The financial world has seen a lot of change, with more women employed in male-dominated industries. This means that women are more independent today than ever before. Despite these achievements, women face many challenges as they approach retirement age.

Financial planning for women is essential as they approach retirement since retirement is when there is less income than spending. Therefore, proper planning should be considered.

Retirement planning is essential for women, and today, there are many ways in which women can invest and diversify their income to ensure that when they retire, they will still have a steady income. They won’t have to depend on their spouses or children for daily expenses.

There are many ways in which women can plan for their retirement. Here is a guide on retirement plans for women.

1. Save more.

As you approach retirement age, you must learn to save more. Women are known to spend more than men. We all know advertising has changed, and we can see it directed toward women. This increases shopping activities that are sometimes aimed at buying the most luxurious things.

Learning how to save more will be very beneficial. Take up the saving rule in which you should save at least 30% of your salary.

If you are used to spending too much on takeout, start preparing your food at home. Savings that do not yield anything are not good. Taking up a savings account with your bank where you can earn a certain amount of money for saving money in your bank account can be very beneficial instead of putting your money in a regular bank account.

When you start saving early, you will realize that by the time you retire, you will have enough money to start a business or enjoy your retirement. Women should consider saving in a savings bank account that yields interest which can increase their savings amount.

2. Emergency fund.

An emergency fund is an essential aspect that you should consider when planning for retirement. Emergency funds are aimed at securing you financially in case you lose a job or in your old age when you run out of cash and you have an emergency that you need to take care of immediately.

Emergency funds should be kept separately from your savings account and used only to handle emergencies that cannot wait. Contributing a certain amount of your income to your emergency fund is very important and should be handled with a lot of discipline. Economists say you should save at least 6 to 18 months’ worth of living expenses in an emergency fund account to cater for emergencies.

You can create an emergency fund bank account that allows you to divert a certain amount of your earnings and use it whenever needed. This will give you a more accessible and more peaceful time since you won’t stress if you are low on funds during retirement.

3. Invest in stocks.

Investing is the best way to prepare for retirement since it will help you make more money even when you are retired. There are many ways of investing. You can invest in stocks earning dividends in which you will be able to earn dividends when the company you have invested in makes profits at the end of the year. There are many companies that offer stocks to the public to buy.

Stocks are sold at the security exchange market. Here you can buy stock when they are low and sell when they are high, or you can decide to wait to earn dividends at the end of the year. Stocks are the most common form of investment that even billionaires use to earn income. Investing in stock is considered to be a low-risk investment since it’s scarce that companies make losses.

The stock investment will ensure that you generate regular income, which is considered passive income. This passive income type is very profitable, and you are assured that the money will keep coming in regularly. Buying stocks before retiring is very beneficial since even as you retire, you will be assured that there will be a steady income.

4. Annuity.

An annuity is an insurance contract in which it’s issued to pay the investor a fixed income in the future of the invested money by the insured. Financial institutions like insurance companies mainly issue annuities. You pay a certain amount of money in terms of premiums or lump sums, and upon retirement, you will earn a specified amount for a certain period for the remainder of your life. Annuities are mainly preferred for retirement since they are less risky, and you are assured of a good life after retirement.

Retirement planning for women is essential. Annuities are one of the best retirement plans for women since annuities will sustain their living expenses and guarantee a steady flow of income. Taxes are associated with annuities that people seeking to get allowances should consider. Getting in touch with a financial institution offering grants for advice on subsidies can benefit you. 

5. Real estate investment.

Real estate investment is the most common option many people are now diving into more than ever. With a high rate of inflation and increased demand for suitable housing, investing in real estate can be very profitable, especially if you want a permanent house in which you can live forever. You can also decide to build your own home and become a landlord in which tenants pay rent. This way, you will have an income stream every month.

Suppose you can’t afford to buy a house or build one. In that case, you can invest in real estate companies where different investors come together and own real estate properties. The profit earned is divided equally among the investors when they sell the property. Women planning to retire should consider this form of investment since it’s very profitable and you are assured of a steady income.


The retirement plan for women is essential, and women should plan their retirement even before they get into retirement age by saving, buying stocks, and investing in real estate and annuities. Join the financial retirement club for empowered women and plan your retirement better today.


