Need a tax break? Here are accounts that can ease tax burdens during big life transitions

MotleyFool-TMOT-4749bef3-tax-forms_large.jpg_thump

Saving for retirement or other big life moments is often viewed as an end in itself: Sock away a little bit each month, and you’ll achieve your financial goals. But many of these accounts can also play a role in lowering your tax burden here and now.

Take Erin Lowry, a self-employed personal finance expert who blogs at BrokeMillennial.com and whose book “Broke Millennial Takes on Investing” will be published in early April. Her transition from company employee with a 401(k) to self-employed worker included the challenge of setting up a new retirement plan.

“The advice out there is for the traditional employee, like, ‘Make sure you get the employer match,’” she recalls. “As a self-employed person, retirement is entirely on my shoulders.”

That includes navigating a complicated set of issues when it comes to retirement savings, such as deciding which type of account best fits her needs.

Lowry said she eventually picked a SEP-IRA, which has higher contribution limits than traditional or Roth IRAs. It also has the advantage of helping with tax planning because contributions are tax-deductible.

March Madness gambling: Are you betting on March Madness? Here’s what to know about taxes if you win — or lose

The SEP-IRA allows Lowry to contribute for the previous tax year until the tax-filing deadline of April 15, which gives her time to strategize with her accountant on last-minute contributions to lower her taxable income. “I’ll put in a little more right before I finalize my tax return for 2018,” she notes.

Tapping those types of tax strategies are crucial for financial planning, says Chantel Bonneau, a wealth management adviser at Northwestern Mutual. And more workers may be thinking about getting a better handle on their tax burdens after the massive tax overhaul that went into effect last year, she adds…..Read more>>

 

 

Source:-usatoday