Is it just me, or do you also feel like the last two years have flown by? It’s always a busy time of year with the holidays, but it’s important that we take some time to financially prepare for the end of the year and the beginning of a new year.
Here are some things to consider as you weigh potential tax moves before the end of the year.
Defer Income to Next Year
Consider opportunities to defer income to 2022, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services in order to postpone payment of tax on the income until next year.
Look for opportunities to accelerate deductions into the current tax year. If you itemize deductions, making payments for deductible expenses such as medical expenses, qualifying interest, and state taxes before the end of the year (instead of paying them in early 2022) could...
You may be familiar with traditional retirement plans available to employees, but there’s a lot of confusion about retirement plans for self-employed or business owners. The great news is that if you are self-employed or own a business, you can create retirement plans for yourself and any employees you have. Having a retirement plan option for your employees can even benefit your business by attracting quality people who are in it with you for the long haul!
Either way, a huge advantage of having a retirement plan is that you’re able to begin saving for the future. The earlier you start saving, the better, but there is by no means a “wrong” time to start investing or contributing to a plan.
Like I mentioned before, having a retirement plan could help you attract qualified employees who wish to stay with your company. This is true whether you have 2 or 200 employees.
Also, in the case of qualified plans and some...
A self-directed 401(k) or 403(b) is an additional investment option to the traditional retirement plans offered by your employer. It might be available to you and you don’t even realize it. In those traditional plans, your employer pre-approves funds you can invest in, whereas a self-directed 401(k) or 403(b) allows for a little more flexibility in choosing what you can invest in.
Whether it’s you or someone outside your company’s organization, the option of a self-directed 401(k) could be great for you if you like having a little more say in where your money goes. It’s important to note that not all employers offer this option, so check with your organization to see if you’re able to participate in a self-directed brokerage of your investments.
I can’t tell you how many people I’ve talked to who have no idea how their 401(k) is invested. It’s usually not managed well because...
The coronavirus has created some interesting situations around money and managing investments, one of which is the CARES Act. The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) includes a number of ways to help retirement savers find relief in an economically turbulent time.
A few benefits of the CARES Act include… Required Minimum Distributions (RMDs) for 2020 have been suspended and if you’ve already taken a distribution, you may be able to return it. Loan repayments from workplace retirement plans could also be delayed.
Additionally, the IRS has relaxed the rules around early distributions of retirement plans. The 10% penalty is waived for “coronavirus-related distributions” of up to $100,000 in 2020 if you take the distribution before age 59.5. This includes both IRAs and 401(k)s, as well as 403(b)s, 457(b)s, and similar tax-deferred plans.
Coronavirus-related distributions apply to individuals or spouses who have been diagnosed with...
Whether you’re starting a new job that offers retirement savings options, or you’re looking into managing your investments yourself, it’s easy to get overwhelmed. If you feel like investment lingo is too far beyond your wheelhouse to tackle, learning about the different types of retirement account is a good place to start. In this case, get a basic understanding of the differences between a Roth IRA vs 401(k). Let's work through what each of those types of accounts is, how to use them, and the pros and cons of each. Spoiler alert: Some people are eligible to take advantage of both account types.
A 401(k) is an employer-sponsored savings plan, which is often included in the benefits package of a full-time job. If your job offers a 401(k), you can sign up through your employer. The account is then managed through the financial institution of your employer’s choosing.
Once you’ve signed up for your 401(k) account, you’ll have...