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Everything You Need To Know About Income Planning for Retirement

Income planning for retirement sounds intuitive. Yet many Americans go without a solid plan.
One-third of Americans have no plan of any kind, and only one-third of Americans who do plan have more than 100,000 dollars saved.

If you haven’t, you should start making monthly retirement savings. But don’t just set some money aside in a bank account.

Get a detailed plan in place. Consider your various options to save money so you can spend decades in retirement. Here is your quick guide.

A Plan for Retirement

You should set a goal for when and how you want to retire. Many people want to work beyond 65, the standard retirement age.

If you’re comfortable doing that, you should. This will give you more time to save money and decide what you want to do after you leave work.

To start planning for retirement, you should look into what employer-sponsored plans you can place your money into. A 401(k) account is the most common option.

But you also choose a 403(b) or 457(b) plan. A 403(b) plan is for employees of tax-exempt organizations, with employers matching their employee’s contributions. A 457(b) plan is for local and state government employees, and it involves contributions taken from pre-tax income.

Start saving money as soon as you can. One common fear that people have is outliving their savings. By saving money early on, you can ensure that you will have resources well into your nineties.

Diversify your investment portfolio. Combine your employer-sponsored plan with IRAs and brokerage accounts. You can maintain some hard assets, but make sure you also have cash in savings accounts.

There is no set rule for how much of your income you should save every year. Talk to your financial advisor about what seems reasonable.

In general, you want to have your retirement income at 80 percent of your pre-retirement salary. If you make 80,000 dollars a year, you want to have 64,000 in retirement. If you plan on traveling or moving abroad, you should have even more money.

Try putting aside 20 percent of your post-tax paycheck into retirement savings. Adjust as you make more money and investments.

Indexed Annuity

An indexed annuity is an annuity that is tied to a stock index. It is distinct from a fixed annuity, which has a constant and unchanging interest rate. The interest rate of an indexed annuity goes up and down depending on stock performance.

This means that an annuity provides more money when times are good. Even when times are bad, an indexed annuity allows for more savings than a variable annuity.

Index annuities do have a guaranteed minimum return. Your contract will specify a certain amount of your principal that you will get back. To determine the interest, you can select several different types of indexed annuities.

An annual reset package looks at the change in the stock index from January to December. It ignores declines, providing interest based on overall increases.

A high watermark annuity examines the stock values at various points in the year. It takes the highest value, then compares it to the one when the annuity contract started. The increase in values determines the interest rate.

A point-to-point annuity is similar to a high watermark one. It examines the change at two preselected points in time, which could be over several years. Most contracts have a term, so a point-to-point annuity will use the start and end of the term.

Index averaging looks at the value of the index every day or month, then average certain values together.

Many people are worried about outliving their income. An indexed annuity provides a protected monthly income, which decreases the risk of outliving.

Social Security

Another resource at your disposal for income planning is Social Security. You can qualify for Social Security at 62. This makes it a desirable source of income for people who want to leave work a little early.

But you need to be strategic with Social Security. If you retire later, you can receive more benefits.

You pay taxes into Social Security while you work. According to the Social Security Administration (SSA), beneficiaries receive 40 percent of their pre-retirement income. This is a good foundation to build upon, but it is not enough for many Americans to retire.

Keep in mind your Social Security payments while you are planning for retirement. But don’t weaken your portfolio or employer-sponsored account. Save up the majority of your money through those programs, then use Social Security as a safety net.

You can use your Social Security money for anything you’d like. If you’re comfortable, consider making investments with the funds. This will give you opportunities to earn money while you are retired.

You can only qualify for Social Security once you’ve earned 40 credits. You can earn up to four per year. You earn one credit for 1,470 dollars in earnings.

If you become disabled and unable to work, you can use your benefits. But the SSA only grants disability benefits under rare circumstances. You should incorporate contingencies into any financial plans you make.

Get Smart When Income Planning for Retirement

Income planning for retirement is straightforward yet profound. Think of when you want to retire, then find a good employer-sponsored account. Put some money into that account and different investments.

An indexed annuity can give you savings over a long period of time. Consider your different options to guarantee yourself a monthly income.

