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YOUR LEGACY PLAN

By October 20, 2020No Comments

Tax-Deferred Retirement Accounts (TDRAs)

Examples of Tax-Deferred Retirement Accounts (TDRAs): 401(k), 403(b), 401(a), 457 plan

Characteristics of TDRAs:

  • Allows individuals to save for the future and defer paying taxes on the earnings.
  • Contributions are made pre-tax.
  • Many employers offer matching contributions.
  • Income tax is paid when funds are withdrawn.
  • Individuals can take penalty-free withdrawals from TDRAs as early as age 59½.
  • Individuals must start taking withdrawals from their account at the Required Minimum Distribution (RMD) age(age 72 for most people).

Required Minimum Distributions(RMDs) Are Taxable Income:

  • Additional income from RMDs can…
  • move you into a higher tax bracket.
  • reduce your eligibility for certain tax credits and deductions.
  • cause you to pay a Medicare surcharge if your taxable income is too high.

Tax Smart Options to Fund Your Charitable Legacy:

  • Leave tax-deferred assets to charity through beneficiary designation(401(k), 403(b), 401(a)…).
  • Leave tax-free assets to your children(bank accounts, CDs, life insurance, Roth IRAs).
  • Rollover employer-sponsored retirement accounts into a Traditional IRA.
  • Make Qualified Charitable Distributions from your Traditional IRA.
  • Create a Testamentary Charitable Remainder Trust to pay income to heirs AND leave a gift to charity.
  • Make your Foundation permanent fund the beneficiary of your tax-deferred account.

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