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☆ How high earners can funnel money to a Roth IRA, the 'gold standard' of retirement accounts
▼ + stars: | 2024-09-05 | by ( Greg Iacurci | ) www.cnbc.com time to read: +5 min

Roth contributions don't get the same upfront tax break: Investors fund Roth IRAs with after-tax money, but generally don't pay income taxes on earnings or withdrawals in retirement. The 'only reason' to save in a nondeductible IRALordhenrivoton | E+ | Getty ImagesHigh earners can contribute to a so-called nondeductible IRA, however. The ability to use the backdoor Roth IRA is a major benefit of these accounts, tax experts said. watch now"The only reason you'd do [a nondeductible IRA] is if the intention was to do a backdoor Roth," Slott said. "All high wage earners should consider looking at both a backdoor Roth IRA and a mega backdoor Roth IRA if they can't set up a Roth IRA," said Ted Jenkin, a certified financial planner and founder of oXYGen Financial, based in Atlanta.

Persons: Thomas Barwick, Roth, Slott, Ted Jenkin, He's Organizations: Investors, Roth IRA, IRA, CNBC, Taxpayers, IRS, Arnold, Mote Wealth Management, Medicare, nondeductible Locations: deductibility, Atlanta, Hiawatha , Iowa

☆ How a Roth conversion ladder can save on future taxes and unlock retirement funds early
▼ + stars: | 2024-07-09 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

Roth individual retirement account conversions are a popular way to reduce future levies on pretax 401(k) or IRA withdrawals — and you can smooth out the upfront tax hit with a "Roth conversion ladder," experts say. Roth conversions transfer pretax or nondeductible IRA money to a Roth IRA, which offers future tax-free growth. The trade-off is regular income taxes incurred that year on the converted balance. By comparison, a Roth conversion ladder is a series of conversions over multiple years, meaning "you're paying taxes in smaller increments," said certified financial planner Preston Cherry, founder and president of Concurrent Financial Planning in Green Bay, Wisconsin. Of course, boosting your adjusted gross income any year can trigger other tax consequences, such as phaseouts for certain tax breaks.

Persons: Roth, Preston Cherry, Ashton Lawrence, pretax, Lawrence Organizations: Roth IRA, Finance, CFP, Mariner Wealth Advisors Locations: Green Bay , Wisconsin, Greenville , South Carolina

☆ This 'bucket strategy' could lower your taxes in retirement — here's how to maximize it
▼ + stars: | 2024-07-03 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

Many retirees don't think about taxes until it's time to withdraw funds from a pretax account, which can be a costly mistake, financial experts say. Only 3 in 10 Americans have a plan to reduce taxes on retirement savings, according to a Northwestern Mutual study from January that polled roughly 4,600 U.S. adults. However, the "bucket strategy" is one way to minimize that burden, according to certified financial planner Sean Lovison, founder of Purpose Built Financial Services in the Philadelphia metro area. More from Personal Finance:Bigger IRA balances can be a 'tax nightmare' in retirement, advisor saysIs holding too much cash a mistake? Roth conversions transfer pretax or nondeductible IRA money to a Roth IRA, which won't incur levies on future withdrawals.

Persons: Sean Lovison, Trump, Lovison, Roth Organizations: Northwestern Mutual, Finance, Roth IRA Locations: Philadelphia

☆ These tax strategies can be a 'silver lining' after a prolonged job layoff, advisor says
▼ + stars: | 2024-06-07 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

"It's not a free lunch" because you'll still owe regular income taxes on the converted balance, she said. Converting funds to a Roth IRA "can be a great opportunity for tax-free growth and future tax-free distributions," Franco‑Cicero said. Leverage the 0% capital gains bracketIf your income is low enough, you could leverage the 0% long-term capital gains tax bracket to rebalance a taxable portfolio or save on future taxes, experts say. For 2024, you may qualify for the 0% long-term capital gains rate with taxable income of $47,025 or less for single filers and $94,050 or less for married couples filing jointly. That's because the bracket is based on taxable income, which is calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.