Leverage your Social Security payments. Use them to make investments while you are retired. Weigh the options of retiring early or working later.

Work with experts on securing a stable retirement. Contact us today.

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A Beginner’s Guide to Income Planning

Does the thought of retiring make you nervous or excited? If you have a strong income plan, retirement can be one of the most exciting and moments of your life.

You can retire with the knowledge that you will be able to continue living your life the way you want to live it. If you don’t start income planning, however, retirement can be downright scary.

Developing an income plan for retirement starts with understanding the different income streams available to retirees. You’ll have to get familiar with terms like indexed annuities, guaranteed income, and many more financial terms that can serve you well when you’re done working.

The better you understand your options for retirement income, the easier it will be to plan for your future.

In the article below, you can learn all about the different options available to you in terms of retirement income. You’ll also learn how to start saving now so that you’ll be set up for a long, relaxing retirement. Read on to make sure you’re ready to retire comfortably when the time comes.

What are Indexed Annuities?

One of the best ways to ensure you’ll have a comfortable life as a retiree is to purchase an indexed annuity as soon as possible. This is a contract between you and an annuity provider that works similarly to insurance.

You’ll give the provider a one-time payment, monthly payments, or annual payments in exchange for a contract that promises to provide you with regular payments when you reach retirement age.

With indexed annuities, the amount of these retirement payments depends on the performance of certain index funds. The S&P 500 and Wilshire 5000 Total Market Index are good examples of the types of index funds that are generally used for indexed annuities to provide guaranteed income.

Purchasing an indexed annuity contract now will set you up for regular income to use when you’re retired.

How Can You Get Access to Tax-Free Income?

The taxes that you pay while you’re working can take a lot of money out of every paycheck. That’s why many people want to know how to avoid paying taxes on the income they get when they’re retired. One option for tax-free income is a Roth IRA.

If you start contributing to a Roth IRA when you’re young, you’ll have plenty of time to let the money grow as the IRA investments increase in value. No matter how much your Roth IRA grows as a result of investments, the extra money in the account won’t be taxed.

Plus, you can take the money out of the Roth IRA when you do retire and it won’t be taxed then either. The only time this money is taxed is when you first receive it as income; before you ever put it into a Roth IRA. You’ll also have to pay taxes on this money if you pull it out of the Roth IRA before you reach retirement age.

How Do Social Security Payments Work?

For however long you’ve been working in the United States, you’ve been giving part of your paycheck to Social Security. When you retire, you can finally get some of that money back in the form of social security payments. How much you get paid from social security depends on how much you made during your life and what age you are when you retire.

If you’re planning to rely heavily on Social Security in retirement, you should know your full retirement age.

If you choose to retire at age 62 and you have not yet reached your full retirement age, you will not receive your full social security payments each month. However, if you choose to delay your retirement by a few years, you can actually receive a larger social security check each month than you would have if you’d retired at your full retirement age.

When Should You Start Planning for Retirement?

When it comes to financial planning for retirement, you should start as early in life as possible. However, it’s never too late to start looking at your options for retirement income. If you do a little bit of income planning today, you can rest easy in the future knowing that you’ve already taken care of your retirement income streams.

Why is it important to start saving for retirement early on in life? It’s important because of compound interest. As your money grows in a retirement account, the previous year’s gains of the previous year can grow on top of the money you initially put in the account. The more years you have between your initial savings deposit and your retirement date, the more compound interest will impact your account.

Start Income Planning Today and Enjoy Your Retirement

The more you plan for retirement today, the easier it will be to relax when the day comes that you finally do retire. People who do a lot of income planning before retirement can also retire earlier than people who don’t.

Instead of having to work longer and save more for retirement, people who are smart about income planning can stop working once they reach retirement age. If you’re interested in learning more about income planning and retirement, get in touch with our retirement planning experts.

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Outliving Your Income

Considering retirement? Most people fear the very real possibility of outliving the money they’ve worked so hard to save.

Making sure your money lasts throughout your life is one of the main concerns when planning retirement. After all, you worked hard and saved your entire life. You shouldn’t have to worry about reducing your lifestyle.

