Since 2006 retirement savers have been able to contribute to Roth accounts via their retirement plans at work. Known better as the Roth 401(k), these unique retirement plans allow you to save after-tax dollars in an account that grows tax-free and allows for tax-free distributions during retirement.
Not every employer offers the Roth 401(k) as a feature available in their retirement plan, but when they do you should take advantage of the opportunity.
Here are 5 reasons why you should contribute to your company’s Roth 401(k).
I have been a member of the Ed Slott Elite IRA Group for nearly a decade. One of the benefits of membership is that twice a year I get to geek out on the latest rules and regulations regarding IRAs and retirement plans with over 400 financial advisors from around the country.
This is also one of the best opportunities in the industry to meet with other like-minded advisors to learn how to help our clients make the most of their retirement assets, and take a deep dive into the estate and financial planning strategies that benefit them most.
This spring’s conference in Kansas City, Missouri, did not disappoint. In the future I may do a more detailed blog post on one or more of the topics below. In the meantime, follow along as I share some of the highlights of the spring conference.
In my last post I wrote about inherited IRAs for non-spouse beneficiaries; for example, if you inherit an IRA from a parent or sibling. Most often, IRAs will pass from an IRA owner to their surviving spouse before they pass to a non-spouse beneficiary like their children.
The rules regarding spousal IRAs are different. When you inherit an IRA from your husband or wife there is one key decision you must make that could affect your ability to access funds in that IRA for years to come.
Imagine getting hit with a $500,000 tax bill just because you checked the wrong box on a form.
If you inherit an IRA, what you do next determines how much tax you will owe on your inheritance. Make a mistake and the entire IRA balance becomes taxable. In addition to owing Federal income taxes on the inherited IRA, you may also owe state income tax and possibly even estate taxes when you inherit an IRA from someone other than a spouse.
Tally it all up and half or more of the IRA could end up going to the IRS.
The average IRA balance varies by age, but for people over age 65 the average balance exceeds $212,000. In many cases IRAs can exceed $1 million or more during the IRA owner’s lifetime. A wrong move by the beneficiary could result in a gut-wrenching six-figure tax bill.
When you inherit an IRA, follow these three steps to avoid a tax disaster.
The IRS allows IRA and Roth IRA contributions to be funded right up until you file your taxes or until the tax filing deadline (not counting extensions), whichever comes first.