Persons: Alvaro Gonzalez, Roth, CFP Catalina Franco ‑ Cicero, Tobias, you'll, Franco ‑ Cicero, Quinones Organizations: CFP Catalina Locations: Plantation , Florida

☆ Roth conversions are up in 2024 — but it's not always a 'slam dunk,' accountant says
▼ + stars: | 2024-05-28 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

Roth individual retirement account conversions are up in 2024 — but there are key things to know before converting funds, experts say. There was a 44% year-over-year increase in the number of Roth conversions during the first quarter of 2024, according to data from Fidelity Investments. Roth conversions transfer pretax or nondeductible individual retirement account funds to a Roth IRA, which provides future tax-free growth. However, "it isn't a slam dunk for everyone" because it takes time for tax-free growth to exceed your upfront tax bill, said Marianela Collado, a certified financial planner and CEO of Tobias Financial Advisors in Plantation, Florida. Here’s how much you can saveInvestors need "sufficient assets" outside of retirement accounts to cover the upfront tax bill, warned Collado, who is also a certified public accountant.

Persons: Roth, Marianela Collado, Collado, You'll Organizations: Fidelity Investments, Roth IRA, Financial, Finance, Medicare Locations: Plantation , Florida

☆ Trump-era tax cuts set to expire after 2025 — here's what you need to know
▼ + stars: | 2024-05-18 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +4 min

The TCJA reduced federal income tax rates across the board, with the top rate falling to 37% from 39.6%. That would return the federal income tax rates to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. In the meantime, some higher earners have been leveraging lower income tax rates through 2025 by incurring income now, experts say. The standard deduction could fallWhen filing taxes, you claim the standard deduction or itemized deductions, whichever is greater. Before 2018, about 70% of taxpayers claimed the standard deduction, compared with 90% in tax year 2020, according to the Tax Policy Center.

Persons: Donald Trump, Michael M, Erica York, Roth, it's, Gleckman, Robert Dietz Organizations: Santiago, Getty, Tax, Center, Federal Tax, Senate, Bernstein Private Wealth Management, CNBC Locations: Wildwood Beach, Wildwood , New Jersey, California , New Jersey, New York, Minneapolis

☆ This is the 'sweet spot' for Roth individual retirement account conversions, expert says
▼ + stars: | 2024-05-09 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +1 min

If you're weighing a Roth individual retirement account conversion, you could save on taxes by leveraging a limited window of time, experts say. Roth conversions transfer pretax or nondeductible IRA money to a Roth IRA, which kickstarts future tax-free growth. After you stop working, but before you start required withdrawals from retirement accounts, is "the sweet spot" for Roth conversions, according to JoAnn May, a Berwyn, Illinois-based certified financial planner at Forest Asset Management. Plus, many investors want to leverage lower income tax brackets through 2025 before provisions could sunset from former President Donald Trump's signature tax overhaul, she said. After a Roth conversion, you'll owe regular income taxes on the converted amount.

Persons: Roth, JoAnn May, IRAs —, Donald Trump's, you'll Organizations: Roth IRA, Asset Management, Finance Locations: Berwyn , Illinois

☆ How to avoid the 'survivor's penalty' before a spouse passes
▼ + stars: | 2024-03-18 | by ( Kate Dore | Cfp | ) www.cnbc.com time to read: +4 min

Jessie Casson | Digitalvision | Getty ImagesIt's hard to lose a spouse, and a costly surprise makes it even more difficult, especially for older women — higher taxes. watch nowTypically, the surviving spouse inherits the deceased spouse's individual retirement accounts, and so-called required minimum distributions are about the same. But the surviving spouse now faces higher tax brackets, Gagliardi said. Spouses may consider partial Roth IRA conversions, which transfers part of pretax or nondeductible IRA funds to a Roth IRA for future tax-free growth, Jastrem said. Check investment accountsIt's always important to keep account ownership and beneficiaries updated, and failing to plan could be costly for the surviving spouse, Jastrem said.

