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 ...
Your consumption tax is idiotic I have ZERO interest in having what little I was allowed to keep, now taxed again.
Empire: 1) I’m not clear. 2)you don’t listen. A consumption tax should replace the income tax. High end earners will pay more for consuming more.
Ha! Ha! Good on ya’...some people just know how to get over on the system.
Even if it magically replaced income tax (which it won’t), I’ve already paid tax on my income. Why do you think I would now want to take on a tax I do not now have? Every dollar I currently have would be double taxed. Do you listen?
No one should want this idiotic non-constitutional tax.
Hasn’t the Federal Government already convinced you that it is completely irresponsible with ANY taxation it implements? It is wishful thinking at its worst to think that a NEW tax would somehow fix existing failure.
If anything, “income” needs to be more narrowly defined, restricting FedGov’s greedy hand with the tax it already has.
BTW, I have ZERO interest in seeing “high income” or any other group of Americans pay more than anyone else. I am not a Communist. A “fair” tax would take Federal spending and divide it equally among ALL Americans, alcoholics and workaholics. That can’t work, so we have the unfair taxation that we have. So be it. Only Communists want to make it even more unfair.
Empire-you must know that I fully agree with your good points. I just wish you would have more of them.
Thank you.
Bkmk
Under my tax system it would be a national consumption tax. Any state can keep their sales/income taxes-it’s on them.
Then there’s the millennials who have no SSI waiting. IRA’s-unlimited contributions-ok? Allow contributions from friends/relatives-Just get them to that half a million, the sooner the better-then they’re on their own. How do you start them off? Let them divy up the taxes saved from ELIMINATING government programs and departments. 2-4 years worth of cutbacks and they’re on their way. I’m sure they’d have the backbone to do what’s necessary. Throw in a $1k IRA upon birth per child-no withdrawals. Similar for military enlistments-no tuition assistance anymore.
I don’t agree with your “solution”. I’d agree with eliminating the Education depth, the NEA, the NEH, large parts of HHS, State, DHS, Interior, Ag, Treasury.
And capping all federal retirement income at $40k?
I made my savings thru owning stock. Instead of 8 or 10 or 12% return the company I work at gets with a 401k plan, I have been getting 300% or 100% or 50% etc. Much higher returns by just looking up what stocks are going up the highest and buying them. The list is below. Tesla I did not make money with but bailed when it started going down! I missed the recent rise by a few months.
They have been tech stocks except for Tesla & Ford.
AMD, NVDA, NFLX, AAPL, TSLA, F.
I also have borrowed from the broker more money to buy more stock when I think that stock is a steady riser. They charge 7%....
Started in 2009 with 13k and now over 7 figures. I figure after taxes if I never invest again, I will have enough for 50k a year for a few decades just spending the principle which I would not but instead live off the interest made (rates are too low now) or making more from stock. I expect a comfortable retirement unless I marry a young blonde who loves my money er.. me.
When I start collecting SS at 70 I will get another 31k a year so 80k+ and I expect my stocks to keep making money like the AMD I have now and the future Starlink stock coming some day (internet, cell, video from SpaceX Musk).
I expect to double the money and more in the coming years and I did it despite the gov’t taking most of my money. I resent hearing from gov’t people that they do not think you have paid enough while they get everything paid for along with many bribes. The rules in the article just get me angry. They want you to jump thru hoops or line up to kick the football and have a ‘Lucy’ pull the ball away and move the hoop and add another for you to jump thru.
We find out others like billionaires who scold us for wanting a nice life are paying less then 1% tax.
I just wish I invested earlier when I was decades younger.
Almost all of my stocks pay dividends. For now its all reinvested but one day soon those dividends will come straight to me.
Minnesota-be careful. Even the experts can screw up with other peoples money. I stayed with my company 401k but moved it away from the company stock at first chance. Didn’t want to end up like Enron. One big market correction and you could be ruined more than the rest of us. Under Biden I’m wondering if there’ a big correction sooner rather than later. If anyone has over a million and they’re over 50 I’d be worried about being too old to go back to work.
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