Retirement Savings Tax Credit Tips

March 26th, 2012  |  Published in 401K, 403b, IRA  |  2 Comments

If you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement, you may be eligible for a tax credit, depending on your age and income.

Here are six things the IRS wants you to know about the Savers Credit:

1. Income limits The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and 2011 income of:

Single, married filing separately, or qualifying widow(er), with income up to $28,250
Head of Household with income up to $42,375
Married Filing Jointly, with incomes up to $56,500

2. Eligibility requirements To be eligible for the credit you must be at least 18 years of age, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.

3. Credit amount If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 ($2,000 if filing jointly). The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.

4. Distributions When figuring this credit, you generally must subtract distributions you received from your retirement plans from the contributions you made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date – including extensions – for filing the return for the credit year.

5. Other tax benefits The Retirement Savings Contributions Credit is in addition to other tax benefits you may receive for retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.

6. Forms to use To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.

House Suspends Required Minimum Distributions for 2009

December 11th, 2008  |  Published in 401K, 403b  |  1 Comment

The House of Representatives recently passed the Worker, Retiree and Employer Recovery Act (H.R. 7327) and has come through on a move that will likely make retirees smile a little in our down economy (and hugely down stock market). The act essentially lets retirees suspend requirement minimum distributions from all defined-contributions plans, including but not limited to 401Ks, 403Bs, 457Bs, and IRA accounts. This is fantastic news as retirement accounts, mine included, have been down 40% or so on the year. While it remains to be seen whether another year will help, it certainly doesn’t hurt. Unfortunately, the legislation comes too late for 2008 so you’ll still need to take your RMD this year or face a penalty.

2008 Retirement Account Limits

October 28th, 2007  |  Published in 401K, 403b, Roth IRA  |  Comments Off on 2008 Retirement Account Limits

In a few short months it’ll be 2008 and with a new year comes new retirement account contribution limits.

For Individual Retirement Accounts (including Roth and Traditional IRAs), the contribution limit for 2008 is $5,000 if you are 49 and below. If you are 50 and above, you can contribute an additional $1,000 as a catch-up contribution. As for 2009 and beyond, those increases are indexed to inflation.

For 401(k) and 403(b), the contribution limit for 2008 will remain $15,500 (the same as 2007) for those 49 and below. If you are 50 and above, the limit will again remain at $20,500 (the same as 2007). The limits for 2009 and beyond are again indexed to inflation.


Switch 403b Providers Without Penalty (until Sept 24th)

September 10th, 2007  |  Published in 403b  |  Comments Off on Switch 403b Providers Without Penalty (until Sept 24th)

403(b) plan sponsors, unlike 401k sponsors, don’t actually manage the investment plans made available in the 403(b). In fact, 401k providers have “fiduciary responsibility,” meaning they must act in the best interests of their employees or suffer legal consequences. So, for many 403(b) plan members, a recent change in the IRS code, which kicks in September 24th, makes it much harder to move your retirement assets from your current 403b into one with friendlier, cheaper, and better options. According to CNN Money article, many 403(b) investment options have “high-fee, low-performing investment choices” because the plan sponsors aren’t responsible for choosing them.

If you want to move your funds, you have to do it by Sept. 24th (meaning the forms must be in the mail by Sept 17th) to avoid the move being classified as a disbursement (payment). This move is called a 90-24 transfer (named after the section of the IRS Code that permits it) and is not a taxable event. Now, you can still do that as long as the new 403(b) has an agreement with your current 403(b) that includes periodic sharing of your information. If they don’t have a written agreement in place, you can’t move it without it being taxed. It’s a crummy situation so be quick to move your funds now while you can.