Posted on 06/10/2021 8:38:42 AM PDT by SeekAndFind
Many Americans don’t save enough for retirement, but it’s entirely possible to save too much — at least according to the IRS.
Tax laws limit how much you’re allowed to contribute to retirement accounts, and excess contributions can be penalized. Uncle Sam doesn’t want you to leave the money in the account too long, either. Those who fail to take enough out of their retirement accounts also face heavy penalties.
Here’s what you need to know to stay on the right side of the IRS’ rules.
Overstuffing your retirement accounts
Not everyone is allowed to contribute to retirement accounts. Contributions to an IRA or Roth IRA require you or your spouse to have “earned income” such as wages, salary, bonuses, commissions, tips or self-employment income. Pension payments, Social Security benefits, rental income and interest and dividends don’t count. Also, the ability to contribute to a Roth phases out at modified adjusted gross incomes between $125,000 and $140,000 for single filers, from $198,000 to $208,000 for married couples filing jointly.
People may not realize that the annual limit on IRA contributions — $6,000 for 2021, plus a catch-up contribution of $1,000 for people 50 and over — is the cap for all IRA accounts. In other words, you can’t contribute $6,000 to a traditional IRA and another $6,000 to a Roth IRA in the same year.
You also can contribute too much to a workplace plan such as a 401(k), especially if you change jobs during the year. Your new employer won’t know if you’ve already made contributions to your previous employer’s plan that would count toward the annual limits (typically $19,500 for 2021, plus a $6,500 catch up contribution for people 50 and older), says tax expert Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting.
(Excerpt) Read more at finance.yahoo.com ...
The more likely scenario: your employment has a 401(k). For a 401(k), the 2021 contribution limit was $19,500, plus a $6,500 catch-up contribution if you were age 50 or older. For over 50, you could build your government savings kitties by about $33,000 each year.
I agree with this. One is throwing money over a fence and hoping government will let them through the gate to retrieve it at some future date. Tax-deferred account balances are no longer a individual's property - at least until government decides what their cut is going to be and how they are going to allow that individual to take distributions.
Never look lovingly at your retirement account balances. That money doesn't belong to you yet.
I expect after the next big market downturn, some kind of a Warren IRA will replace all previous forms, with investments only allowed in specific "safe" government debt instruments and distributions only allowed though IRS tax refunds - after a thorough annual audit of the individual's income and assets. Exceed the threshold and one's distributions become taxable at capital gains rates - or higher.
Saved two much for retirement, simple. Divorce your wife and she will get the majority of it. Makes no difference if the bitch hasn’t worked a real job in 30 years. Right Jamie?
Read the article.
Half a million? That won’t get you through your retirement years these days.
Everything I see means you need a million dollar nest egg.
Your consumption tax is idiotic.
I have had my income taxed my entire life. I have ZERO interest in having what little I was allowed to keep, now taxed again when I spend it.
Dying economies, like England, use a VAT tax.
Have no fear. The democrats will be glad to take the excess, because “you don’t need all that money.”
True dat.
An efficient economy will not allow for people to pull resources without working.
So the real number will be “10X what most have saved up!”. Just like now.
At the end of the day it does not matter what we think.
Truer words have not been spoken.
Or give it to me.
RE: Diversified real estate and stocks are much better in the long run.
The problem with stocks is there is no guarantee that you will get the price you want at the time you need it. Plus, there’s the issue of capital gains tax.
Also, if you have diversified stock portfolio, how exactly are you going to get a monthly income from these when you retire?
Ha! Ha! Good on ya'...some people just know how to get over on the system.
I can see the wisdom of that, but it’s ludicrous to pass up the opportunity to invest in a tax-deferred 401(k) plan if the employer is offering a generous match. That’s like giving up an opportunity for free money.
That’s why you don’t sell stocks at the time you need the money. You sell them at the price you want at least a few years before you need the money and move those funds into other safer investments.
Billy and Akaisha Kaderli retired in 1991 at the age of 38.
The couple, now 68, have watched their nest egg grow from $500,000 to more than $1 million, while still managing to fund their lifestyle.
The strategy they use is pretty simple: Track every dollar you spend, and invest in index funds and ETFs.
Check out this video to learn more about the five budgeting techniques these retirees use to grow their money.
Not if you keep buried in your back yard . F the IRS.
The good news we will all be millionaires sooner than you think. BIDEN HARRIS 2024!!!
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