Keeping your retirement properly funded remains an ongoing challenge. This holds true with the market volatility, economic uncertainty, and other concerns. On top of that, we’re living longer than we used to.

Pension Plans

Company pension plans provide a steady income for life countered some of those risks. But, only a few are lucky to have one.

Today, pensions are disappearing from the American landscape. Only 26% of American workers have access to a defined-benefit pension plan, according to a Bureau of Labor Statistics survey in 2018.

How Annuities Give You Protected Monthly Income

But, there’s some good news. Even with the risks, concerns, and in the absence of a pension, you can get that kind of protected monthly income. You can get it by investing in an annuity.

“An annuity is the only financial product that can generate income that will last as long as someone may live, whether that is to age 80, 90, 100, or 110,” explains Frank O’Connor, vice president of research and outreach at the Insured Retirement Institute.

Annuities are long-term investments offered by insurance companies. They can provide this lifetime guarantee because they’re able to pool the risk among a wide range of individuals.

<h2″>Other Annuity Benefits

“Setting aside part of your retirement savings into an annuity also helps you avoid a second issue associated with working with lump-sum investments,” says William G. Gale at the Brookings Institution think tank in Washington, D.C. He serves as the Arjay and Frances Miller Chair in Federal Economic Policy and Director of the Retirement Security Project.

Gale says, “If you drawdown your lump-sum savings too and live longer than you expected, you might have to rely on less in your later years.” Keep in mind, if you also drawdown your savings and pass away earlier than you expected, your thrift will have been unnecessary. You won’t have enjoyed your retirement years as much as you could have.

“Having part of your retirement assets in an annuity reduces these two risks,” Gale says. You can have a standard of living that’s higher than in the conservative drawdown case and rest assured your protected lifetime income will last as long as you do.

O’Connor believes that the temptation to overspend is greater when you see your savings as a lump sum. “Retirement savings will seem like a financial windfall at first,” says O’Connor. He states “using that ‘pot of gold’ without a plan creates a high likelihood of depleting those savings while you still need them.”

How to Plan Ahead with an Annuity

Annuities can also protect you from outliving your income in retirement. It decreases your need to make financial decisions late in life. “We’re all vulnerable to the challenges of old age,” says Jack Dolan, vice president of the American Council of Life Insurers.

Remember—not all annuities are alike. For example, some annuities provide a family benefit, beyond one person’s life. This could be a joint benefit or a death benefit.

Plus, your need for an annuity also depends on your other sources of retirement income, like Social Security or required minimum distributions from retirement plans. So check with a financial professional before investing in an annuity.

Ultimate Retirement Planning Goal

Whatever your asset mix is, all retirement planning comes down to one thing: being more secure. The protected lifetime income of an annuity can free you to focus less on financial concerns and more on enjoying your golden years to the fullest.

Important info

Annuities are long-term investments designed for retirement purposes. The value of variable annuities is subject to market risk and will fluctuate. Product guarantees are subject to the claims-paying ability of the issuing insurance company.

Earnings, when withdrawn, are subject to federal and/or state income tax, including a 10% tax penalty for withdrawals before age 59½. Some income guarantees offered with annuities take the form of optional riders and carry charges in addition to the fees and charges associated with annuity products.

There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Investments in annuity contracts may not be suitable for all investors.

© 2021 Alliance For Lifetime Income. All rights reserved.

IMPORTANT NOTICE: This article is provided exclusively for use by the licensee, including for client education, and is subject to applicable copyright laws. The unauthorized use, reproduction, or distribution of this material is a violation of federal law and punishable by civil and criminal penalty. This material is furnished “as is” without warranty of any kind. Its accuracy and completeness are not guaranteed and all warranties expressed or implied are hereby excluded.

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Should You and Your Spouse File Taxes Jointly or Separately?

The 2021 tax season is now here and Americans are excited to maximize their refund. Last year, the average tax refund was nearly $3,000.

Due to the Covid-19 pandemic, Congress passed additional tax relief legislation to help American families. There were major changes in 2021 including popular provisions like the Child Tax Credit (CTC).

Many married couples face a predicament about whether to file separately or jointly. Read on to learn whether you and your spouse should file taxes jointly. Explore the pros and cons so that you can make an informed decision about filing taxes.

