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The Internal Revenue Service recently announced anyone, who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts, now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

This 60-day rollover period for any RMDs already taken this year has been extended to Aug. 31, 2020, in order to give taxpayers time to take advantage of this opportunity.

The CARES Act will provide billions of dollars of relief to individuals, businesses, state and local governments, and the health care system.

After extensive negotiations, an agreement was reached on a massive stimulus bill to address the financial and health care crisis resulting from the coronavirus (COVID-19) pandemic.

A new piece of legislation enacted in late December will help simplify the retirement system and help individuals increase their savings.

The “Setting Every Community Up for Retirement Enhancement” Act or SECURE Act, which was part of the Further Consolidated Appropriations Act of 2020 expands opportunities for individuals to increase their savings, and makes administrative simplifications to the retirement system.

Among the major changes for individuals are:

The IRS has released the retirement contribution limits for the 2020 tax year. The new limits are adjusted based on increases in the cost of living.

How much life insurance should I carry?

This is a great question! We hear it frequently, so we wanted to cover it here on our blog. The question is usually asked in the context of: “I’m about to purchase a life insurance policy. How much coverage do I need?”

The answer is – it depends.

If you’re like most, you want to be able to leave something to your progeny when you die. Leaving a legacy for our children is just part of the American dream of wanting them to “have it better” than we did. But many well-intended parents have had their wishes left unfulfilled because of simple errors in estate planning.

The Tax Cuts and Jobs Act of 2017 generally lowered federal income tax rates, with some exceptions. Among the ways in which lower rates impact tax planning, they make unmatched contributions to traditional employer retirement plans less attractive.

Example 1: Chet Taylor has around $100,000 in taxable income a year. Chet contributed $12,000 to his company’s traditional 401(k) in 2017, reducing his taxable income. He was in the 28 percent tax bracket last year, so his federal tax savings were $3,360 (28 percent of $12,000). An identical contribution this year will save Chet only $2,880, because the same income would put him in a lower 24 percent bracket.

Not everyone will be in this situation.

Many higher income taxpayers have long made it a practice to open investment accounts for their children, hoping to take advantage of their lower tax rates.  Many years ago, Congress imposed, what is colloquially known as the “kiddie tax” to place strict limits on the amount of investment income that can be taxed at those lower rates. 

One of the changes made by the recently enacted Tax Cuts and Jobs Act of 2017 made some significant changes to how the “kiddie tax” is administered, impacting the way adults pass investment income on to their minor children. 

The "kiddie tax" is a provision that taxes the unearned income of children under the age of 19 and of full-time students younger than 24 at a special rate. Under both the new law and the old, the first $1,050 of a child's income is tax-free and the next $1,050 is taxed at a rate of 10 percent.

The pros and cons of Roth IRAs, which were introduced 20 years ago, are well understood. All money flowing into Roth IRAs is after-tax, so there is no upfront tax benefit.

As a tradeoff, all qualified Roth IRA distributions can be tax-free, including the parts of the distributions that are payouts of investment earnings.

To be a qualified distribution, the distribution must meet two basic requirements:

Many folks faced the new year with a fresh-start mindset, new goals, and a handful of resolutions. For some, 2017 is still at the top-of-mind with credit card balance carry-overs and a loan or two. For others, the new year brings ideas of travel, home renovations, or major purchases. 

Regardless of the intent, oftentimes folks think they can simply borrow or withdraw from their 401(k) to pay for these things when their bank account is not liquid.  After all, the money is theirs and just “sitting” untouched.  So why not tap into the account – life is short, right?