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Category Archives: Retirement Planning

Will the Recently Passed Pension Legislation Affect You?

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on January 12, 2023 by Lake Wylie Tax Services StaffJanuary 12, 2023

How will the recently passed pension legislation affect meThe President, on December 29, 2022, signed the Consolidated Appropriations Act, 2023, which is the “omnibus spending bill” Congress needed to pass to avoid a government shutdown. That legislation also included the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act, a.k.a. the SECURE 2.0 Act, that can significantly impact and augment your retirement planning strategies. The SECURE 2.0 Act incorporates provisions from proposed legislation that was passed by the House and another bill that was passed by the Senate that had not previously been reconciled.

So What’s in the Legislation That May Affect You?

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Posted in Retirement Planning | Tagged 401k, Retirement, RMD

IRS Unveils Retirement Plans Inflation Adjustments for 2023

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on November 1, 2022 by Lake Wylie Tax Services StaffNovember 1, 2022

Retirement Plans Inflation Adjustments for 2023The IRS just released the inflation adjusted retirement plans maximum contribution amounts for 2023, and the increases are dramatic. So, this may be the time to start considering funding a retirement plan if you don’t currently have one. If you are already contributing to a tax-favored retirement plan and are looking for ways to increase your annual contribution, these inflation increases will be good news.

Here’s a rundown on the various tax-favored retirement plans available and the inflation adjustments pertaining to each.

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Posted in Retirement Planning | Tagged 401k, IRA, Retirement, Social Security

Is This an Opportune Time to Convert Your Traditional IRA to a Roth IRA?

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on October 18, 2022 by Lake Wylie Tax Services StaffOctober 18, 2022

Roth IRA vs Traditional IRA in a Down Stock MarketIf your traditional IRA is invested in stocks and/or mutual funds, the recent substantial downward slide by the stock markets may provide a unique opportunity to convert your traditional IRA to a Roth IRA at a low cost, and then benefit when the markets recover.

Why would you want to do that? Because Roth IRA distributions provide tax free retirement benefits while payouts from Traditional IRAs are taxable.

Of course there is no assurance that the markets will not continue to decline, and this may not be the most opportune time to make a conversion in your specific circumstances but is something you may want to consider. Conversions provide the most benefit to younger individuals who can look forward to many years of the tax-free growth provided by a Roth IRA.

You don’t have to convert all of your traditional IRA in one year. You can convert what you can afford to pay the tax on each year.

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Posted in Retirement Planning | Tagged IRA, Roth IRA, Traditional IRA

What Is a Required Minimum Distribution?

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on August 3, 2022 by Lake Wylie Tax Services StaffAugust 3, 2022

Required-Minimum-DistributionRequired minimum distributions (RMDs) are required distributions from qualified retirement plans. RMDs are commonly associated with traditional IRAs, but they also apply to 401(k)s and SEP IRAs.The tax code does not allowtaxpayers to keep funds in their qualified retirement plans indefinitely. Eventually, assets must be distributed, and taxes must be paid on those distributions. If a retirement plan owner takes no distributions, or if the distributions are not large enough, he or she may have to pay a 50% penalty on the amount that is not distributed. (Note that distributions are not required to be taken from Roth IRAs while the account owner is alive.)

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Posted in Retirement Planning | Tagged RMD, Tax Planning

Will Your Planned Retirement Income Be Enough after Taxes?

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on July 26, 2022 by Lake Wylie Tax Services StaffJuly 26, 2022

Will Retirement Income be Enough After Taxes That is an important question because the actual money you have to spend when you retire depends upon the after-tax sources of your retirement income. Thus it is important to understand how the various retirement vehicles are taxed. There is significant diversity in taxation since a retiree must consider both Federal and state taxes on retirement income. Of all the states one might consider retiring to, there are eight that have no state income tax. These are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming. However, to make up for no revenue from individual income taxes these states may be funded by other types of taxes, such as property taxes, sales taxes, or excise taxes.

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Posted in Retirement Planning | Tagged IRA, Social Security, taxes

Read This First Before Tapping Your Retirement Savings

Lake Wylie Tax Service | Bookkeeping | Payroll Service Posted on March 8, 2022 by Lake Wylie Tax Services StaffMarch 8, 2022

Read This First Before Tapping Your Retirement SavingsYour 401(k), IRA or other retirement accounts may be a tempting source for cash if you find yourself short of funds or have a major purchase you are considering. But withdrawing money from a traditional IRA or qualified retirement account before you reach age 59 1/2 may not be the best idea, as you will likely pay both income tax and a 10% early-distribution tax (also referred to as a penalty) on any previously untaxed money that you take out.

Withdrawals you make from a SIMPLE IRA before age 59 1/2, and those you make during the 2-year rollover restriction period after establishing the SIMPLE IRA, may be subject to a 25% additional early-distribution tax instead of the normal 10%. The 2-year period is measured from the first day that contributions are deposited.

These penalties are just what you’d pay on your federal return; your state may also charge an early-withdrawal penalty in addition to the regular state income tax.

Thus, before making any withdrawals from a traditional IRA or other retirement plans, including a 401(k) plan, a 403(b) tax-sheltered annuity plan, or a self-employed retirement plan, there are two things you should carefully consider: (1) you are taking funds, and their future appreciation, from your retirement savings which can impact your future retirement lifestyle. (2) You will be creating unnecessary taxes and penalties which will increase the amount you will need to withdraw to obtain your needed funds.

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Posted in Retirement Planning, Tax Central | Tagged IRA, Retirement, Tax Planning
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