How Taxes, 401(k) Plans And IRAs Work
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- čas přidán 1. 06. 2024
- Taxes, 401(k) plans and individual retirement accounts, or IRAs, are complicated. If you can master the fundamentals of your personal taxes and understand your retirement savings options, you’ll be able to make informed decisions about your future.
The IRS estimates the average taxpayer spends 12 hours working on their taxes and pays an average of $230 to get their paperwork filed.
“Your tax return is in no way that simple,” said Mark Steber, chief tax information officer at Jackson Hewitt Tax Service. “I don’t care who you are or what economic situation you’re in - high, medium, low, no income or unemployed.”
However, tax experts say all those IRS tax return forms and schedules are actually designed to help people save money.
“If you have knowledge about how it works, you can utilize the tax code to benefit you more in the long run,” explained Sheneya Wilson, founder of Fola Financial in New York. “However, most people don’t have that knowledge, and I think that is what creates this fear of the IRS and paying taxes, when essentially the tax code is not there to harm anyone.”
Retirement plans can impact your annual taxes. Until the 1980s, most Americans planned for retirement through pensions. They were defined-benefit plans, in which employers saved on workers’ behalf and calculated employees’ retirement benefits based on their years of service and final salary. That changed when Congress passed a new tax code in the Revenue Act of 1978. The act included a new provision in the Internal Revenue Code, Section 401(k), which gave employees a tax-advantaged way to defer compensation from bonuses or stock options.
401(k) and other defined-contribution plans like it quickly replaced traditional pension plans. Unlike traditional pensions, 401(k) plans are defined-contribution plans. Employers create a retirement plan in which their employees can contribute a portion of their wages on a pretax basis, up to an amount determined by the IRS.
From 1980 through 2008, participation in pension plans fell from 38% to 20% of the country’s workforce, while employees covered by defined-contribution plans jumped from 8% to 31%, according to the U.S. Bureau of Labor Statistics.
In 2020, there were about 600,000 401(k) plans, with approximately 60 million Americans participating in them. The 401(k) continues to be one of the most popular retirement savings options for U.S. workers.
When people think of retirement savings, in addition to 401(k) plans, IRAs likely come to mind. The key difference is that employers offer 401(k) plans whereas individuals open IRAs. There are pros and cons to both, but if you understand how to contribute and invest those contributions you can maximize your return ahead of your retirement.
Watch the video above to learn about taxes, IRAs and 401(k) plans.
SEGMENTS:
00:00 - Why Taxes Are So Confusing In The U.S. (April 2021)
12:17 - How 401(k) Plans Work And Why They Killed Pensions (March 2021)
24:34 - How IRAs Work And Why They Are More Popular Than 401(k)s (August 2021)
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How Taxes, 401(k) Plans And IRAs Work
Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My parents both spent same number of years in the civil service, but my mom was investing through a wealth manager, and my dad through the 401k. My mom retired with about 4.2 million, but my dad retired with roughly 1.8 million.
`This is true. I'm in my mid 50's now. My wife and I were following this same trajectory. Last two years, I pulled out my money and invested with her wealth manager. Not catching up with her profits over the years, but at least I earn more. I'm making money even before retiring, and my retirement fund has grown way more than it would have with just the 401(k). Haha.
Today's inflation is a result of corporate avarice, not only problems with the supply chain. We know that the money obtained by the higher prices isn't being transmitted along the supply chain since businesses are reporting record profits. More pricing result in increased revenue for businesses, which stays with them and goes into their pockets. We can rule out supply-related inflation because of this. If your stocks are extremely weak, now is an excellent opportunity to take a battered 401k and convert it to a Roth. Then, your Roth will be tax-free, and you will just have to pay taxes on the substantially reduced current values.
I delegate my daily investing decisions to an investment advisor because their entire skill set is concentrated on being both long and short at the same time, adopting a profit-driven strategy and removing risk as a hedge against the inevitable downtrends. When combined with exclusive insights/analysis, it is incredibly impossible not to outperform. I've had a relationship with an investment advisor for almost two years, during which time I've generated a return on investment of more than a million and five hundred and seventy thousand dollars.
