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- Income tax is paid when funds are withdrawn.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.