What Do the Tax Brackets Look Like?

When debating to file taxes separately or jointly, the first question to answer is what are the different tax brackets? The Internal Revenue Service (IRS) publishes tax brackets for each filing category before returns are accepted.

This way, tax filers have adequate time to prepare and have insight on how much to withhold from their pay. Continue reading for a breakout of the tax brackets for married vs single:

Single and Married Filing Separately

For the most part, the tax brackets for single and married filing separately are the same. There is only one difference in the tax brackets between the two filing categories.

Those earning $10,275 or less pay 10% taxes in both filing categories. The same is true for the 24%, 32%, and 35% tax brackets. The income thresholds for these brackets are $89,075, $170,050, and $215,950 respectively.

The only observed difference is in the 37% tax bracket. Single filers who earn $539,900 or more pay this tax rate.

For married filing separately, the income figure drops down to $323,925. This is often referred to as the marriage penalty. A person earning $400,000 pays higher taxes if married than if he or she remained single.

Married Filing Jointly

Now, it is time to discuss the tax brackets for married filing jointly. The relationship between married filing jointly vs. separately is simple. Typically, the income thresholds double from the single or married filing separately category.

Of note, the income threshold for single filers in the 37% tax bracket does not double. In this case, it only doubles from the married filing separately figure.

Bottom Line

At first glance, there is not much difference in the tax brackets for married filing separately vs. jointly. The income levels are simply doubled for joint filers.

There may be unique situations where a couple wants to ensure that one spouse’s income falls below a certain threshold. Perhaps they claim all the deductions and tax credits to achieve a desired rate. However, these cases are rare and require a tax professional to crunch the numbers.

What Is the Standard Deduction?

The standard deduction is a mechanism used in tax filings to reduce your taxable income. While many people itemize their deductions, the vast majority claim a standard deduction.

The Trump Administration’s Tax Cuts and Jobs Act doubled the standard deduction to increase its popularity and usage. In fact,90% of Americans now claim the standard deduction on their tax returns.

The standard deduction varies depending on your filing status. For married couples filing separately, the standard deduction is $12,950. This figure doubles to $25,900 for those who are married filing jointly.

Again, the bottom line is that married filing jointly does not benefit you for the standard deduction. Each spouse is going to receive the same share of the standard deduction regardless of your filing category.

What about Tax Deductions and Credits?

Tax deductions and credits is where married couples filing jointly finally get ahead. The IRS does not allow married couples filing separately to claim a number of popular deductions and credits.

The Earned Income Tax Credit (EITC) is one of the big losses for separate filers. Married couples filing separately are not allowed to claim EITC.

Students and recently-graduated filers are also at a disadvantage if they do not file jointly. Married couples filing separately are not permitted to claim the student loan interest deduction.

They also lose access to the American Opportunity Credit and the Lifetime Learning Credit. These are two popular programs designed to help Americans pay for their education expenses. Barring a few exceptions, separate filers cannot claim adoption or dependent care tax assistance as well.

An additional benefit for married couples filing jointly is Roth IRA contributions. Joint filers can contribute to a Roth IRA up to $214,000.

This is not true for single filers. Only filers with an income less than $10,000 are able to contribute to a Roth IRA.

Are There Cases Where Filing Separately Is Better?

There are instances in which filing separately maximizes your total tax refund. One common situation involves deducting medical bills. The IRS allows tax filers to deduct medical bills that surpass 7.5% of your adjusted gross income.

If you file jointly, this 7.5% threshold is more difficult to reach. This is especially true if your spouse was in good health and did not see a doctor often. Another contributing factor is if your spouse has significant income and makes it harder to reach 7.5% of AGI.

Student loans are another reason why you may not file jointly. Ironically enough, we listed losing the student loan interest deduction as fallout of filing separately.

However, many Americans are on income-based repayment plans. If you add your spouse’s income to your tax status, it may increase your monthly student loan payment.

There are a few other reasons why a spouse may not want to file jointly. For instance, one example is if their spouse has made tax errors in the past and owes back taxes. The other spouse may not want to expose their assets to seizure.

Should You and Your Spouse File Taxes Jointly or Separately?

