Year end is a great time to review your 401k contributions -- or 403b/457 plan contributions if you don’t work for a private company. I like these plans for a lot of reasons. Most plans these days have some decent investment options. Some have both pre-tax and Roth contribution options. Your employer may match a portion of your contribution. Many plans allow you to set up an ‘auto-increase’ on an annual basis. You set your contribution to increase by a certain amount (usually a percentage of salary) each year. One of my clients set up auto-increase to coincide with her annual raise. After several years she hit the maximum! But best of all, the money is …
Retirement
How Will You Pay Your Taxes in Retirement?
A client once asked if there is an upper age limit for paying taxes. Answer: No, there is no upper age limit on paying taxes. If you have enough taxable income you must file and pay even if you are a 100 years old. In fact, it’s likely that someone will still be dealing with your tax concerns after you pass away. Death and taxes – two of life’s certainties. After retirement, many people are not sure how taxes will work. Nothing in the tax code is simple, but I hope to shed a little light on post-retirement taxes. Today, I am focusing on Federal taxes. Your state might tax none/some/all of your retirement income. First, let’s take a look …
A break for low-income seniors in MA – the Circuit Breaker Tax Credit
Massachusetts Senior Circuit Breaker Tax Credit The Massachusetts Senior Circuit Breaker Tax Credit has been around for a long time. But I suspect not everyone who is eligible takes advantage of it. Once in a while I come across someone, usually a client’s elderly parent, who is unaware they are eligible for this credit. When that happens they can file/amend the last 3 years of tax returns. This results in a $3,000+ windfall. Taxpayers may be eligible even if they aren’t required to file tax returns. This credit is available to both homeowners and renters. This article is specific to Massachusetts, but there are similar programs in many other …
You Must Take a Distribution from Your IRA But Don’t Need the Money- Now What?
Recently, I was sitting with a client celebrating the fact that her IRA balance is nearing $1 million dollars. This is always an exciting milestone. I rang the bell for her. In 2023 my client will turn 72 and she will need to take a distribution from her IRA. The distributions are called Required Minimum Distributions. (RMDs) RMDs must also be taken from employer retirement accounts such as 401k/403b plans starting at age 72.* The starting age was recently changed, it used to be 70.5The amount that must be distributed is based on a calculation – more on that below. Why does the government require these distributions? Because in most cases the …
Have you looked at your Social Security statement recently?
The Social Security Administration recently started rolling out newly designed statements. The new statements graphically illustrate the increase in income from delaying benefits. Here’s the retirement benefit information from an old statement: From a different client, the retirement benefit illustration from a new statement: The new design helps workers get a better understanding of the income increase they can gain from delaying their benefits. It can make sense to delay claiming your benefit even if you have retired. It all depends on the numbers, but if you have other assets to draw on, holding out for a larger Social Security payment could be more …
