In a recent article entitled “Moving the Retirement Savings Plan to Secure” which was published in The Motley Fool we found a way to move your retirement savings plan to SECURE. We will take a look at that point in this article.
Let’s begin with the US government offering some of the best tax incentives to encourage retirement. The Tax Act of 2020 makes it possible for you to defer your taxes for an extended period of time. Also, the Americans With Disabilities Act means that when you are seeking disability benefits your Pre-2020 benefits can be permanently and fully disabled.
All of these provisions together mean that when you change your investment vehicles you can get permanent tax reductions as well as lower rates on your current tax code. The SECURE Act offers you the option of having your contributions to both traditional IRAs and 401(k) is increased so that the full maximum amount can be collected by the end of 2020.
The Federal Government has now offered billions of dollars in tax incentives to help you get on the road to success in setting up your retirement savings plan to SECURE. Although it is the intent of the US government to make sure that everyone who is qualified can save for their future, the rules just simply don’t apply to everyone. You can set up your retirement account to SECURE without having to pay a huge tax penalty.
Now, there are certain forms of investment that you should be aware of that the SECURE Act offers incentives to encourage people to include in their retirement savings plan, including Roth IRA investments and 401(k) s. Before you start saving, and you may also want to check out our other articles on what investments will attract the best incentives from the government and the most tax savings.
When you are ready to begin investing you will realize that there is a large portion of your funds that you are leaving on the table. This money is “lock in” if you have already started contributing, and you should understand why before you get started.
Some investors set up their retirement account at a brokerage and allow that brokerage to keep part of the interests accrued. This is an arrangement that will attract the SECURE Act incentives for traditional IRAs but not for 401(k) s. Keep this in mind before you begin planning.
As you can see there are a number of tax incentives that you will not qualify for if you have started investing. Also, you should know that you cannot move money from one retirement account to another during your retirement. This means that even if you have accumulated enough funds for retirement you cannot start a new account.
Your account must remain in one place, and you cannot transfer it, or “wash”, it. While you might feel like you are in control, you are not, and neither is the government. A long term investment strategy is needed to reach the age of retirement.
You must be careful that your retirement plan is not set up so that you end up becoming totally reliant on Social Security and Medicare. It is too risky to simply rely on this program. It is highly likely that you will have to draw down your funds to supplement your income.
If you do not intend to have anyone draw down the funds that you have set aside, then you need to understand the importance of diversifying your retirement fund. You must set aside a percentage of your account for each of your retirement goals. Each goal should be looked at as a separate strategy, and only when all of them are in place will you need to add a lump sum to your account.
Your income and investments are not a strategy in themselves, but they are the starting point for a combination of strategies that will be used to build a retirement fund that is secure and available to you at retirement. Make sure that you start today and never stop.
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