Bookmark this page on your mobile

QR Code image

What is this?

Daily Court Reporter - News Three tax savings strategies for a secure retirement to try right now


Three tax savings strategies for a secure retirement to try right now

(BPT) Individuals who rushed to prepay property taxes after the passage of the Tax Cuts and Jobs Act may have saved some money in 2018 - but that's pennies compared to the long-term tax savings taxpayers should take advantage of before the TCJA's individual tax provisions are expected to expire in 2026, according to Robert Fishbein, vice president and corporate counsel at Prudential Financial.

Also expected to expire in 2026? According to trustees for Social Security, that's when Medicare's main trust fund will run out of money. With the increasing likelihood that Social Security and Medicare benefits may be reduced in the future, it's more important than ever to use every technique available to maximize your retirement savings.

Three outside-the-box strategies could make an enormous difference in your retirement readiness. The sooner you start, the more you may save.

Fund an HSA for retirement health care

Estimates suggest even a healthy 65-year-old couple will need at least $275,000 to cover retirement health care costs. A Health Savings Account, or HSA, provides a way to save that money without paying a dime in taxes. An HSA account is available to individuals enrolled in a high deductible health insurance plan.

First, these individuals can fund their HSA through a tax-deductible contribution or pre-tax payroll deduction. Second, any interest and investment gains are tax-free. Finally, the funds can be withdrawn tax-free to pay for qualified medical expenses- a triple tax advantage over a traditional savings account.

The best part? There is no requirement to use HSA funds in the year of contribution, which means funds can grow on a tax-favored basis for future health care expense needs.

For 2018, family contribution limits are $6,900, or $7,900 if you are 55 or older, and those amounts are indexed for inflation in future years. If you start contributing the maximum even as late as age 55, and earn 3 percent per year, you could have more than $90,000 to pay for your retirement health care by age 65. If you start contributing the maximum as early as age 40, you could have saved almost $270,000. These funds will continue to grow tax-free in retirement until you need them.

If you don't use HSA funds in full before you die, excess funds are subject to income tax, but will be otherwise available for your heirs.

Consider a Roth IRA conversion

The typical dogma says that converting an IRA or traditional 401(k) to a Roth IRA does not make sense if you expect your tax rate in retirement to be lower than at the time of conversion. However, lesser known benefits of a Roth IRA may make it worthwhile to have at least part of your retirement assets in Roth IRA form.

Start with no required minimum distributions. With a Roth you aren't forced to draw down your funds once you attain age 70½ and can continue to benefit from the tax-free growth, thereby maximizing the after-tax funds eventually available for you or your heirs.

Another significant benefit of a Roth IRA or Roth 401(k) is tax diversification. For example, you may choose to take taxable distributions up to a certain amount and then tax-free distributions to avoid a higher income tax bracket.

If you are a high-income taxpayer, Roth IRA distributions are not considered income when determining thresholds for increased Medicare premium charges or the 3.8 percent income tax surcharge on investment gain. If your income is more modest, Roth IRA distributions are not considered income when determining whether you are subject to income tax on Social Security benefits.

If anything, a conversion is more attractive now since you have an opportunity to convert and pay income tax with marginal rates that are generally lower than under prior law. Since individual tax law changes are temporary and tax rates will revert to the former higher amounts starting in 2026, you have an eight-year window to benefit from lower rates.

Make "backdoor" Roth IRA contributions

The tax law prescribes income limits so high-income individuals may not make a direct contribution to a Roth IRA. However, there are no income limits on converting traditional IRA funds to a Roth IRA.

Any person under age 70.5 who has earned income by year-end can make an IRA contribution. While income limits may prevent you from making a pre-tax contribution, you can make this contribution even if you have fully funded a 401(k) or another employer plan.

Once you have made your contribution to a traditional IRA, simply convert that amount to your Roth IRA. As long as this is your only traditional IRA and you have made an after-tax contribution, then an immediate conversion will have converted a tax-deferred asset into a potentially tax-free asset. If you have multiple IRAs, the IRAs are aggregated to determine how much is taxable upon conversion.

While we spend much time on our investment strategies to help gain an extra percentage or two of investment yield, these tax planning strategies can be a more reliable way of maximizing your after-tax retirement income and wealth for your family - no matter how Social Security and Medicare turn out.

Prudential Financial, its affiliates, and their financial professionals do not render tax or legal advice. Please consult with your tax and legal advisors regarding your personal circumstances.

Date Published: November 28, 2018




Wright State University agrees to pay government $1 million for visa fraud

Wright State University’s Board of Trustees has accepted responsibility for visa fraud offenses on behalf of the university and agreed to pay the federal government $1 million.

Settlement expected to improve Ohio's special education system

An organization championing the rights of Ohio special education students announced last week that it had arrived at a settlement with the state in a 25-year-old class action lawsuit seeking sufficient resources for the public instruction of disabled students.

Attorney General DeWine offers holiday shopping tips for consumers

Ohio Attorney General Mike DeWine recently offered consumer protection tips for the holiday shopping season.