The answer to this question really depends on your financial situation. Each couple has different circumstances and should make the decision that benefits them the most.

The best solution is to run your taxes both ways and see which one yields the lowest tax. If you enjoyed this article about whether you should file taxes jointly, check out our blog for more great financial advice.

7 Important Tax Tips for Women

Successful American women are now getting ready to prepare their annual tax returns. The number of women-owned
businesses now stands at more than 1.1 million nationwide. Women are producing nearly $2 trillion in sales and employ more than 10 million American workers.

Tax planning is one critical area for women seeking to get ahead. This way, females can keep more of their income generated from self-owned businesses and sales.

Read on to learn tax tips every woman should know about. Explore 7 tax tips for women that are certain to reduce their taxable income this year.

1. Save for Retirement

Far too many Americans are kicking the can down the road on retirement savings. In fact, one in four Americans has nothing in their retirement savings account. An even greater number of people, including women, are not saving enough.

Saving for retirement is sound tax advice. Contributions to your 401k or Individual Retirement Account (IRA) are pre-taxes. This means they are deducted from your pay before federal taxes are calculated.

The end result is that you are lowering your taxable income. Increasing your retirement savings contributions may allow you to qualify for a lower tax bracket if planned correctly. An added benefit is that your savings account is allowed to grow without being held back by taxes.

2. Child and Dependent Care Tax Credits

Caring for your loved ones is one of the greatest challenges that female entrepreneurs and workers deal with. How do you balance caring for your family with career aspirations? For decades, women were forced to put their careers on the back burner so they could stay at home with a child.

In the 1970s, Congress made changes to the tax code to help working families. The child and dependent care tax credit helps women pay expenses incurred while they continue to work.

The American Rescue Plan Act increased the tax credit amount. Now, women can receive a $4,000 tax credit for one qualifying child or dependent. The amount doubles to $8,000 if you have two or more children or dependents.

3. Education Credits

Many women want to get ahead by pursuing an education. In some cases, they were forced to postpone their educational goals for family or other reasons. The good news is that Uncle Sam offers generous education tax credits to help you pay for school.

The American opportunity tax credit (AOTC) is worth $2,500. It can be used for eligible tuition, room and board, and other education-related expenses.

The lifetime learning credit (LLC) provides another $2,000 of tax assistance. There is no limit on how many times you can claim the LLC. You remain eligible so long as you are enrolled in at least one academic period at a higher-education institution.

Congress is aware that these credits are not enough to pay for the totality of student tuition and education-related expenses. Many women need to take out private or public student loans to pay for school. You can deduct your student loan interest as well with a 1098-E form.

4. Deduct Expenses From a Home Office

Many female entrepreneurs are starting businesses from home. Whether they are selling or making products, their home is the primary place of business.

While working from home keeps overhead expenses low, it also has tax advantages. You can deduct expenses from your home office to lower your taxable income.

There is a simplified version of the home office deduction. Here, you can claim a $5 deduction for up to 300 square feet. This means it is a $1,500 deduction.

In the regular version of the deduction, you add up all home expenses. This includes big items like the mortgage and rent. Also, utilities such as electricity and internet are also deductible.

5. Side Hustles

More Americans these days need a side hustle to pay all of their bills. One out of every three Americans is doing a side job right now. However, many women are not thinking about how this extra income affects their taxes.

When you work a job as an independent contractor or freelancer, you do not get a traditional W-2. Instead, you may receive a 1099-MISC to capture your income.

It is important to consider this income when planning your taxes. If you have a more traditional position, you should opt to withhold more in federal taxes on the new W-4 form. This is especially important as you are now responsible for the employer portion of Social Security and Medicare taxes.

6. Medical Expenses

You never know when medical expenses are going to play a significant role in your finances. The good news is that you can deduct medical expenses from your taxable income. If you itemize your taxes, medical expenses that exceed 7.5% of your adjusted gross income are deductible.

Many states, like New Jersey, allow you to deduct all of your medical expenses. Either way, it is good financial advice to save all of your medical receipts.

Along these same lines, many women choose to contribute to a Health Savings Account (HSA). This is a way to shield your money from federal taxes.

