Traditional IRA

The IRA Tax Bomb

Many Wyoming workers take advantage of employer retirement plans, like 401ks or 457s, which offer tax-deferred contributions as well as matching contributions from the employer. This is an incredible benefit that should seldom be passed up. Even when you don’t have access to a 401(k), IRAs are also available to help lower your taxes and get tax-deferred growth.

A problem comes, however, when an account holder reaches the age to begin Required Minimum Distributions, or RMDs. These are amounts of money that MUST be taken from the retirement account, and taxes paid on the withdrawal.

5 Ways to Lower Your Taxes Before 2020 Is Over

As we anticipate the final quarter of 2020, this has certainly been an unusual year in many, many respects. Two substantial laws were signed into law that impacted the taxes of nearly every American: The SECURE Act and the CARES Act.

Between the implementation of these two laws and existing rules already in place, there are several tax-saving strategies that come to mind which families should consider taking advantage of before the end of the year.

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:

  1. How exactly does contributing to a retirement account mean lower taxes today?

  2. 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.