Persons: Jessie Casson, Digitalvision, Edward Jastrem, —, Donald Trump's, George Gagliardi, Gagliardi, Roth, Jastrem Organizations: Getty, Centers for Disease Control, Heritage Financial Services, CNBC, Coromandel Wealth Management, Wealth Locations: Westwood , Massachusetts, Lexington , Massachusetts

I made a ton of money mistakes in my 20s and have been trying to clean things up. I finally sat down with a financial planner, and he pointed out five mistakes I'm still making. I had spent most of my 20s making all kinds of money mistakes (from not saving for retirement to racking up credit card debt). I'm making this mistake because I'm not sure what else to do with that money and I'm scared to lose it. "To do so, you'd open a traditional IRA account and a Roth IRA account, then make 'nondeductible traditional IRA contributions' and convert the funds over to the Roth IRA."

Persons: I'm, Adam Scherer, Scherer, it's, doesn't, Get, I'd, Roth, we've, we're Organizations: Service, Greenbeat, Roth IRA, Roth Locations: Wall, Silicon

☆ What Is a Roth IRA and How Does It Work?
▼ + stars: | 2023-08-16 | by ( Tanza Loudenback | ) www.wsj.com time to read: +13 min

How does a Roth IRA work? “A Roth IRA offers investors a lot of flexibility which, in my opinion, is its biggest benefit,” says Eric Presogna, a financial planner in Erie, Pa.How is a Roth IRA different from a traditional IRA and from a 401(k)? The annual limits apply to traditional and Roth IRAs, in aggregate—meaning you can’t add more than the allowed amount to your traditional and Roth IRAs combined. High-income workers can use the “backdoor Roth” strategy to get money into a Roth IRA. How to fund a Roth IRAA Roth IRA typically needs to be funded before you can start choosing investments.

Persons: Roth, “ Roth, ”, David Edmisten, Internal Revenue Service doesn’t, you’re, Roth IRAs, we’ll, “, Eric Presogna, Nick Cantrell, don’t, posttax Roth, Cantrell, Zach Teutsch, brokerages, IRA —, ” Teutsch Organizations: IRA, Internal Revenue Service, Roth IRA, Washington , D.C, Fidelity, Vanguard, IRS, Financial Locations: Prescott, Ariz, Erie, Pa, Massachusetts, Washington ,

☆ Perfect Storm for Some Companies: Fewer Interest Deductions, Rising Rates
▼ + stars: | 2023-02-06 | by ( Mark Maurer | ) www.wsj.com time to read: +9 min

For some firms, the move shrank the amount of taxable income that can be offset by interest expenses. Higher interest rates generally lead to higher interest expenses tied to companies’ variable-rate debt, new borrowings and refinancings. The cap can hit companies’ cash flows immediately, though not necessarily their financial statements, due to timing differences in claiming the deductions. Aluminum maker and recycler Novelis plans to allocate less cash toward its venture-capital arm due to the higher interest expenses. Leveraged loans have variable rates that typically reset every one to three months, based on short-term interest rates.

☆ Business owners have an IRS payment coming due well before April federal income tax deadline
▼ + stars: | 2022-11-15 | by ( Cheryl Winokur Munk | ) www.cnbc.com time to read: +6 min

New business formation has boomed, and that means more new business owners than ever are dealing with tax season and potential tax nightmares. For starters, there's a big tax bill coming due for many business owners related to the pandemic, well ahead of the April 2023 federal income tax deadline. Here are a few more tips to stay ahead of the IRS this income tax season. Expect a new tax form related to Venmo, PayPal incomeFor tax year 2022, many business owners may be receiving a form they haven't in the past. The Wave State of Small Business Study for 2022 found that 35% of small businesses are blurring the lines between personal and business accounts.

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