How to Boost your Retirement Savings

For many of us, a trip to the grocery store is a constant reminder of how much inflation keeps creeping into our pocketbooks. Add taxes, market volatility, and the rising costs of healthcare and it’s no wonder nearly 75% of us are feeling anxious or even overwhelmed when we think about our retirement savings.* Fortunately, when it comes to taxes, you don’t have to feel powerless. By planning now, you can design a tax efficient plan and feel more confident about reaching your goals. There are basically three types of accounts in which you can grow your savings. Two types are specifically earmarked for retirement: Pre-tax retirement accounts: You contribute before taxes, then pay ordinary income taxes on withdrawals after retirement. These are typically business plans such as traditional 401(k)s, 403(b)s, and SIMPLE and SEP IRAs. If you’re in a high tax bracket and/or still working, you’ll generally want to save the most in these types of accounts. Read how to ask your employer for halal 401(K) investment options. Traditional IRAs can be established outside of work. However, depending on various circumstances, your contributions and withdrawals may not be before taxes. After-tax retirement accounts: You contribute after taxes, but withdrawals

March 6, 2023 No Comments

What You Should Know About Required Minimum Distributions (RMDs)

What are RMDs? At some point, the government wants you to start spending your tax-sheltered retirement savings, or at least pay taxes on the income. That’s why it requires you to withdraw minimum payments annually from your traditional IRAs and employer-sponsored retirement plans after you reach a certain age. These are referred to as RMDs or required minimum distributions. Congress has passed significant changes related to these distributions in what’s known as the SECURE Act and its successor, SECURE Act 2.0. This legislation modifies several rules related to distributions from retirement accounts. When must RMDs be taken? The new rules now extend RMD age beyond the previous age of 72. If you were born between 1951-1959, you can now wait until age 73. If you were born after that, it’s age 75. If you fail to take your RMD, the penalty has been reduced to 25% (from 50%) of the amount that should have been withdrawn. The IRS may reduce your penalty further to 10% if you fix the error within a prescribed correction window. Your first RMD must be taken by April 1st of the year you reach RMD age. Subsequent RMDs must be taken by December 31st each

February 14, 2023 No Comments

Have you heard of a Roth 401(k)?

You’re probably familiar with traditional 401(k) plans, and we hope you know about Roth IRAs as well. (If not, check out these 5 things you should know about Roth IRAs). But did you know there’s also a Roth 401(k)? Basically, a Roth 401(k) is a 401(k) account to which you can contribute either pre-tax dollars, like a regular 401(k), or post-tax dollars, like a Roth IRA. All your contributions grow tax-free, but your pre-tax contributions will be taxable when you withdraw them in retirement and your post-tax contributions will be tax-free. It’s technically called a “designated Roth” account, and it’s an option your employer can add to your company 401(k) plan. The same provision for a Roth option can also be added to other kinds of qualified retirement plans, such as 403(b) or 457 plans. If you own a business and sponsor a qualified retirement plan for yourself and your employees, you may want to consider adding a Roth option. And if you’re self-employed and have no employees except your spouse, you could establish a solo 401(k) plan that allows Roth contributions. So why would you need a Roth 401(k) if you already have a Roth IRA? Here are four ways

January 8, 2019 No Comments

Time to max out your 401(k)

Only 13% of retirement savers maxed out their 401(k) contributions last year. Were you one of them? One great thing about saving for retirement in a 401(k) compared to an IRA is that you can contribute much more to the 401(k) account, regardless of your age. This year, you can contribute up to $18,500 if you’re under age 50 or $24,500 if you’re 50 and over. Even though it’s a great way to help create a secure retirement, a recent report showed that only 13% of 401(k) plan participants maxed out their contributions last year. Of course, many people don’t have an income that would allow them to invest the maximum amount each year. Yet interestingly, even 60% of people with higher incomes still didn’t max out their allowed contributions. Perhaps those who have the means would be more motivated to save the maximum amount if they understood how much they can build for the future. Let’s take a look at the numbers: Another thing to keep in mind about these figures is that they’re based on this year’s annual contribution limits. If those thresholds increase in future years, which they’re likely to do, and you keep pace, you stand

July 10, 2018 No Comments