Do you have a significant portion of your retirement assets in a 401(k) plan or traditional IRA? If so, you’re not alone. Many Americans use these tax-deferred vehicles to accumulate retirement assets.
Traditional IRAs and 401(k) plans provide tax benefits in several ways. First, your contributions may reduce your taxable income. Traditional IRA contributions may be tax-deductible, and 401(k) contributions are taken from pretax earnings. As long as the funds stay inside the account, you don’t pay taxes on your growth.
The new year is upon us. For many people, that signals an opportunity to implement new strategies and pursue important resolutions. One of your major goals may be to catch up on your retirement savings. If so, you’re not alone. According to a Gallup study, more than half of Americans are worried about their ability to afford retirement.1
The good news is it’s never too late to take action and stabilize your financial future. Perhaps you started saving for retirement late in your career. Or maybe you suffered some setbacks along the way that limited your ability to save. You can make 2018 the year that you get back on track and take control of your retirement plans.
For many, New Year’s is a time to look to the future and start fresh. It’s a time to set goals and chart a new course. You may be looking at your family’s finances as one area where you can implement new habits and strategies. Perhaps you’ve fallen behind on your savings or feel that you may be too exposed to risk. The new year might be the right time to analyze your current situation and make changes.
The good news is there are many steps you can take to strengthen your family’s financial picture that are relatively simple. Below are five such steps. Use the new year as a time to reflect on your current financial picture and take action to make improvements. If you haven’t undertaken the following steps, now may be the time to do so.
Considering an early retirement? Maybe you’ve accumulated enough savings to retire in your 50s. Or maybe you’re facing a health issue or job loss that’s pushing you into retirement. No matter the reason, early retirement can present a number of unique challenges.
One of the biggest issues that early retirees face is taking distributions from their qualified retirement accounts, such as IRAs and 401(k) plans. These accounts are tax-deferred, which means there are no taxes on growth as long as the funds stay inside the account. However, distributions may be taxed as income. Additionally, if you withdraw funds from a 401(k) or an IRA before age 59½, you could face a 10 percent early distribution penalty.
Are you considering making a sizable financial gift to a friend or family member? A financial gift can be a great way to make a difference in a loved one’s life. It can also be an effective estate planning strategy, as gifting may potentially remove assets from your estate. That could reduce the amount of assets that face probate and the estate tax.
Gifting could trigger its own set of taxes, though. You may not know that the gift tax exists or how it works. Depending on the size of your gift, you could face up to a 40 percent gift tax.1 If you fail to pay the tax, the recipient may face additional tax obligations.