@@danieljackson87 Nice one, buddy. How does the process work with the investing advisor?
@@mikeharry96 Because my portfolio only consists of the stocks she trades and not just some of my favorite securities, the process is very simple. So far, Julie Anne Hoover has been excellent and significantly impacted my portfolio.
@@danieljackson87 That's great, I checked up Julie with her full name out of curiosity, found her webpage, and her credentials/testimonials seem respectable with good ratings. I just sent her a note and I'm hoping she gets back to me soon. Many thanks
Nobody can become financially successful over night. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals.
"[B]old steps". Agree completely.
Definitely, you got to have a positive attitude and confidence, eliminate all the toxic people around projecting their fears into you. Once I stop talking to my toxic family I started thriving.
As I approach retirement, ensuring the stability of my 401k after the turbulent year of 2022 is a top priority. I've come across stories of investors achieving up to $270k in ROI during this current declining market. Any advice on enhancing my ROI before retirement would be highly valued.
There are routines capable of delivering consistent gains irrespective of economic or market conditions, but these are typically implemented by seasoned investment experts or advis0rs.
Many people underestimate the importance of advisors until their emotions lead to financial setbacks. I recall a couple of summers ago, during my protracted divorce, when I needed a significant boost to keep my business afloat. I conducted research and found a highly qualified licensed advisor. She has effectively increased my savings from $220k to $740k, even in the face of inflation.
Could you kindly share the contact information for your financial advisor here? I'm in urgent need of one.
Hello! Stacey Lee Decker is my advis0r. She has since provided entry and exit points on the securities I concentrate on. If you want to check her out, you may do so online.
She seems highly educated and informed. I looked up her name on Google and found her website. Thanks for sharing.
You might not have a hundred million dollars to invest, but that doesn’t mean your money can’t share in the same opportunities available to others. You work hard for your money; make sure your money works hard for you.
The wealth you pass to the next generation can have a profound impact on your heirs, providing educational opportunities, the capital to start a business, or financial support to your grandchildren.
To manage investment risk, consider maintaining a broad diversification of your investments that reflects your personal risk tolerance, time horizon, and the nature of your financial goal. Remember, diversification is an approach to help manage investment risk. It does not eliminate the risk of loss if security prices decline. Because investing can be complicated, consider working with a financial professional to help guide you on your wealth-building journey.
can you endorse any ?
TERESA JENSEN WHITE does a perfect job. look her up on the web
thanks for the info . Found her website and it really impressive
My concern is my portfolio is struggling, and I'm not sure how a retirement strategy would help in this situation. Making *a million* tax-free sounds like a dream, especially as my stock portfolio is down *30%*
I'm also thinking about keeping an eye on economic indicators and staying informed on any policy changes that could impact the market. It's essential to be proactive in managing our portfolios during these uncertain times.
I engaged the service of a skilled financial advisor for portfolio who guided me strategically to navigate the complexities of this market With their tailored advice, I capitalized on tax-free opportunities, making substantial gains that positioned me on the path to a $1M portfolio.
I might look into this strategy to see if it aligns with my financial goals. I could really use the expertise of this advsors.
I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
My inheritance, a whooping 1m has grown only 4.72% in the past 12 months. In this bear environment does investing w/ a brokerge account under a custodian outperform a 401k? should I seek a pro to grow my funds on brokerage or still hold? I have 5 years to retirement. Happy to discuss.
Mine was 8.16%, I used to dca into etfs but I reconsidered the strategy since I am still way behind after the massive downturn since Jan last year
I don’t want to touch it despite dwindling savings and losing both my jobs. I wish to grow it aggressively if I must draw it down, hence my question.
Private investing is the best way to go about the market right now, especially for near retirees, I’m invested in a hedge fund under a wealth manager. netted 370thousand the last downturn, made it clear there's more to the markets than we average joes know.
Be careful not to be lured into the market too soon, this current situation has really opened my eyes to the importance of a good mentor on CZcams or elsewhere knowing what he/she is doing.
who is this manager you use? I lost over 75000 already this year, I’m in need of a planner going forward.
I have lost everything I have earned in the market over the last ten years in my 401k just this year. I am down 18%. Thanks to politicians not realizing we can’t just print money with no consequences and it is the middle class that suffered.
