Category: IRA

Secure Act 2.0

Here are some of the highlights of Secure Act 2.0 as it relates to personal finances:

Required Minimum Distribution (RMD) Starting Age Is Getting Pushed Back Again
- In 2020, the Secure Act changed the starting age for RMD’s to age 72. Secure Act
  2.0’s new starting age will be 75–but there’s a phase in. Here’s what it looks like:

RMD’s No Longer Required From Roth Employer Plans
- Previously there were no RMD’s for Roth IRA’s, but you still had to take RMD’s
  from Roth 401k’s, Roth 403b’s, Roth 457’s, etc.
New Roth SIMPLE and SEP IRA’s
- Prior to Secure 2.0, Roth options were not available in SIMPLE and SEP IRA’s.
Employers Can Now Make Roth Contributions
- Prior to Secure 2.0, Employer matches and other contributions to employer
  plans were always traditional (tax deferred) contributions regardless of the
  employee’s contribution.
Roth Catch Up Contributions For Wages Over $145K
- For W–2 Employees, if you earn more than $145K the previous year and you are
  making catch up contributions, they will automatically be Roth contributions.
Potential Ability to Transfer 529 Funds to Roth IRA’s
- There is a $35K lifetime limit for these transfers and several other stipulations
  that must be met in order to allow this transfer to happen (529 must exist for 15
  years, etc.)
- These transfers can start in 2024, but make sure you look up the rules to see if
  you would be allowed.
IRA Catch Up Contributions Will Be Indexed For Inflation Each Year
- Starting in 2024, the catch–up contributions for those over age 50 will be indexed
  for inflation in $100 increments
Employer Plan Catch Up Contributions Will Increase For Ages 60–63
- Starting in 2025, those who participate in Employer Retirement Plans and who
  are ages 60–63 will be able to contribute more than just the catch up
  contribution.
Maximum Annual Qualified Charitable Distributions (QCDs) Will Be Indexed For
Inflation
- The annual amount for a QCD has been $100K for 15 years. Starting in 2024,
  QCD maximums will be indexed for inflation.
RMD Penalties Reduced
- Beginning in 2023, the penalty for not taking your RMD for the year is reduced to 25% (from 50%) AND there is a correction window so that you can correct your mistake and reduce the penalty even further to 10%.

There are lots of other things in this Secure 2.0 Bill, but the above are the highlights that I feel are the most likely ones that apply to more people.

It’s that time of year again. Holidays are approaching and the end of the year is winding down. Before you get in full on holiday mode, make sure you wrap up any loose ends before the end of the year so that you can spend your time relaxing and being present with your loved ones. Here’s a quick list of items that may be helpful.

If there is anything that you need to do for taxes for this year, now is the time to do it. There are only a few retirement contributions that you can make after December 31st that will still be counted for this tax year. Everything else needs to be done during the tax year for it to count.
Have some extra money and you didn’t maximize your 401k this year? You have until December 31st to make any additional contributions for the year.
Employee Benefits—have you confirmed your employee benefits for next year? Don’t forget that you need to re-elect any FSA and HSA contributions, they do not automatically carry forward.
Gifting—the annual exclusion amount for gifts is $16,000. This means that you can gift anyone up to $16,000 without having to pay any gift tax.
- Charitable gifts are included on Schedule A-Itemized Deductions. Remember that in order to take your itemized deductions, they need to be more than your standard deduction. Check here to see what your standard deduction is.
- Because standard deductions are relatively high, some options for taking your tax benefit for your generosity could be to lump several years’ worth of gifts into one tax year by utilizing donor advised funds.
- If you are age 70.5, you are eligible to make gifts directly from your IRA to a qualified charity and never take that money into income at all. This is called a qualified charitable distribution.
- See this blog post for more charitable giving ideas.
Insurance Plan Deductibles—if you have met your insurance deductible for the year, try to squeeze in any last appointments that you can before your deductible resets on January 1.
Tax Loss Harvesting—do you have large capital gains that you may want to offset? Review your holdings to see if any changes should be made in your taxable accounts.
Address Changes—don’t forget to update your address, if necessary, with all of the people that may send you something in the mail—particularly any tax forms.
RMD’s-Required Minimum Distributions-you must take your RMD’s by December 31st to avoid penalties. Wondering who is required to take RMD’s? See this article.

Financial Journey LLC is a registered investment advisor offering advisory services in the states of Florida, Alabama, Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.

charity deductibles donations employee benefits fsa gifting hsa insurance Required Minimum Distribution Retirement RMD's taxes

RMD’s (Required Minimum Distributions)

We are approaching the end of the year, and this is when you start hearing people mention RMD’s because they need to be satisfied by the end of the tax year—December 31st.

