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Do tax law changes affect IRA deductibility?

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Do tax law changes affect IRA deductibility?
Workers have until the last day of the tax-filing season to make 2018 contributions to their traditional IRAs, according to this article on Morningstar. Although more taxpayers are expected to opt for the standard deduction, which increased under the new law, they can still claim the tax deduction for IRA contributions. That’s because the tax break for these contributions, including the funds socked away in health savings accounts are considered “above-the-line” deductions, meaning clients can claim the tax break regardless of whether they take the standard route of itemize their tax deductions on their returns.

How will your retirement benefits be taxed?
Seniors may have to owe taxes on their retirement income, depending on the source of their earnings and the total amount of income they receive, according to this article on Motley Fool. For example, up to 85% of their Social Security benefits will be taxed at the federal level if their combined income - their taxable income plus 50% of the benefits - exceeds a certain threshold. Pension payouts are also subject to federal income taxes, unless they contributed to their pension plan using after-tax funds. Distributions from tax-deferred retirement accounts such as traditional 401(k) and IRA are also taxed at the federal income, while withdrawals from a Roth account are tax-free.

HSAs are a triple tax break that can help fast track retirement savings
A health savings account is a tax-advantaged savings vehicle that clients can use to turbocharge their retirement savings, according to this article on USA Today. That’s because an HSA offers triple tax benefits- tax deferral on contributions, tax-exempt growth on investments and tax-free distributions for qualified medical expenses. “Longer-term advantages, after the age of 65, may include the payment of Medicare premiums and other long-term care expenses. The HSA becomes an important aspect of both solving near-term medical expenses, but also for larger expenses well into retirement with those accumulated earnings,” says an expert.

Wondering how your 401(k) would respond to a downturn? These new tools can tell you
Retirement investors have the option of using new tools to determine the best way to manage their investments in the face of risks and survive a market correction, according to this article on CNBC. They can have access to many of these programs through a financial advisor, with a company trying to develop an app to make these tools available to all. "Examining real-life scenarios allows you to understand ahead of time what type of potential downside and upside you have," says an expert.

How to find the perfect balance between spending and saving
Finding the right balance between spending and saving is key to developing a successful retirement plan, an expert on Kiplinger writes. To do this, clients can start by setting up a savings rate based on the cost of their goals, the amount needed to support their preferred lifestyle and the time they have to build their nest egg. They should also make the necessary adjustments along the way and maintain the balance, shoring up their savings when they can. “In both enjoying today and planning for tomorrow, you can create a financial plan that offers the best of both worlds — and a good balance between the two.”

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