A year-end checklist always gives you a number of ways to take control of your finances—and possibly save on your taxes. Here are a few to consider—just make sure you do them by December 31, 2012, as discussed by Charles Schwab & Co. 1 Prepare for new tax reporting changes. Review legislation related to cost basis reporting that could affect your taxes. 2 Convert to a Roth IRA. Compared to a Traditional IRA, a Roth IRA can give you control over your income taxes when you start taking withdrawals from your retirement account(s). 3 Turn losses into…
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In today’s tax environment – namely, a relatively low tax rate today with the perhaps-inevitable prospect of higher tax rates in the future – many people are looking to the Roth IRA as a way to hedge their tax bets. With the Roth IRA, you pay your tax upfront on contributions to the account, and withdraw them tax-free during retirement. You may want to investigate another lesser-known option available in many 401(k) plans called the Roth 401(k). Stuart Robertson of Forbes describes the Roth 401(k) as a Big Brother to the Roth IRA, saying the 401(k) version of the Roth…
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If you’ve been a diligent saver and keeping an eye on your 401(k) for all these years, it’s important to remember that the tax-man also has been looking on with interest and waiting for his cut. It’s simply too easy to forget, but a traditional IRA is tax-deferred until withdrawal, so that balance is deceiving. What is more, it means that the tax you will owe has yet to be decided. A recent MarketWatch article points out the strong possibility of higher tax rates for 401(k) savers once they reach retirement. The value of delaying a tax hit into retirement,…
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It is not uncommon for a large portion of your wealth to be concentrated in tax-deferred retirement accounts such as IRAs and 401(k)s. From an estate planning standpoint, planning for these qualified accounts brings its own sets of issues and concerns. Because of their tax-deferred nature, the tax consequences can be significant, and mistakes quite costly. The special nature of these funds also impacts charitable giving decisions. If you want to make sizable gifts during your lifetime, you may turn to your qualified retirement account(s) for these gifts. In so doing, however, you could meet head-on with negative tax consequences….
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Roth IRAs have become the darling of the financial media recently. Of course much of the chatter has been about using a Roth as part of your retirement planning strategy, and the superb conditions for Roth conversions. But what about the Roth IRA and your estate planning, what happens if you leave your Roth IRA to your estate? Marketplace Money guru for American Public Media, Chris Farrell, recently fielded the question. “When it comes to estate planning, the Roth ranks among the best of the retirement savings plans,” says Farrell. Why? Unlike a traditional IRA, a Roth does not have…
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The Tax Guy, Bill Bischoff at Smart Money recently outlined the most important ones. When should I report the income from a 2010 conversion? The benefit of a Roth IRA is paying the tax upfront rather than when you withdraw the funds during retirement, thus locking in a known tax rate. Now, though, you still have to choose whether to report that income during 2010, or elect to spread it out evenly in 2011 and 2012 (50/50.) For most, stretching it out will be the best option. Still, for some it might be better to report it all in 2010,…
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New Year’s resolutions never stick terribly well, as we are just a few weeks into the year and we have forgotten about them already, but if your resolutions were for proper retirement planning (and they should be) then you simply can’t allow them to lapse. Consider it a New Year’s follow-up, then, and perhaps take a cue from Robert Powell of MarketWatch and his recent list of eight retirement-planning resolutions for 2011. There is a good deal of specific information to be gleaned from that article and the entire eight resolutions, but it can also be boiled down to three…
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Christmas music has already begun in some stores, which also means that it’s time to begin end-of-year planning. For many, this means looking at your 401(k), and so I thought I’d share some news and tips from a recent article. Brightscope Inc., a retirement plan rating company, recently compiled a list of the 10 most commonly held mutual funds in 401(k)s. Generally, it hasn’t been a bad year for 401(k)s and investors. Nevertheless, many of the top ten underperformed the Standard and Poor’s 500 stock index. This may simply be a sign that size is not always conducive to…
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The remaining months of 2010 may prove an uneasy time for tax and financial planning – with the status of Bush-era tax cuts and the possible return of the estate tax hanging in the balance while a “lame duck” congress still has the wheel.
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