Financial experts agree that all Americans should build a strong retirement fund so they can avoid money woes in their golden years. And there are several important ways to maximize retirement savings under President Donald Trump’s tax law.
“Start setting aside money towards retirement as soon as you can,” says Eva Rosenberg, author of the best-selling book, “The Trump Tax Cut: Your Personal Guide to the New Tax Law.”
“Follow Warren Buffett’s advice to save early and save often, even if it’s just a little at a time,” Rosenberg says. “As he is quoted saying, ‘Someone is sitting in the shade today because someone planted a tree a long time ago.’”
Firstly, people under the age of 50 can contribute up to $19,000 to their 401k or workplace retirement plan. That money is deducted from your salary and will not be taxed until you take it out in retirement,
As well, older taxpayers can opt for a $6,000 “catch-up” contribution, which brings their annual contribution limit to $24,500.
The new law gives Americans who borrow from their 401k plans more time to repay their loans if they lose their jobs.
In past years, borrowers were required to repay the balance in 60 days to avoid having it treated as a taxable distribution, with under 55s also getting hit with a 10 percent penalty.
Now you have until the date your tax return is due for the year your job ended.
And under Trump’s tax law, taxpayers aged 70½ can directly contribute from their IRAs to their favorite charities.
It’s called the “Qualified Charitable Donation.” Donating this way will count toward the required minimum distribution somebody who reaches 70½ must take. But it won’t be counted as taxable income.
The law also preserves the so-called “Stretch IRA.” That is, the rule that allows heirs of estates to spread payouts from an inherited IRA over their lifetime.
Just what you will pay in taxes as a retiree varies. If you have other sources of income, then part of Social Security payout will be taxed. Those with large pension incomes could pay as 85 percent of their Social Security benefits.
But where you live van also make a difference, because 10 states have no state tax on Social Security.
According to gobankingrates.com, they are: Alaska, Wyoming, Delaware, New Hampshire, Washington, Nevada, Florida, South Dakota, Tennessee and Hawaii. The least tax friendly states are: Nebraska, Minnesota, Connecticut, Kansas, Missouri, Vermont, Rhode Island, New Mexico, West Virginia and Utah.
Rosenberg, whose "Trump Tax Cut" guide book details dozens of ways retirees can use the Trump tax law to your benefit, also advises working Americans to explore with their employers what kind of retirement programs are offered by the company.
Some employers offer generous matching contributions to company 401K plans, which can add thousands of dollars to your nest egg over time.
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