The latest on the blog:
How High Earners Can Sneak Money Into a Roth IRA (Legally, Of Course)
If you’ve ever felt left out of the Roth IRA party because you make “too much money,” I have good news. It’s called a Backdoor Roth IRA, and it’s one of the ways for high-income earners to build tax-free retirement income. And before you ask—yes, it’s legal, and no, you won’t get a knock on your door from the IRS (as long as you do it correctly). Here’s how it works, why it’s great, and what you need to watch out for. Why Backdoor Roths Are a Game-Changer for High Earners One of the most frustrating things about tax-advantaged accounts is that many of the best benefits fade away once your income gets too high. The Roth IRA, for example, has strict income limits that keep high earners from contributing directly. But the Backdoor Roth IRA? No income limits. Zero. Nada. Which means if you’ve been shut out of Roth contributions because you’re “too successful,” this is a great workaround. Even better? Maxing out your 401(k) at work—whether it’s a Roth 401(k) or a traditional 401(k)—does not impact your ability to make a non-deductible IRA contribution. Many people assume that hitting their 401(k) limit means they’re done saving for retirement
The 4 Biggest Mistakes People Make with HSAs (And How to Avoid Them)
Health Savings Accounts (HSAs) are one of the best financial tools out there—offering tax advantages and long-term growth potential. But unfortunately, most people don’t use them to their full potential, and some make mistakes that cost them serious money. Heck, I could have easily made the mistake with my own family’s medical expenses. Last year, my daughter had a major jaw surgery (which, as a father, was both emotionally and financially painful). My first inclination was to use some of the funds we had saved up over the past 10+ years. It would have been easy to use our HSA to cover the cost immediately—but instead, I kept the receipts and paid out-of-pocket. Why? Because someday, when I’ve likely predeceased my wife (thanks to my bad knees, statistical likelihood, and general refusal to ask for directions), she’ll be in a higher tax bracket. By holding onto those records, she can withdraw from the HSA tax-free in retirement, when it’ll matter more. So, in the spirit of learning from my own near mistakes, here are the biggest blunders we see clients make with HSAs and how to avoid them: 1) Not Contributing Enough (Or at All) Health Savings Accounts have a
Lessons Learned from Offering a 401(k) Plan
As a business owner, providing a 401(k) plan can be a game-changer for both your company and your employees. While the benefits—such as tax advantages and talent retention—are clear, many business owners have also learned valuable lessons along the way. Understanding these lessons can help you optimize your plan and avoid common pitfalls. Key Benefits of a 401(k) Plan for Business Owners Before diving into the lessons learned, it’s important to acknowledge the major advantages of offering a 401(k): Lessons Learned from Implementing a 401(k) Plan While these benefits seem substantial, successful business owners have learned several key lessons when setting up and managing their plans. 1. Offer a Roth 401(k) Option for Long-Term Tax Benefits *This is a hypothetical illustration and is not intended to reflect the actual performance of any particular security. Future performance cannot be guaranteed, and investment yields will fluctuate with market conditions. Actual investor results will vary 2. Avoid Allowing 401(k) Loans 3. Implement Auto-Enrollment and Auto-Escalation for 401(k) Plans 4. Use a Safe Harbor Plan to Avoid Compliance Headaches with 401(k) Plans 5. Provide Regular 401(k) Employee Education Conclusion Offering a 401(k) plan is a smart move for business owners, but there are lessons
