Ally Becker, CPA/PFS’ Post

Great perspective. Qualified accounts have their place but they only do two things: 1. Defer tax, 2. Defer (postpone) the calculation of the tax.

Before Doing a Roth Conversion, Evaluate These Three Thresholds https://ift.tt/8vxaKL6 Imagine you’re crossing a road and are looking only to the left. You’ll be good for part of the road but may get hit by a car coming from the other direction. That’s kind of like doing a Roth conversion and looking only at income tax rates. You may do your math perfectly — but then realize that you unintentionally jumped into new Medicare premium brackets and possibly higher capital gains rates. I see all sorts of articles online regarding the benefits of doing $100,000 Roth conversions over a 10-year period, which makes me think that a lot of people aren’t even evaluating income tax brackets. But that’s the best place to start when evaluating whether a Roth conversion makes sense. Subscribe to Kiplinger’s Personal Finance Be a smarter, better informed investor. Save up to 74% Sign up for Kiplinger’s Free E-Newsletters Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail. Profit and prosper with the best of expert advice - straight to your e-mail. This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA. To continue reading this article please register for free This is different from signing in to your print subscription Why am I seeing this? Find out more here Finance via Kiplinger RSS Feed https://ift.tt/ABpDgHn July 7, 2024 at 05:48AM

How much of your retirement savings is actually yours? Sure, tax deductions feel good, But there can be too much of a good thing. If nothing has been taxed yet, How much is for you vs. the government? The further we look out, The more uncertainty there is. What will tax bracket rates be? What will the income brackets look like? How will your income impact SSA and Medicare? How can your loved ones benefit from different accounts? Pre-tax is the default. Don't just settle for the default. You need a real tax strategy. Most advisors won't talk about taxes, But tax prep and planning are included in our service. Every year, you'll have a plan for which accounts to use, And give yourself more control and confidence in the future. Individual vs. Joint vs. Trust accounts SEP IRA vs. SIMPLE IRA vs. Solo 401k Pre-tax vs. Roth 401k or 403b Mega Backdoor Roth 401k Deferred Compensation Traditional vs. Roth IRA HSA vs. FSA It's not about paying the least amount of taxes this year. It's about paying the least amount of taxes, period. Think big picture and have an actual tax strategy. #money #taxes #finances ***Not tax advice. This is for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.***

Normally you pay tax when you convert funds to Roth. But this year my client actually made $15k. I'll show you how 👇 (This is a post to clarify my post from yesterday.) In 2022 our client was in the highest tax bracket. In 2023, he will be in one of the lowest. One of the few retirement plan contributions you can make months after the end of the year is a SEP IRA contribution. You have until the extended deadline to make this contribution. Since it was a high income year, we recommended that our client make a $62k SEP IRA contribution when we filed the 2022 tax return in October 2023. This saved him $32k in tax, which was applied to his 2023 tax return. Next, we advised him to convert the funds in his SEP IRA to a Roth IRA. He did this just a couple of days after putting the money in his SEP account. Converting to Roth means he has to pay tax on the $61k. But, since he is in a lower tax bracket for 2023, he only has to pay $17k in tax to do the conversion. Since the $32k savings was applied to 2023, he still has an additional $15k leftover after paying the $17k tax on the conversion. This means that he only paid $46k out of pocket (61k - 32k + 17k), but now has $61,000 sitting in a Roth IRA. This money will never be taxed again, and we just created $15k out of thin air. Call it savings or call it earnings. Either way, I think it was a pretty cool idea! Any questions? Please put them in the comments. What are some other ways you can get a similar result? #money #taxes #finance #strategy #motivation

"You want me to pre-pay the IRS?!" That's what you're doing when you convert pre-tax IRA money into a Roth IRA. Better known as a Roth conversion. It can seem illogical to do something like this. Until you start thinking about future taxes. Savings vehicles like 401ks and Traditional IRAs are terrific. You invest money pre-tax, lower your current taxable income, and save for the future. But at some point you have to pay the piper... aka, Uncle Sam. He knows you've been saving the dollars and they've yet to be taxed. He is patient but does have his limits. When you reach the age of 73, it's time to pay up. This comes in the form of a Required Minimum Distribution (RMD). Uncle Sam makes you withdraw a certain amount from those pre-tax accounts each year so he can tax them. Again, he's got a long memory. If you've been a great saver, you may realize these RMDs can be quite large. And every dollar that comes of your 401k or Traditional IRA is taxed as ordinary income. The higher your RMDs... the more taxes you pay! So back to this idea of pre-paying... Let's say you retire. You realize that you don't have a paycheck anymore and not paying nearly as much in taxes. This can be an ideal time to consider a Roth conversion. You transfer - or "convert" - pre-tax funds from your Traditional IRA to your Roth IRA. The amount converted is now taxable. However, if you're in a lower tax bracket, you'll pay less tax overall. Often much less compared to when your RMDs begin. The cherry on top... those funds are now growing inside your Roth IRA, which mean you won't pay any taxes on those investments in the future! -Less tax liability, and... -Tax-free future growth That's a win-win. A word of caution... there are a lot of moving parts when it comes to taxes. Don't jump in head first. But if you do your homework and put together a good plan, you may realize that doing Roth conversion could save you serious $$ in taxes over time. And that makes the idea of "pre-paying" seem a lot less crazy. #rothconversion #taxplanning #retirement

