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4 tax moves to consider early in your career

johnNjohnN
edited July 2019 in Off-Topic
4 tax moves to consider early in your career

https://www.merrilledge.com/article/4-tax-saving-moves-for-young-professionals-to-consider

These tactics could potentially help you save on your taxes now while putting you in a better position to work toward your long-term investing goals.
Key points

Because of the power of compounding, small tax savings invested while you're young could produce greater results than larger amounts invested later on
Spreading your investment assets across different account types could provide for more tax-efficient withdrawals in the future
Matching different types of investments to different types of accounts can increase tax efficiency



We did open sep-ira 2 yrs ago... These strategies help us save lots tax $$.. Probably will roll over to retirement acct when turn 62.5 yo (this was what our cpa recommended previously)... Sep-ira worth every penny imho

Comments

  • CrashCrash
    The way that things "reads" just feels too much like work.
  • msf
    johnN said:

    We did open sep-ira 2 yrs ago... These strategies help us save lots tax $$.. Probably will roll over to retirement acct when turn 62.5 yo (this was what our cpa recommended previously)... Sep-ira worth every penny imho

    Like any traditional IRA, the SEP helped you defer taxes. Savings depend on tax rates now and later.

    Which gets to a consideration the article didn't discuss - where you will retire. Several states have no income tax, and a few more doesn't tax IRA withdrawals. If you're in a high income tax state but will retire to one of these states, it might pay to contribute to traditional accounts rather than to Roth accounts, even if your federal tax rate is higher now. (There are several other states that exempt a portion of IRA withdrawals from taxation.)
    https://sdirahandbook.com/self-directed-ira-news/avoiding-state-income-tax-on-retirement-income-distributions/
    http://www.ncsl.org/documents/fiscal/StateTaxOnPensions2015update.pdf

    Conversely, of course, if you're in a low income tax state and planning on retiring to a high income tax state (that doesn't exempt at least part of IRA distributions from taxation), then you'll want to contribute/convert to Roths before moving.

    With respect to SEPs, they're fundamentally the same as "regular" IRAs. You can transfer assets from a SEP to an IRA at any time, with the the same tax implications.

    "A SEP-IRA account is a traditional IRA and follows the same investment, distribution, and rollover rules as traditional IRAs."
    https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps
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