of IRAs, company-retirement plans, and college-savings accounts, each with its own tax treatment, its own set of rules governing who can contribute and how much, and its own policies on distributions. It’s all enough to make you wish for the good old days of certificates of deposit and passbook savings accounts.
They’re questions nearly every young and middle-aged worker has asked themselves: Should I leave my job and retire early? What would I need? How do I know I’m ready?
If you’re considering retiring early, you’ll forego not only the headaches of working, but also the additional money earned that could have made your retirement even more comfortable. To help you decide, here are six signs you may be able to retire early instead of continuing to work.
Wealthy people usually aren’t born that way. Most spend their lives amassing their fortunes by working hard, spending little, saving a lot and investing wisely. It may sound like a simple strategy, but the fact that the vast majority of Americans fall short of millionaire status proves that it’s easier said than done.