Are you a high-earner and feel like you're missing out on one of the most tax-advantaged accounts out there, the Roth IRA?🤔 The solution? Backdoor Roth IRA As we step into 2024, the rules haven't changed: If you're single with an income above $161,000 or married filing jointly with a combined income over $240,000, the direct path to a Roth IRA is closed to you. ☀️ But where one door closes, another opens - through the backdoor. The Backdoor Roth IRA strategy offers a solution.☀️ Regardless of your income level, you can make a non-deductible contribution to a traditional IRA and then convert it to a Roth IRA. I spoke with a client this week who wasn't aware that he could do this strategy while he still makes contributions to his 401(k) plan through work! This strategy has helped many of our clients, especially retirees looking to diversify their retirement savings and enjoy the Roth IRA's benefits: tax-free growth, no required minimum distributions (RMDs), and tax-free inheritance for your heirs. 📌 But be cautious: If you have other pre-tax IRA funds, the pro-rata rule could apply, triggering significant taxes on the conversion. However, pre-tax 401(k) accounts don't count in this equation, while SIMPLE and SEP IRAs do. It's a delicate balance, requiring precise navigation.📌 https://buff.ly/4a1BzKb. *This educational insight is not financial advice but a starting point for discussions with your financial advisor and CPA to tailor a strategy that fits your unique situation. #taxplanning #rothira #retirees #financialplanning

Here's how to pay less taxes on your investment portfolio today with proper tax planning One common issue I've observed is individuals holding a significant portion of their investment portfolios in a non-reg account or within their holding company despite having RRSP and TFSA contribution room. This can lead to unnecessary tax payments. When holding investments in your non-reg account, you're forced to pay taxes on interest and dividend income today. You might be asking yourself, should I maximize my RRSP my TFSA or leave the money in the non-reg account? I will walk you through three different scenarios so you can make an informed decision. Scenario one: you're in a 40% tax bracket today when you're contributing to your RRSP, and you will withdraw that amount at retirement in the same tax bracket at 40%. In this case, whether you're contributing to your RRSP or your TFSA, they provide equal benefits over a non-reg account. Scenario two: if you're in a 40% tax bracket today and expect your earnings to continue growing and be in a 50% tax bracket during retirement, then you're better off by maximizing your TFSA first and then filling up your RRSP. Keep in mind that the TFSA only has a room of $7,000. So, if you're a high-income earner with a high saving rate, you will fill that up pretty quickly, and then you will fill up your RRSP, which is still better than keeping the money in your non-reg account. Scenario three: you're in a 40% tax bracket today, and you'll be in a 30% tax bracket during retirement. Then, you're better off by maximizing your RRSP today over your TFSA. The RRSP is going to give you two benefits, deferred taxes, as well as reduced your taxable income over your lifetime, given that you will have contributed in a higher tax bracket and taken the money out in a lower tax bracket. This is how I help clients with asset location decisions and tax planning strategies based on their situation so that they can - Build more wealth - Retire earlier - Spend more in retirement What's your approach to minimizing your taxes over your lifetime? Comment below! #TaxPlanning #InvestmentPortfolio #RRSP #TFSA #AssetLocation #TaxStrategy #FinancialPlanning #RetirementPlanning #TaxEfficiency #WealthManagement

Imagine you’re crossing a road and are looking only to the left. You’ll be good for part of the road but may get hit by a car coming from the other direction. That’s kind of like doing a Roth conversion and looking only at income tax rates. Let an Ericksen Krentel professional can help you navigate the process! #retirement #rothIRA #IRA #taxes

Exciting news for families with a 529 Plan! Starting this year (2024), a new tax law allows tax-free rollovers from 529 plans to Roth IRAs, thanks to the SECURE Act of 2019. 📅💰 Here’s what you need to know: 💰 529 Plan is ideal for college savings, contributions and withdrawals are tax-free for qualified higher education expenses. 💰 Roth IRA is a tax-advantaged retirement account where earnings from investments are tax-free. 💰 Starting 2024, you can rollover funds from your 529 Plan to a Roth IRA. You can contribute up to $10,000 per year (couples: $20,000) tax-free. It’s important to note funds must be held in the 529 Plan for at least five years to avoid taxation on gains. 💰 Consult with financial professionals (like us) to navigate potential tax implications and other considerations for the filing year. Ready to explore this opportunity? Contact us today! We're here to guide you through the process and maximize your financial benefits. Related Topics: CPA accountant tax preparer accounting services tax planning taxes Roth IRA #accountingservices #californiacoast #tax #taxseason #taxrefund #taxreturn #taxprofessional #wealthbuilding #wealthmanagement #buildwealth #buildingwealth #moneysaver #moneytips #encino #irs

Exciting news for families with a 529 Plan! Starting this year (2024), a new tax law allows tax-free rollovers from 529 plans to Roth IRAs, thanks to the SECURE Act of 2019. 📅💰 Here’s what you need to know: 💰 529 Plan is ideal for college savings, contributions and withdrawals are tax-free for qualified higher education expenses. 💰 Roth IRA is a tax-advantaged retirement account where earnings from investments are tax-free. 💰 Starting 2024, you can rollover funds from your 529 Plan to a Roth IRA. You can contribute up to $10,000 per year (couples: $20,000) tax-free. It’s important to note funds must be held in the 529 Plan for at least five years to avoid taxation on gains. 💰 Consult with financial professionals (like us) to navigate potential tax implications and other considerations for the filing year. Ready to explore this opportunity? Contact us today! We're here to guide you through the process and maximize your financial benefits. Related Topics: CPA accountant tax preparer accounting services tax planning taxes Roth IRA #accountingservices #californiacoast #tax #taxseason #taxrefund #taxreturn #taxprofessional #wealthbuilding #wealthmanagement #buildwealth #buildingwealth #moneysaver #moneytips #encino #irs