Why I always advise people to make 401k a contingency plan, and never to forget the diversification principle, no matter how much you are making from a particular investment, make sure to diversify your investments so that when another is down, the other will be up. You can do so by getting an experienced specialist whose platform has diverse investment choices to choose from. By doing this, you give little room for regrets and perhaps gain more.
@@kathleenstoner.n7499 Great tips. Generally, diversification is a key factor. Don't put all your eggs in one basket. Pragmatically, I have been into all of these for some time, though I won't say I have made or lost a fortune. Do you mind recommending a specialist whose platform has diverse investing choices? Quite rare! I anticipate your response.
@@patriciacleveland2588 Funny enough, I can honestly relate. I don't know if I am permitted to drop this here, but do run a check on Sandra Yvonne Webster or Sandra .Y. Webster Finance. Was in the news alot in 2020.
@@kathleenstoner.n7499 Too bad most people don't follow the diversification principle, the reason why they easily get tense when there is volatility.
Can anyone help me better understand diversified portfolio? Do you mean invest in diff sectors if the stock market or is it buy real estate and have stocks and then maybe something else? Thanks 🙏
High prices for everything have severely affected my plan. I'm concerned if people who went through the 2008 financial crisis had an easier time than I am having now. The stock market is worrying me as my income has decreased, and I fear I won't have enough savings for retirement since I can't contribute as much as before.
It's recommended to save at least 20% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 20% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of investing in the stock market and potentially grow your retirement savings over time.
I agree, that's the more reason I prefer my day to day invt decisions being guided by a init-coach, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using a init-coach for over 2years+ and I've netted over 2.8million.
Impressive can you share more info?
Credits to 'Carol Vivian Constable' she has a web presence, so you can simply
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
Thanks for this video.I’m a dividend investor, my wife and I have invested in the s&p500, both through my TSP with the government and through fidelity in her 401-k. Cashed out 270k from the S&P and invested with a full service broker.. Until about 3years ago we were 100% in the s&p after over 30 years. I’m retiring at the end of the month at 59, while my wife will retire next year at 54. We currently have 4.7 million in out tex deferred savings.
An everyday millionaire. Well done! This is goals! I’m looking at making some passive income with investment from stocks, do you mind telling who your broker is?
Big win. Congrats to you and your wife.
Discipline yourself to have a saving habit and take risks.
@@Logicallyanswered. this is a bot
How much did u contribute to it throughout those 30 years? 4.7 mill is a lot. Seems like u put a good chunk into it
This sounds so incredibly complicated. Over here the government automatically generates a tax report based on your income of the previous year with the data you provided back then. You then check and correct the form online and you are done.
Here's a smart move: retire overseas in a less expensive stable country. Ecuador, Panama, Vietnam, Costa Rica, Malaysia, Indonesia, Portugal are all good spots. A trip to a dematologist that would cost $250-300 in the States costs me $75 for private care here in Costa Rica. Medical insurance with Costa Rica's good socialized medicine system costs me less than $19 a month. Deductibles? None. Co-pay? None. Get outta Dodge, folks.
Biggest financial mistake I ever made was with my 401k. My company had a Roth 401k when my kids were in college, but I didn't actually start contributing until year 3 of the 6 years I had kids in college. Because I was helping them with expenses, I was entitled to the tax credits, so my effective tax rate was extremely low. That is the time you NEED to be in a roth! i still retired with about $350k in my 401k.
People don't really know this, You need to create your own process, manage risk and stick to the plan, through thick or thin while also continuously learning from mistakes and improving.
I totally agree; I am 66 years old, recently retired, with approximately $1.2 million in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, I didn't do all this alone, but with the help of a financial advisor. Having one is currently the best way to trade in the stock market, especially for people nearing retirement.
Could you recommend your advisor? I'll be happy to use some help.
Sharon Lee Peoples is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
The incoming bull run together with the looming recession will be both interesting and exciting!
Is there any way the recession is going to affect the market positively? I have a lot of concerns about it and really hopes my portfolio survives through it all
@@chris-pj7rk As with any big financial decision, it’s important to keep your guard up for economic risks and uncertainties. However, smart planning, time management and following guides from a financial adviser can help keep your investmnts safe.
