Last Friday, President Trump signed into law a massive piece of legislation, titled the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The law provides over $2 trillion (yes, trillion) of funding to everything from the health sector, state and local governments, large and small businesses, and of course, individuals and families.
How Does Saving For Retirement Actually Lower Your Taxes?
One of my favorite tax breaks is contributing to a tax-deferred account, like a Traditional IRA, SEP-IRA or SIMPLE IRA. Contributions to these accounts lower your taxes when the contribution is made, and allow you to defer (postpone) owing taxes on those contributions until retirement.
But I fear in the past I’ve given this same advice on my blog without thoroughly explaining how and why this actually works.
In today’s post, I’d like to answer two questions:
How exactly does contributing to a retirement account mean lower taxes today?
Why does that matter if taxes are still owed later?
Roth Conversions Are Amazing. Here's How They Work.
Roth IRAs have made a good run in their relatively short 23 year history. I join with millions of Americans in celebrating the fact that there is an instrument like these allowing workers to save and grow their after-tax dollars and never pay taxes on them again. It’s fitting that the creation of the Roth IRA fell under the Tax Relief Act of 1997.
Roth IRAs have many advantages (which I’ll highlight again); but what I’d really like to dive into is something called a Roth Conversion--where you convert traditional IRA funds into Roth IRA funds.
A New Law Just Made IRAs and 529s a Little More Interesting
As last year’s U.S. Congressional session approached the Christmas holiday, a little known bill called the SECURE Act was once again teetering on the edge of failure. However, at the last minute it was tacked onto the year-end appropriations bill in order to keep the government funded. Just like that, a new series of financial rules and requirements impacted millions of American’s financial lives, though most don’t even know about it.
Following is a brief rundown of the SECURE Act’s 1,000+ page rule, with a focus on the areas that I feel would most likely impact you.
Does Financial Education Work?
While shoveling snow last weekend (it’s been snowy here in WY...and now miserably cold) I tuned in to a Morningstar podcast. Their guest, an academic from the University of Colorado Boulder, was discussing the virtues of financial education. But according to his research, it doesn’t work as often as we hope or expect.