You can contribute up to $3600 for an individual or $7200 for a family. The major benefit is that the contributions are pre-taxed which lowers your taxable income.

7. Consider Required Minimum Distributions (RMDs)

For older women, it is necessary to pay attention to their age and IRA. When you turn 72 years old, the IRS requires you to take out RMDs.

This means that you have to withdraw a certain amount of money from your retirement accounts each year. The IRS then taxes these withdrawals. It is important to consider these RMDs when you are doing your retirement planning.

7 Important Tax Tips for Women

There are elements of the U.S. tax code that can help women thrive. Generous programs like the AOTC and child tax credit provide thousands of dollars when you file taxes. You should also increase your retirement savings as they are pre-taxed.

Tax planning is so important as you should have an opportunity to retain your hard-earned income. Knowing about every deduction and tax credit helps improve your annual bottom line.

If you enjoyed this article about 7 important tax tips for women and paying taxes, check out our blog for more great financial advice.

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The Best Retirement Plans for Women and How to Convert Them

Did you know that 36% of non-retirees have an individual retirement account (IRA)? While many people can benefit from opening one of these retirement accounts, it’s also important to consider the type of IRA you contribute to as well. What are the best IRA plans and how you should get started?

If you’re one of the many women who have a traditional IRA account, you may want to consider converting it to a Roth IRA. While it’s not the right choice for everyone, a Roth IRA is a much better solution for certain women who are trying to plan their finances for retirement.

In this guide, we’ll look at the main benefits of Roth conversions.

Roth IRAs vs. Traditional IRAs

Before moving your IRA to a Roth IRA, you need to understand what the differences between them are.

While there are many differences between traditional and Roth IRAs, the main thing to understand is that paying taxes on your contributions will differ. With a traditional IRA, you’ll pay taxes as income once you withdraw your contributions. However, with a Roth IRA, you’ll pay taxes when contributing.

If you’re older than 59½, you’ll be able to withdraw your contributions tax-free later on. However, remember that it will also need to have been more than 5 years since you contributed to your Roth IRA for the first time.

Another difference between Roth IRAs and traditional IRAs relates to required minimum distributions (RMDs). You’ll be required to start taking RMDs from a traditional IRA account once you reach the age of 72.

With Roth IRAs, however, you won’t be required to withdraw money at all. You can pass the account on to your heirs if you decide to do so.

Who Should Convert to a Roth IRA?

One of the main situations in which you might want to convert your IRA to a Roth IRA is if you expect to enter a higher tax bracket in retirement.

A Roth IRA is beneficial for someone who makes a low income now but will expect to make a higher income later. Converting to a Roth IRA can help you pay fewer taxes in the long run.

Another reason why you might want to convert to a Roth IRA is if you want to pass on money to your heirs. If you don’t expect that you’ll need to use the funds in your traditional IRA, then it might be worth converting it to a Roth IRA.

Since you won’t need to make RMDs with a Roth IRA, your savings can continue to grow and can be withdrawn tax-free by your heirs if certain conditions are met.

Benefits of Roth Conversions

So what are the main advantages of converting to a Roth IRA? Here are the main benefits of making the switch.

Withdraw Your Money Tax-Free

One of the key advantages of converting to a Roth IRA is that you can withdraw your money tax-free.

With a traditional IRA, you’ll have to pay taxes once you withdraw it and will need to consider it income. You’ll also need to pay taxes on the money you earn through your investments.

With a Roth IRA, you can end up saving a lot of money on taxes, particularly if you’ll be in a higher tax bracket in retirement. This makes opening a Roth IRA well worth it if you want to go ahead and take care of your taxes ahead of time.

Avoid RMD Penalties

If you have a traditional IRA, you’ll be required to take out RMDs starting at age 72. If you fail to do so, then you’ll have to pay tax penalties to the tune of 50% of the amount that you should have withdrawn.

With a Roth IRA, you won’t have to make withdrawals from your account if you don’t want to. This means you’ll avoid potential penalties for failing to withdraw your savings.

Grow Your Money Longer

Because Roth IRAs don’t require you to withdraw money, you can continue to grow your account for a longer period of time. You can keep your money in an account where it can continue to grow tax-free.

