How Can I Upgrade My Insurance — Tax-Free?
Responding to the changing needs of consumers, the life insurance industry has developed some alternatives that go much further in satisfying a variety of financial needs and objectives than some of the more traditional types of insurance and annuities. Advancements Modern contracts offer much more financial flexibility than traditional alternatives do. For example, universal life […]
Is There Such a Thing as a Tax-Free Investment?
The simple answer to this question is “yes.” There are two main types: (1) municipal bonds and municipal bond mutual funds and (2) tax-free money market funds. Municipal bonds are issued by state and local governments in order to finance capital expenditures; typically, municipal bond funds invest in municipal bonds. Municipal bonds are generally free […]
What Tax-Advantaged Alternatives Are Available?
A strong savings program is essential for any sound financial strategy. We take Benjamin Franklin’s saying to heart, “A penny saved is a penny earned,” and we save our spare cash in savings accounts and certificates of deposit. Investors who’ve accumulated an adequate cash reserve are to be commended. But as strange as it sounds, […]
How Can I Benefit from Tax-Advantaged Investments?
For many people, tax-advantaged investing is an excellent way to reduce their income tax liability. And while many of the traditional tax-advantaged strategies have been eliminated, there are still alternatives left that can help you reduce your taxes. Some are described below. Real Estate Partnerships Two of the most common types of real estate partnerships […]
What Is Tax Deferral?
“Tax deferral” is a method of postponing the payment of income tax on currently earned investment income until the investor withdraws funds from the account. Tax deferral is encouraged by the government to stimulate long-term saving and investment, especially for retirement. Only investment vehicles designated as “tax deferred,” such as IRAs, plans covering self-employed persons, […]
What Happens If I Withdraw Money from My Tax-Deferred Investments Before Age 59½?
Withdrawing taxable funds from a tax-deferred retirement account before age 59½ generally triggers a 10% federal tax penalty, on top of any federal income taxes due. (Distributions from Section 457(b) plans are generally not subject to an early distribution penalty; and the penalty for distributions from SIMPLE plans during your first two years of participation is […]
When Must Taxes Be Paid on IRA and Employer-Sponsored Retirement Funds?
Traditional IRAs and most employer-sponsored retirement plans are tax-deferred accounts, which means they are typically funded with pre-tax or tax-deductible dollars. As a result, taxes are not payable until funds are withdrawn, generally in retirement. Withdrawals from tax-deferred accounts are subject to income tax at your current tax rate. In addition, taxable withdrawals taken prior […]
What Is a Required Minimum Distribution?
A required minimum distribution (RMD) is the annual amount that generally must be withdrawn from a traditional IRA or a qualified retirement plan (such as a 401(k), 403(b), and self-employed plans) starting no later than April 1 of the year after the year the account owner reaches the age of 73 (for individuals who reach […]
How Much Money Can I Put Into My IRA or Employer-Sponsored Retirement Plan?
IRAs and employer-sponsored retirement plans are subject to annual contribution limits set by the federal government. The limits are adjusted periodically to compensate for inflation and increases in the cost of living. IRAs For tax year 2023, you can contribute up to $6,500 to all IRAs combined (the limit is adjusted annually for inflation) which is an […]
What Is the Estate Tax?
The estate tax is a tax on property that transfers to others upon your death. Estate taxes are assessed on the total value of your estate — your home, stocks, bonds, life insurance, and other assets of value — that is over the applicable exemption amount. Everything you own, whatever the form of ownership and […]