Roth Conversions
The Tax Cuts & Jobs Act (TCJA), passed into law in December 2017, significantly reduced income tax rates.
If an individual wants their existing tax deferred retirement accounts to become tax free going forward, they need to pay the taxes now on the value in their tax deferred retirement accounts.
The reduction in tax rates has reduced the tax bill to do this conversion.
For many people, trying to convert everything they have in a tax deferred retirement account in one shot is too large a tax burden even with the reduced tax rates of the TCJA.
We can help you determine whether it makes sense to convert your tax deferred accounts in one shot or via a series of smaller annual conversions along with where to find the funds for the taxes that are due as a result of the conversion.
Changing Jobs
Moving company retirement plan money because you are changing jobs forces a departing employee to walk a tax minefield.
A misstep can wipe out years of savings & earnings in the form of unnecessary taxes & penalties.
There are many choices in this situation, including:
Staying in your old company plan
Rollover to an IRA
Convert to a Roth IRA
Move to a new employer’s plan
Take a lump sum distribution
Convert plan assets to a plan Roth Account (an in plan Roth conversion)
Combination of more than 1 item
As always, the “best” strategy depends on your unique situation and your unique needs.
Reducing & Eliminating Required Minimum Distributions (RMDs)
One question that is often posed to us is “what is the best way to avoid taking money out of my retirement account when I reach 73 years of age?”
The honest answer is that there is no best way.
There are several ways to minimize the amount of distributions as well as several ways to eliminate distributions completely.
Choosing the “best” strategy all depends on your unique needs and circumstances.
Estate Tax Reduction
The Tax Cuts & Jobs Act doubled the estate tax exemption to $11.2 million for individuals and $22.4 million for married couples.
Because of this change in the law, you can now die with significantly more money in your name that can be passed on to your heirs free of estate taxes.
These levels only remain in effect thru the end of 2025, meaning that now is the time to take action and reduce the size of your estate, including making gifts to younger generations.
In 2026, absent any changes in the law, the exemption reverts back to an exclusion of $6.8 million.
Tax Planning & Preparation
Many individuals assume tax time only consists of March & April, leading up to the April 15 filing deadline.
While tax returns are normally prepared in these months, working to minimize one’s taxes so as to pay the lowest amount possible involves planning and executing on proven strategies. This can only occur when tax planning is initiated during the rest of the year.
A small sample of strategies to focus on to slash one’s taxes includes
Planning years in advance of having to take RMD’s (Required Minimum Distributions) from retirement accounts
Knowing the maximum you can contribute to a retirement plan
Optimize the way your business is structured
Maximizing the new Sec 199a deduction
Utilizing 1031 exchanges and Opportunity Zone Funds to minimize capital gains
Making gifts to family members before many of the 2017 Tax Cuts & Jobs Act provisions sunset at the end of 2025
Minimizing Your Medicare Premiums
The amount one pays for Medicare is a function of the level of a person or couple’s adjusted gross income.
Being able to manage these levels and keep one’s income under certain thresholds is the key factor in controlling one’s Medicare premiums which can range from as low as $170.10/mos to as high as $578.30/mos.
We can help you plan out your income and taxes to obtain the lowest possible monthly Medicare cost.
Evaluating NUA for Public Company Employees
Are you working in (or thinking of leaving) a public company? You may be eligible to use NUA to create up to 20% tax savings.
When triggering events occur, you’re eligible to use NUA to move shares you own in your public company from the company retirement plan to a regular brokerage account, creating up to 20% tax savings.
Triggering events include
Attaining Age 59 ½
Separation from service (i.e. you leave the company)
Disability
Death (in which case, your heirs are eligible to evaluate NUA)