Don't Wait for Congress – Give Yourself a Tax Cut Now
Your 401(k) and traditional IRA may be saving you on taxes today, but you'll owe taxes on them in the future. And who knows what rates will be then? In the meantime, here are two tax-taming strategies to consider instead.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
Despite the Trump administration’s current attempts at lowering taxes, it’s tough to look at our $20 trillion national debt without wondering when — and how high — rates eventually will have to rise.
Another possible path: Life insurance
A Roth conversion is a popular choice right now, but it isn’t the only option. Rather than continuing to place all or part of their nest egg into a tax-deferred account, we’ve seen some savers redirect part of their funds into an Indexed Universal Life (IUL) insurance plan. The benefits can be considerable: tax-deferred growth, no contribution limits, income tax-free distributions, no penalties for withdrawals before age 59½, non-reportable income, no RMDs and a potentially income tax-free legacy (with the death benefit).
In his book, “The New Rules of Retirement Saving: The Risks No One Is Telling You About … And How to Fix Them,” Martin Ruby, a former actuary, describes in detail the strategy of converting an IRA to an IUL policy, which can significantly reduce taxes paid over many years through RMDs and the resulting taxation of the RMD money reinvested into taxable accounts. Ruby provides specific examples of how the strategy can be applied. Your adviser should be able to walk you through the pros and cons.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
There’s an old Morgan Stanley ad that says, “You must pay taxes. But there’s no law that says you gotta leave a tip.”
It’s important to remember that deferral postpones taxes, but it doesn’t eliminate them. Eventually, Uncle Sam will want his share of the money you’ve been saving — and he can change the rules for how he gets it at any time.
That’s why many investors are looking at ways to put their own tax efficiencies in place — with strategies that will last their lifetimes.
If you’re worried about the money that’s piling up in your tax-deferred retirement plan, talk to your financial adviser and a tax professional about creating a tax-efficient strategy for the future.
Kim Franke-Folstad contributed to this article.
This is provided for informational purposes only; it is not intended to provide tax or legal advice. All individuals are encouraged to seek advice from qualified professionals regarding their individual circumstances.
-
Quiz: Do You Know How to Avoid the "Medigap Trap?"Quiz Test your basic knowledge of the "Medigap Trap" in our quick quiz.
-
5 Top Tax-Efficient Mutual Funds for Smarter InvestingMutual funds are many things, but "tax-friendly" usually isn't one of them. These are the exceptions.
-
AI Sparks Existential Crisis for Software StocksThe Kiplinger Letter Fears that SaaS subscription software could be rendered obsolete by artificial intelligence make investors jittery.
-
Social Security Break-Even Math Is Helpful, But Don't Let It Dictate When You'll FileYour Social Security break-even age tells you how long you'd need to live for delaying to pay off, but shouldn't be the sole basis for deciding when to claim.
-
I'm an Opportunity Zone Pro: This Is How to Deliver Roth-Like Tax-Free Growth (Without Contribution Limits)Investors who combine Roth IRAs, the gold standard of tax-free savings, with qualified opportunity funds could enjoy decades of tax-free growth.
-
One of the Most Powerful Wealth-Building Moves a Woman Can Make: A Midcareer PivotIf it feels like you can't sustain what you're doing for the next 20 years, it's time for an honest look at what's draining you and what energizes you.
-
I'm a Wealth Adviser Obsessed With Mahjong: Here Are 8 Ways It Can Teach Us How to Manage Our MoneyThis increasingly popular Chinese game can teach us not only how to help manage our money but also how important it is to connect with other people.
-
Looking for a Financial Book That Won't Put Your Young Adult to Sleep? This One Makes 'Cents'"Wealth Your Way" by Cosmo DeStefano offers a highly accessible guide for young adults and their parents on building wealth through simple, consistent habits.
-
Global Uncertainty Has Investors Running Scared: This Is How Advisers Can Reassure ThemHow can advisers reassure clients nervous about their plans in an increasingly complex and rapidly changing world? This conversational framework provides the key.
-
I'm a Real Estate Investing Pro: This Is How to Use 1031 Exchanges to Scale Up Your Real Estate EmpireSmall rental properties can be excellent investments, but you can use 1031 exchanges to transition to commercial real estate for bigger wealth-building.
-
Should You Jump on the Roth Conversion Bandwagon? A Financial Adviser Weighs InRoth conversions are all the rage, but what works well for one household can cause financial strain for another. This is what you should consider before moving ahead.