Legislation proposed to ensure financial resources for counties of capital crimes involving multiple victims and defendants

When a multi-defendant capital crime occurs in a county with limited resources, local officials may be unable to seek justice because of the extraordinary cost of prosecuting such a case. Recently, Ohio Auditor Dave Yost was joined by Senator Bob Peterson and Representative Shane Wilkin to call for legislation to address the financial strain on a community brought on by cases involving multiple victims and defendants.

Chinese national sentenced to nearly six years in prison for distributing opioids and other drugs that were shipped from China to the U.S. and ultimately to Ohio

A Chinese national who had been living in Massachusetts was sentenced to nearly six years in prison for distributing opioids and other drugs that were shipped from China to the United States and ultimately to Ohio.

Ohio's young hunters harvest more than 6,500 deer during youth gun season

Ohio’s young hunters had a successful weekend and checked 6,563 white-tailed deer during the two-day youth gun season, Nov. 17-18, according to the Ohio Department of Natural Resources (ODNR). During last year’s youth gun season, 4,958 white-tailed deer were checked.

Kroger shooting suspect charged with federal hate crimes and firearm offenses

Gregory A. Bush, 51, was indicted recently by a federal grand jury on hate crime and firearm charges arising out of the racially motivated murder of two African-American patrons at a Kroger grocery store, and the attempted murder of a third, on Oct. 24 in Jeffersontown, Kentucky. The indictment was announced by Acting Attorney General Matthew Whitaker, Assistant Attorney General Eric Dreiband for the Civil Rights Division, U.S. Attorney Russell Coleman, and FBI Louisville Special Agent in Charge James Robert Brown, Jr.

Proposed legislation designed to make children safer in homes with guns

Lawmakers in the Ohio House of Representatives heard testimony recently about a measure that would criminalize a Ohio gun owner's failure to secure or make a firearm inoperable in circumstances in which a minor may gain access to the weapon.

Former nonprofit executive director arrested and charged with embezzling $172,000

A former executive director of a Cleveland community development corporation was arrested this morning for embezzling more than $172,000 from the Collinwood and Nottingham Villages Development Corporation.

Secretary Husted releases new business filings figures

Ohio Secretary of State Jon Husted just recently announced 10,876 new entities filed to do business in Ohio last month, an increase of 1,626 when compared to October 2017.

Ohio Peace Officer Training Academy receives $280,000 in grants for law enforcement training courses

Ohio Attorney General Mike DeWine recently announced that his office’s Ohio Peace Officer Training Academy has received two grants totaling $280,000 to provide training for Ohio law enforcement officers on topics including identifying impaired drivers and investigating traffic collisions.

Bar admission caps years-long journeys for almost 600 new attorneys

Nearly 600 attorneys took their oaths and received their certificates to practice law before all seven justices at the Ohio Supreme Court’s annual fall bar admission ceremony at the Palace Theatre in Columbus.

Football runs past Morehead State, 63-20

On a chilly Saturday afternoon at Welcome Stadium, the Dayton Flyers' offense came out on fire and took control of the game well before halftime.

Public Health provides bikeway signs with the goal of increasing physical activity

Public Health - Dayton & Montgomery County’s Creating Healthy Communities (CHC) program has provided bikeway signs in Old North Dayton to direct residents to the Great Miami Recreation Trail, Mad River Recreation Tail, Stuart Patterson Park, and other Old North Dayton destinations. The goal of the project is to increase the number of Old North Dayton residents who have access to places for physical activity.

WSU men’s basketball slips at Murray State

The Wright State men's basketball team went on the road Saturday, November 10, for their first game away from the Nutter Center and fell at Murray State 73-54. WSU is now 1-1 while the Racers are 1-0.

Clerk outsmarts phony owner of Ohio Bureau of Workers’ Comp rebate check

An Akron sex offender added forgery to his criminal record last month after a clerk at a Check Smart thwarted his attempt to cash a $5,500 rebate check from the Ohio Bureau of Workers' Compensation (BWC) that belonged to a church-owned day care center.

Proposal would make it legal to post a photo of your ballot

A pair of Republican lawmakers are making an attempt - albeit late in the legislative session - to extend free speech right up to the nearest voting machine.

Newton Falls woman indicted for stealing $377,000 from healthcare plans she administered and using the money to pay personal and business expenses

A 26-count indictment was filed today accusing a Newton Falls resident of stealing more than $375,000 from healthcare plans she administered and using the money to pay for personal and business expenses, said Justin E. Herdman, United States Attorney for the Northern District of Ohio.

PUCO encourages safe driving around motor carriers during the holidays

During the winter holiday season, Ohio’s world-class transportation system will be heavily relied upon as travelers visit family and friends. Ohio ranks fifth as one of the most highly traveled states in the country, even as some areas receive up to 68 inches of snow annually.

Akron man sentenced to nearly 10 years in prison after ordering 500 grams of a fentanyl analogue from China

An Akron man was sentenced to nearly 10 years in prison after ordering 500 grams of a fentanyl analogue from China.