Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
IRA options for the self-employed
The self-employed can use an IRA to put away for retirement and boost their savings at tax time, according to this Motley Fool article. Employers can make contributions to a SEP-IRA for all their employees, while small employers who hire fewer than 100 workers may opt for a Simple IRA. Self-employed individuals also have the option to contribute to a traditional IRA and Roth IRA, although these accounts have lower contribution limits.
Planning for a low-tax, high-deficit world
IRA investors who want to convert some of their assets into Roth may want to do it now, as the current administration seeks to cut tax rates this year, according to this article from Bloomberg. The Roth conversion triggers a tax liability, and lower tax rates will reduce the tax bill, according to an expert. “Tax rates may never get lower in your lifetime than in 2017. Now would be the time to strike.”
Don’t let your client settle for a subpar HSA
Although a health savings account is funded with pretax money and offers tax-free investment growth and withdrawals for qualified medical expenses, the account's hefty fees and limited investment options can offset these benefits, according to Morningstar. Clients who are stuck in a poor, employer-provided plan may want to set up another HSA. The employee should then consider transferring the funds directly to the new HAS, according to the research firm’s personal finance director. Clients may also do a rollover — withdrawing from their employer-provided HSA before depositing it into the new account.
Grandma to the rescue: The tax-smart way to cover preschool
Baby boomers have the option to pay their grandchildren's preschool fees and save considerably on gift taxes, according to this CNBC article. They may also pay these expenses and count the payments towards their lifetime gift limit exemption, which amounts to $5.49 million. "The numbers are real and they can be significant," an expert said.
6 ways to protect your clients from falling stock prices
Investors who gained from the robust market performance in recent years should consider reducing their stock holdings to ease the negative impact from a market downturn, according to this Kiplinger article. They may reduce stock investments to rebalance their portfolio back to their original asset allocation. Selling stocks could trigger tax liability, so it's important that they apply the right tax rates on their capital gains. Profit from the sale of investments held for less than a year is subject to short-term capital-gains tax rates, which are higher than the tax rates for gains from selling stocks owned for more than a year.
Register or login for access to this item and much more
All Employee Benefit News becomes archived within a week of it being published
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access