Does tax-free growth for your retirement nest egg sound good to you? Perhaps your employer doesn't offer a Roth retirement option, or your income exceeds the limits for direct Roth IRA contributions? If so, the backdoor Roth IRA strategy could be what you have been looking for! A Roth IRA is a retirement account where contributions are made with after-tax dollars, offering tax-free growth and...
Although required minimum distributions (RMDs) are now mandatory components of retirement plans, this was not always the case. RMD rules began to apply to qualified plans following the Tax Reform Act of 1986, after policy makers noticed that retirement account holders were saving the funds for their beneficiaries rather than their own retirement spending. Fast-forward to the current day, where...
Pretend for a while that you are 40 years old and about to make an additional $10,000 per year with your new job that just started today, January 2, 2024. You are ecstatic about your future, and you go into your new HR manager’s office with all smiles ready to discuss details of your benefits package. You sit down and see that you have a 401(k) available with a Roth option and the ability to...
Excess deferrals occur when a 401(k) participant defers a greater amount than the annual IRS limit permits. The annual deferral limit was $22,500 for 2023 and $23,000 for 2024. For participants 50 years old and older, an additional $7,500 can be deferred. When this limit is exceeded, excess deferrals and earnings need to be removed from the plan and returned to the participant. Employer matching...
Save More for Retirement in 2024 Plans must be tested each year to ensure that they are compliant with the laws governing retirement plans. To understand the testing performed for your plan, it may be helpful to review some of the terms that are commonly used. First, let’s examine how your plan’s noteworthy individuals are identified. Highly Compensated Employees (HCE): There are two...
The main determining factor in whether your plan needs an audit performed by an independent qualified public accountant is the participant count. An audit will be required if the beginning of year participant count is more than 100. For the plan year that began in 2023, there is a change to how the participants are counted. Prior to this, the count included active participants—regardless of...
The SECURE 2.0 Act, passed in December 2022, made wide-ranging changes to U.S. tax laws related to retirement savings. While some provisions were effective in 2023, others did not take effect until 2024. Here is an overview of some important changes for this year. Matching student loan payments Employees who make student loan repayments may receive matching employer contributions to a workplace...
Here are some things to consider as you weigh potential tax moves between now and the end of the year. 1. Defer income to next year Consider opportunities to defer income to 2024, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rents, and payments for services. Doing so may enable...
By: Arash Navi, CFP®, CPA, Controller & Wealth Manager Our goal is to help our clients build and grow their wealth and tax planning plays an important role in this process. We recommend that you mark your calendar to review your finances in the first week of October, annually. Take this time to review your income for the year from employment, businesses, investments, or any other...
In early 2022, the IRS issued proposed regulations regarding required minimum distributions (RMDs) to reflect changes made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The IRS has held off on releasing final regulations so that it can address additional changes to RMDs made by the SECURE 2.0 Act of 2022, which was passed in late 2022. In the meantime, the...
By: Braden Priest, CFA®, Retirement Plan Consultant Hiring the right advisor for your company's retirement plan is one of the most critical decisions you will ever make as a plan sponsor. Many brokers and retail wealth managers dabble in retirement plan advisory services, but putting your plan in the hands of a non-specialist advisor can lead to expensive plan corrections, penalties, and poor...
By: Braden Priest, CFA®, Retirement Plan Consultant A recent survey from TD Ameritrade showed only 27% of 401(k) participants knew how much they were paying in fees, and 37% mistakenly believed their retirement plan was entirely free! We’re here to set the record straight about 3 common retirement plan myths: The Retirement Plan is Free – Don’t shoot the messenger, but retirement plan service...
By: Braden Priest, CFA®, Retirement Plan Consultant The SECURE Act 2.0 was signed into law by President Biden in December 2022 and is guaranteed to impact your retirement plan. Here are 3 key provisions you should be aware of to keep your retirement plan in compliance: Increased Participation for Long-Term Part-Time Workers Many plans exclude employees who work less than 1,000 hours from...
Approximately 78% of people who work for companies with fewer than 10 employees and about 65% of those who work for companies with 10 to 24 employees do not have access to a retirement plan at work.(1) That's unfortunate, because workers with a retirement plan are far more likely to save for retirement than those without a plan. In 2022, 62% of those without a retirement plan had accumulated...
The SECURE 2.0 Act, passed as part of an omnibus spending bill in December 2022, added new exceptions to the 10% federal income tax penalty for early withdrawals from tax-advantaged retirement accounts. The Act also expanded an existing exception that applies specifically to employer plans. These exceptions are often called 72(t) exceptions, because they are listed in Section 72(t) of the...
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