@@viviangall1786 Very true. One can never overestimate of these precautionary steps, especially using the services of a pundit. I ventured into stock with less than $100k and now my portfolio worth is almost hitting half a million dollars. Just in 2 years! Credits to Nicole Deanne Mckay
@@bobbygunz9254 how can I reach pls, my TD account needs resuscitation
@@viviangall1786 surf the web
What I love about the Roth 401(k) is it can help you save on taxes in retirement. Not only are withdrawals tax-free at 59 1/2 , it won't impact the taxation of your Social Security benefit and Medicare premiums.This is an important aspect of a Roth account that most people are not aware of.
yes right now I prefer the Roth 401k! Because I am paying 19% in taxes on my Roth contributions. That is for state and federal combined.
I love this! Thanks CNBC!
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Thank you for the video!!! We learn a lot from you! Thank you!
This is the first time I've heard of it. I'm sure I'm not alone.
Watching this video is giving me headache. Cannot imagine how ordinary Americans cope during tax season.
I can see my HSA as a 2nd retirement behind my 401k. I like it because i can go over my limit on my 401k through another avenue plus mine has monthly employer contributions.
Hope it does for you. I had to liquidate my HSA over 300K to pay for my sisters home care for cancer. (She died) and my parents long term care dementia. So my HSA is long gone and because of my age I can no longer contribute to an HSA. I was going to use it to pay for my dental check ups and medicare costs which cost me over 10K/yr because my income is too high. Before Obama care I paid 3 K/yr for BluexBlushield was covered for 3 mil 10K deductible. With Obama care my rates went up to 8 K/yr but now as a male I was covered for mammograms, pap smears and Kaitlin surgery. Now with Medicare I pay over 10K/yr. because of my income. IRMMA ect My health has not changed in all these years. I am not on meds and have never spent a day in the hospital. I am going backwards. Luckily I still am able to work 60 hr/wk and that is how I pay for my taxes. always my largest cost. I have paid millions.. and for gas and food. I wish we had a 2 line tax code. If you made under 250K you pay 5% and less you pay what it takes to pay for schools police roads army ect. No deductions. We would not have to hire another 75K IRS workers if we had a simpler tax code. Cant wait to get audited again my the new IRS rookies. The IRS screwed up twice already for me . Unfortunately you have to prove them wrong which takes time and adds costs to ones business. The other problem is our tax code keeps changing so it is hard to plan. In the Biden build back better plan ROTH IRA ARE NOW TAXED if too high no matter what your age. It goes into effect in 2028. Senator Wyden wrote it. It is buried at the end of the bill. You have to read the bill to know what is inside of it.. At least the IRS treats you better than plaintiff attorneys. The legal system needs to be controlled such if the soupeana or sue you they need to automatically pay you if they screw up. Now they sue everyone and hope something sticks. The legal beagles many who cheated off me in school strut bloviate and pontificate and are now are weaponized by the gov..not a good thing.
my mistake ROTH are not taxed but there is a required RMD if your account is over 10 mil. which leaves your assets more open to lawsuits and you loose the tax advantage.
I just read the average Obama care plan in Maryland is 338/month and some pay 0. Wow if this internet new is true. It is cheaper than my monthly Medicare costs. about 800/month most as a result of IRRMA 656 plus drug plan 7,50/month plus Medicare supplemental 120/month No wonder everyone luvs OBAMA care. Unfortunately if you are the one who pays for others insurance it gets kind of old. I need to be at work in 4 hours signing off.
The tax system is not complex. If you are an adult with access to the internet, you have all the tools to necessary to learn how to do taxes your taxes. I bet everyone here spent more time playing on social media than trying to learn how to save on taxes. The only thing that should be required is adding a tax class to all public education. Probably more important than half of all other schooling
The process for taxes in the USA will never change to be like, say, Europe. The USA is in the business of propping up industries- Big Government for industries to prop them up and save them from failure, but little government and rugged self sufficiency for the individual person. The tax industry employs too many people and makes too much money for the government to make the process clean and efficient.
