I’m writing on the last day of June. This of course marks the end of the second quarter, the years’ official halfway point, and is another reminder that Wyoming summers are short, and I’ve spent too much time at work and not enough time horsing around with my kids outside.
The last three months have been particularly interesting in financial markets, so I thought I’d write a quick post reflecting on some of the key lessons I’ve observed so far this year.
Many Wyoming workers take advantage of employer retirement plans, like 401ks or 457s, which offer tax-deferred contributions as well as matching contributions from the employer. This is an incredible benefit that should seldom be passed up. Even when you don’t have access to a 401(k), IRAs are also available to help lower your taxes and get tax-deferred growth.
A problem comes, however, when an account holder reaches the age to begin Required Minimum Distributions, or RMDs. These are amounts of money that MUST be taken from the retirement account, and taxes paid on the withdrawal.
Roth IRAs have made a good run in their relatively short 23 year history. I join with millions of Americans in celebrating the fact that there is an instrument like these allowing workers to save and grow their after-tax dollars and never pay taxes on them again. It’s fitting that the creation of the Roth IRA fell under the Tax Relief Act of 1997.
Roth IRAs have many advantages (which I’ll highlight again); but what I’d really like to dive into is something called a Roth Conversion--where you convert traditional IRA funds into Roth IRA funds.
As last year’s U.S. Congressional session approached the Christmas holiday, a little known bill called the SECURE Act was once again teetering on the edge of failure. However, at the last minute it was tacked onto the year-end appropriations bill in order to keep the government funded. Just like that, a new series of financial rules and requirements impacted millions of American’s financial lives, though most don’t even know about it.
Following is a brief rundown of the SECURE Act’s 1,000+ page rule, with a focus on the areas that I feel would most likely impact you.