37 states that don't tax Social Security benefits: Retirement Scan
37 states that don't tax Social Security benefits
Social Security benefits are not taxed in 37 states, but some of these states may not be tax-friendly for retirees, according to this article on Motley Fool. For example, although California doesn't tax retirement benefit, the state's average combined state and local sales tax bracket is 8.48%, while almost all types of retirement income, including distributions from 401(k)s, IRAs and pensions, are subject to tax.
Making a living as a freelancer? Here’s how to save for retirement
A Roth IRA, a solo 401(k), a SEP IRA, and SIMPLE IRA are among the tax-advantaged savings vehicles that self-employed workers and freelancers can use to build their nest egg, according to this article on The Wall Street Journal. While retirement saving can be challenging, self-employed people should make it a priority and develop a long-term plan for building their nest egg. “Whether you are taking a gig or working full time for a corporation, you still need to have that same long-term plan. Your long-term plan doesn’t stop just because your source of income has changed,” says a certified financial planner.
Who should inherit your IRA?
IRA investors are advised to understand the tax and other consequences when designating loved ones as beneficiaries, according to this article on Morningstar. They also have to make sure that their chosen beneficiaries are not in conflict with their trusts and other estate-planning documents. For example, IRA investors may be better off leaving the account to an adult child who needs the money more than their spouse, who may be past the required minimum distribution age by the time of the transfer and can no longer delay withdrawals for tax purposes.
Health savings accounts: The hidden retirement option
Health care is one of the biggest costs in retirement, and clients with high deductible health insurance plans can prepare for this major expense by contributing to a health savings account, according to this article on Barron's. Clients can make pretax contributions to the account and withdraw the funds without owing any taxes. Fidelity estimates that a 65-year-old couple who are to retire this year will need at least $275,000 for healthcare expenses throughout their golden years. “It doesn’t get better than an HSA to accumulate that pool of money. It’s much better than an IRA,” says a financial advisor.
Tax diversification: An untapped resource for wealth over your lifetime
Investors should diversify their retirement portfolio not only based on the investment types but also on the way their financial accounts and securities are taxed, according to this article on Kiplinger. Clients should focus on tax diversification because most of their retirement income is subject to ordinary income tax and the tax changes are likely in the future. Moreover, tax diversification can help retirees save extra money for their needs and recreational activities.