Not used to harm anyone, bro if you get it wrong and don't have an attorney or accountant you're going to jail.
TurboTax and H&R make it hard to find the Free option when checking out (finalizing) the tax return
Intuit was also sued recently after forcing some users to pay when they qualified for a free file. LOL
The legal system at large in the USA, and to be fair much of the world, holds the same place religion did in Europe during the middle ages. Everyone is prescribed to it, but only the rich really benefit because only they can read the code. Everyone else is actually manipulated by them because of it.
If the IRS's freefillableforms supported auto-importing the IRS's copy of your 1099s, W2s, and Schedule Ds then half of people's federal taxes would be done. Excluding freefillableforms from the discussion in the first part of this video was a major miss, since there is no income limit and it's provided directly by the IRS.
It's complex because there is a lobby to support a tax preparation industry. It can be made simple.
Nice segment...I max my 401k...I would like a roth ira type of account to earn more than the average savings account without the 59 1/2 age restriction. Any options?
The only account similar to o a Roth IRA because the earnings are tax free is an HSA. You have to be enrolled in an HSA health plan to make contributions to an account. However, the distributions (withdrawals) must be to pay for qualified medical expenses. But no age restrictions. The funds can be used at any time
I think programs that help feed and house people are important, but I'm not down for taxes going towards weapons and war and all that. Is there anyway to choose where one's taxes going toward ?
I think you make an important argument! Something to consider. The US military budget is 850+billion. Most of it goes to private contractors. With 100 billion from that, a lot of problems could be solved.
Its so confusing.. god i hate tax season
Very complicated in America.
Who wrote tax laws manual code?
Everyone talks about diversification? What does that mean? Does that mean buy a house, some stocks, and maybe own a business? Or does that mean buy diff sectors on stocks?
Typically it means don’t put all your money into one stock such as game stuff for example make sure to buy other stocks as well so that if GameStop fails your other stocks can potentially keep you afloat
401k Is a rip off, at 70 I had to close my 401 K, 139 thousand dollars was taxed by the government 23 thousand dollars, then they added the money which was left after tax, they called it income for that year and I was charged 5,000 dollars due to it being income....why save, hell why work.
Our system is designed to confuse
You left out the 457 plan for government employees.
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403b ...you contribute after tax...no tax on money later
В Китае и Индии например, численность населения позволяет вероятно, содержать государство и его население только за счёт одного налога, это налога с оборотной стоимости денег, поэтому можно констатировать, что налоговая система устарела, уже не говоря о прогрессивной налоговой системе.
its that taking the standard deduction is easier but that itemizing is really harder to do since trump made it more of a nuisance
Who said I wanted tax simplification? I want tax eradication.
Had no idea I could file for free. They didn’t advertise that.
they forgot the most important thing about hsa
Got a job that offered 401k & roth Ira. I got both this was when I was 23 & ima turn 27 this year. I contribute 15% but I'm tryna see how I can increase my financial security in the nearer long term if that makes sense? Cuz my current job, although the benefits are good, doesn't pay good. I'm tryna see, if anyone here could help or steer me to someone that could help, what would better to have like just a traditional savings account, a mutual fund, money market or a mix of those? Any suggestions?
Find a good Financial Advisor and he'll help you far more than anyone here. Their advice is worth it's price
Courtney it’s not free money. Let’s not forget that 401K are subject to market volatility!
Exactly!!!!!!!!!!!
THERE WILL ALWAYS BE TAX BUSINESS, LIKE HE SAYS IN THE END,, YES BUT TAX WAS NEVER SUPPOSED TO STAY. WHEN ARE PEOPLE SUPPOSED TO SEE THE LIGHT IF THEY HAVE LETS SAY EVERYTHING PAID FOR AFTER BUSTING THEIR BUTTS WORKING TO PAY OFF A HOME A CAR ECT WHY IS THAT EVEN ALLOWED TO HAVE TO KEEP BUSTING YOUR BUTT TO PAY TAXES ON YOUR OWN PAID OFF HOME? THATS NEEDS TO STOP
Wow
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Insightful and a video more should be watching before proceeding to continue to studying the games of taxes and the benefits of IRAs and 401ks, America has a spending probably.. It is a shame that one of the wealthiest countries in the world doesn't have more millionaires.. We must stop trying to impress and keep up with the Jones', less becomes more and wealth is then inevitably built!
