Here’s how to reduce income taxes on your pretax IRA withdrawals

[Pelican Press 0]

This is the hidden content, please

• Sign In
• or
• Sign Up

Here’s how to reduce income taxes on your pretax IRA withdrawals

Maryna Terletska | Moment | Getty Images

Individual retirement accounts are getting ******* — and it can cause tax issues for retirees or their children who inherit the assets, experts say.

The median IRA or self-employed Keogh balance was

This is the hidden content, please

• Sign In
• or
• Sign Up

, up from $81,144 in 2019, according to a June report from the Employee Benefit Research Institute, which analyzed Federal Reserve data.

A separate Fidelity report found the

This is the hidden content, please

• Sign In
• or
• Sign Up

was $127,745 during the first quarter of 2024, up 29% from 2014, based on an analysis of 45 million IRA, 401(k) and 403(b) accounts. 

While higher balances are typically a good thing, a ******* pre-tax IRA balance “can be a tax nightmare in retirement,” said certified financial planner Derek Williams with Veratis Advisors in Cary, North Carolina.

More from Personal Finance:
What Taylor Swift’s The Eras Tour says about ‘passion tourism’
‘NEETS’ and ‘new unemployables’: Why fewer young adults are working
What the new IRS guidance on crypto tax reporting means for investors

The Employee Benefit Research Institute report found that more than 45% of IRA assets were in rollover IRAs, which are typically funded via past employer plans. Only about 17% of analyzed assets were in Roth IRAs, which don’t incur taxes on withdrawals.

Required minimum distributions can cause tax issues

Starting in 2023, most retirees need to begin

This is the hidden content, please

• Sign In
• or
• Sign Up

“Congress isn’t really helping people out,” said CFP Sean Lovison, founder of Philadelphia-area Purpose Built Financial Services. 

By postponing required withdrawals, pretax balances will continue to grow, which can lead to larger RMDs later, he said.

For lower future taxes, some advisors recommend so-called Roth conversions, which transfer pretax or nondeductible IRA money to a Roth IRA. The strategy can be useful during lower-income years because there’s an upfront tax on the converted balance.

Pretax IRAs are ‘much less desirable’ to inherit 

******* IRA balances could also cause tax issues for ****** children who inherit their parents’ accounts, experts say.

“Recent changes to tax law have made pretax IRAs a much less desirable asset to inherit,” said Williams with Veratis Advisors.

Before the 

This is the hidden content, please

• Sign In
• or
• Sign Up

The ****** of a parent often coincides with an heir’s highest earning years and taxes could “eat away a tremendous amount of an inherited pretax account,” Williams said.

This is the hidden content, please

• Sign In
• or
• Sign Up

Personal investing,Personal taxes,Income Tax,National taxes,Financial planners,Financial Advisors,Financial planning,Personal finance,Government taxation and revenue,Retirement planning,Breaking News: Investing,Investment strategy,Wealth,Personal saving,business news
#Heres #reduce #income #taxes #pretax #IRA #withdrawals

This is the hidden content, please

• Sign In
• or
• Sign Up

This is the hidden content, please

• Sign In
• or
• Sign Up