What are they?

RMD’s are distributions that you must take from a retirement account. Essentially, the government has given you (or the account owner) a tax break for saving this money in a retirement plan and RMD’s help with getting the money back in circulation and tax revenue for the government.

Who has to take them?

This is where it gets complicated. We can break this into two groups of people: age based for your own retirement account and inherited retirement accounts.

Age based for your own retirement accounts
- You must start withdrawing money annually from your retirement accounts (except ROTH IRA’s) the year you reach age 72 (this was age 70 ½ if you reached 70 ½ before 1/1/2020).
- How much do you have to take? This is based on your age, and you follow the Uniform Life Table from the IRS—there are a few exceptions that may require another table. You can check which table to use on the IRS site. Essentially, if you are required to take a distribution in year 2024, you see what age you will be in 2024 and divide your account value on January 1, 2024 (or December 31, 2023, because they are the same number) by the factor for your 2024 age in the table. You do this each year based on your age until you empty the account, or you are no longer with us.
Inherited retirement accounts
- This is where it gets really tricky. There are a couple of moving parts. The first is figuring out if you are an eligible designated beneficiary. For the most part, this includes surviving spouses, disabled individuals, minor children or an individual who is not more than 10 years younger than the deceased owner.
  - These eligible designated beneficiaries can take distributions over their own life expectancy, except for minor children. Minor children must distribute the account completely within 10 years of reaching age 18.
  - If you are not an eligible designated beneficiary, then you must distribute the account within 10 years from the date of death of the original account owner. You also may be required to take annual distributions during those 10 years as well.

What happens if you do not take them on time?

There is a penalty for not taking your RMD and it is a big one—FIFTY (50)percent! You still need to take the RMD, pay taxes (federal and possibly state) on the amount AND pay a 50% penalty. All of this adds up and eats away at your distribution, so you really want to avoid these penalties.

Bottom Line

The bottom line is that you just need to know that these rules exist. There are people (like Financial Journey!) that can help you with the details of figuring this out—and it will most likely cost you less to hire some help than to pay one penalty of missing your RMD.

Financial Journey LLC is a registered investment advisor offering advisory services in the states of Alabama, Florida, Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.

401k Distributions IRA Retirement

Pre-retirement vs. Retirement Income Taxation

When thinking about taxes in retirement—surprise you still must pay taxes in retirement—most people look at their pay stubs and see how much they are paying in taxes. However, there are some taxes on your paystubs and W-2 that you do not have to pay.

capital gains IRA medicare Retirement Roth IRA self employed tax planning taxes

Financial Planning-is it Easy?

Over the years I have gained lots of experience in financial planning with seeing so many different scenarios-not one person’s situation is the same. Also, the CFP(R) curriculum consists of an education piece that really lays out a great framework in the Financial Planning process. When you start with a good framework that has pieces that can be replicated and add real life situations to this framework, it becomes second nature.

finances financial advisor financial plan financial planning

Year End Planning

Wow, I cannot believe it is November already. This means the winter holidays are approaching, cooler weather is coming and so is the end of the tax year. Following is a list of items to consider when wrapping up the year:

capital gains tax IRA Retirement Roth IRA savings self employed tax planning taxes

The FIRE Movement – Or choices?

Let’s start with what FIRE stands for—Financial Independence, Retire Early. Isn’t this what everyone wants? I have a theory about how this movement started. There has been a lot of research in the financial planning space and trying to figure out how much you need in investment assets and how much you can take out over the course of your retirement (safe withdrawal rate) without running out of money.

fire movement IRA Retirement Roth IRA savings

How to Choose a Self-Employed Retirement Plan

The first step to deciding which retirement plan to choose for your self-employment income is figuring out the amount that you think you will be able to contribute. From that point, then you can choose which vehicle may work best for you.

IRA Retirement Roth IRA savings self employed

What is Tax Planning?

Tax planning is considering your whole situation and making any necessary changes or decisions before the tax year is complete. Think of it as forward looking. When you prepare your tax return, you are looking backwards at things that have already happened and figuring out any credits or deductions that you can take based on things you cannot change.

capital gains charitable contributions Retirement savings self employment tax planning taxes

IRA Beneficiary Designations

As you may know, the Secure Act put an end to the Stretch IRA. The stretch IRA is the ability to stretch the IRA distributions over the beneficiaries’ lifetime. Let us look at the new rules to see how this may impact your current situation.

IRA Retirement taxes