6 Retirement Income Streams Which Will You Have?
- Individual Retirement Accounts (IRAs) These include rollovers from a previous employer or contributions you have added to your own IRA over the years. You can begin taking distributions without a penalty at age 59 1/2, normal retirement distributions are taxed as ordinary income, required minimum distributions start at age 70 1/2, and ROTH IRAs offer you tax free income after age 59 1/2. Contributing to an IRA is subject to limits each year.
- Employer Plans include 401(k) or 403(b) plans as examples. At retirement, you should consider if you want to adjust your risk level and if it benefits you to roll your assets into an IRA. Health Savings Accounts (HSA) are also offered by some employers as a way to help pay for future medical expenses during retirement. Medical needs can have a huge impact on your retirement scenario.
- Employer Pensions are often qualified and payments to you would be taxed as ordinary income. Analyze whether a lump sum or annuity payments are best for you.
- Non-Retirement Accounts are taxable individual or joint accounts that you may have been contributing to over time. These accounts are useful because they are only taxed on their gains when you take a distribution. A mix of taxable and tax deferred investments can be beneficial to you when you use them as a source of income later.
- Continued Employment can help you delay taking Social Security until you reach full benefit age, however be aware that making over a specified income can reduce your benefit if you continue to work after you have claimed Social Security.
- Social Security has been in the news lately but it is here to stay. As the U.S. population expands and contracts you can expect some changes that will help continue Social Security benefits for future retirees. Consider waiting to claim your benefits until full retirement age. Some of your benefits may be taxable depending on your "total" income during the year.
Rollover and Traditional IRAs are subject to different taxes than Roth IRAs. Withdrawals taken from any IRA before age 59 ½ may be subject to a 10% federal income tax penalty. Please visit a tax professional for more information on tax deferred savings and retirement account distributions. Some pension plans may be considered non-qualified retirement accounts and would be subject to different tax rules. Cox Global Associates is neither a tax or legal advisor.
529 Savings Plans
One of the primary ways we suggest saving for college is through a 529 Plan. Oh, and they aren't just for kids! That's right, you too can have a 529 Plan if you are planning to go back to school in the future to further your career or even change your career. Let's cover the basics of 529 Plans:
1. Also known as a qualified tuition plan, where after taxed money can be deposited and grown free of taxes when used for qualified education expenses.
2. Qualified education expenses include: tuition, fees, room and board, books, and computer technology and equipment.
3. Expenses may be related to primary or secondary school (max $10,000 per year), accredited two and four year colleges or universities, vocational school, and eligible foreign schools.
4. What if your kids don't use the money? You'll pay income tax and a 10% penalty on the gains within the account. The penalty is waived if a scholarship is awarded. To avoid paying taxes and penalties you can change the designated beneficiary of the account to someone who will be able to use the funds for qualified expenses.
5. Anyone can contribute to a person's 529 Plan account but you should be aware of gift tax limits.
6. There was over $288 billion in 529 Savings Plans at the end of 2018.
The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. There may be maximum contribution limits for a state sponsored 529 Plan. Please see specific rules for the state plan you are interested in. Deductions for education expenses are subject to IRS rules and change from time to time.
Our Take Aways this Quarter
We believe the trade negotiations are a big deal to the market and our future economy... BUT WHATABURGER SOLD, THE PEACH TRUCK WAS IN TOWN, AND IT WAS CODY'S BIRTHDAY!!! We know, we know, we heard that Whataburger promised things wouldn't change but we sure hope they keep their word. ;)
Did you get some of those sweet Georgia peaches from The Peach Truck? They made a quick stop in Katy and we grabbed a few cases. They were out of of this world! Perfect for the beginning of summer!
We want to give Small Cakes Cupcakery and Creamery a special thank you for their amazing cupcakes to celebrate Cody's birthday! They were amazing!
Other important news we heard about included that our Katy ISD teachers are getting a raise! Yahoo! And Christ Clinic is expanding their Kingsland location. Consider donating to Christ Clinic because they serve so many who need quality healthcare.