In addition, since you don’t have to withdraw the money at all, you can also leave your money to your heirs. They won’t need to pay federal income tax on the account if it’s been open for 5 years or more.

Get a Roth IRA With a High Income

One major reason why you may decide to convert your IRA is if you can’t get a Roth IRA otherwise.

Whereas a traditional IRA doesn’t have income limits, you’ll need to have less than a certain amount of income to open a Roth IRA. However, you can use a “backdoor” strategy to convert a traditional IRA to a Roth IRA, even if your income is too high for you to open a Roth IRA outright.

However, this strategy has some unintended consequences that could be problematic, so make sure that you understand it fully before doing it. Remember that you’ll have to wait five years to withdraw funds. You’ll also increase your taxable income since the pre-tax portion of your converted funds will become a part of your taxable income.

How to Initiate a Roth IRA Conversion

Going through with a Roth IRA conversion is fairly simple.

To get started, you’ll need to get in touch with the financial institution of your traditional IRA and request that they transfer your money and help with the conversion process. They can initiate a direct transfer to another financial institution or to the same institution, depending on where you’re opening a Roth IRA account.

An alternative to getting a direct transfer from your financial institution is to handle the Roth IRA conversion manually. To do this, you’ll withdraw money from your traditional IRA and then will deposit it into a Roth IRA account on your own.

Keep in mind that you’ll have 60 days to complete the transfer, or you might need to pay penalties. Also, remember that the money will become taxable as well.

Deciding Whether a Roth IRA Conversion Is Right for You

If you want to improve your retirement plan, consider the benefits of Roth conversions. Depending on your goals, a Roth IRA could be a much better choice for making sure you’re able to retire comfortably.

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retirement planner

Retirement Plan Checklist and Finance Guide

Did you know 64% of Americans aren’t prepared for retirement? Fortunately, over 53% have at least some retirement planning in order.

We’re here to help bridge that gap. With our easy retirement plan checklist, you can find out what you still need before you’re ready to retire.

So ensure you’re on course for a healthy, luxurious retirement by checking these boxes.

1. Build a Solid Financial Foundation

A proper retirement financial guide is incomplete without ensuring you have a solid foundation in place.

First, pay off all debt, except for perhaps your mortgage, depending on how close you are to retirement. Start by paying off payday loans, credit card debt, and car loans. The less debt you have in retirement, the more spending money in your budget.

Make sure you have an emergency fund in place, so as surprise expenses come up, you don’t need to turn to debt to cover your bills. This should be anywhere from $1000 minimum up to 6 months worth of expenses.

Finally, make sure you’re keeping a budget. It will help you stay in control of your finances, and will give you an idea of the lifestyle you can afford in retirement.

2. Max Out Your Retirement Contributions

While it’s always best to start young when it comes to your retirement planning, it’s never too late. Within your budget, max out your retirement contributions.

If your employer offers a 401(k) match, make sure you’re at least investing enough to meet the full extent of the match—hey, it’s free money!

Other retirement accounts have various limits on how much you can save each year. Make sure you do your best to hit these numbers.

3. Save with an HSA

An HSA, or health saving account, lets you set aside money with great tax savings to pay for health expenses at later points. There are rules on who can and can’t qualify for an HSA, but reach out to us, and we’ll help you find what you’re eligible for.

4. Consider Life Insurance

Life insurance is there to take care of your family after you pass on, and it can be anywhere from funeral expenses to a significant sum. We talk about the pros and cons of various life insurance policies here.

While it may seem like an unnecessary expense, consider it “I love you money” and enjoy the peace that comes with knowing your family is protected.

5. Invest in Your Health

Finally, you need to invest in your health. What’s the point in being wealthy in retirement if you can’t enjoy it?

So cut back on stress, eat more vegetables, cut back on processed foods, and exercise more. Cultivate healthy, lasting relationships throughout your entire life.

A Retirement Plan Checklist Is the First Step to a Happy Retirement

Retirement planning sounds scary, but with our simple retirement plan checklist, it doesn’t have to be. These tips ensure your health, family, and living expenses will all be taken care of, so you can enjoy your retirement worry-free.

Ready for a comprehensive, personalized plan? That’s our specialty. Contact us today.

jennifer trowbridge miami florida