I just lost over 2 grand in my aggressive set up of my Roth IRA 🤮
Thanks
I don't know about Employer matches up to 6% for 401k. Most are matching up to only 3% and I even heard that some companies don't even match anything at all. American companies are getting rid of as much benefits as they can get away with it.
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It depends on the company. I've know people who got up to 15% match, and other companies don't match at all. Better (and often bigger) companies do better with benefits than others. I've had a 3% with graduated options, nothing, 5% match, and a 1-for-4. It's all over the place.
Boomers got a 401k match? I can name companies off the top of my head who dont give you anything. Microsoft, and IBM just to name a couple.
Regarding free file, does the government t know places like turbo tax only offer basic 1040, but makes you pay extra under the program to check for credits and further deductions?
The fact that people don't already know how taxes, 401k, and IRAs work is maddening. We graduate from high school and college and the only thing they teach us about finance is that money is evil, rich people are greedy (and probably also all tax cheats), but paying tax, spending money, and borrowing money (especially on student loans) is good. I have people in their late 20s asking me if they should buy Bitcoin because everyone is talking about it yet they haven't even opened a 401k yet and aren't aware about any need to save for retirement.
Since a lot of American workers no longer get benefits from their employers a lot of this does not apply to them. Again they get shafted at both ends. Again, they tend to be really low wage workers holding down 2 or 3 jobs
The reason people pay for tax software when they "could have gotten for free" is because every year I log into a tax program, they end up charging and I have to switch to another program or pay the ransom
Money supply increases should fund the federal government instead of that pouring in as fractional reserve lending money supply increases
"tax experts say that all those forms and paper works are design to help us save money" lol... thats not true... since when...?
My 401k rate of return YTD is -11.80%. It's been 7 years contributing. I lost money the entire time have contributed 6%. I would have more just putting into a savings account. I don't understand.
YTD means this year. Everyone's down this year. That doesn't mean you lost all your money
Move to a no income tax state
Hot take from a retirement pro: The new legislative proposals are missing the mark.
Here's what we would want:
More tax credits/deductions to lower-income savers.
Ditch smaller 401k plans for aggregated ones to lower costs.
Make employer matches mandatory for up to 3%.
Tax credits/deductions for the cost of hiring a financial advisor, up to a certain limit.
Have a "self-directed" option open for all 401k enrollees that want to DIY.
Drop the age of penalty-free withdrawals from 59 1/2 to 55 to accommodate early retirees.
Retirement? I'm trying to die yesterday. 🤡
I live in India , even we login to the incometax portal online and pay out our taxes if we owe or apply for tax credit here.. more than 40 million has filed taxes online freely in India for the FY 2021-2022
do you guys pay similar gradual percentage taxes based on incomes?
@@supunaynagpal9186 yes we do
In france, you can opt-in for income tax automatically deducted from your paycheck every month, no more lum sum pay at the end of the fiscal year...
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I wish they could match up to 10% or at least 5%.
They could. It all depends on the company that you work for. They decide how much to match when they start up the 401k. I have heard of people moving to similar companies to get a better match on the 401k.
I love how the guy who works for the tax preparation company is openly advocating to keep the tax code complicated because he claims it helps to make us all more equal. Of course, I'm sure he and his company have nothing to gain from a complicated tax system.
Heard tax companies lobby to make it complex
Yep. It's gotten way more complex in the last few years with people trading crypto and big cap gains bieng paid out at the end of the year in non-qualified accounts last year. Tax preparers are getting as frustrated as we are.
He later contradicted himself and said they are for simplified tax code. Umm, which one is it?
@@inveele A little of both. There's definitely ways to make it simpler (see other countries' versions) that still have enough complexity to help people.
taxes aren't so difficult...but that's how they made money by keeping people in the dark...why isn't this offered in school.
401k work if you put enough money into it
I'm not a very smart tiny little seed
Why is our tax code so broken and complex? Because the people who write the code also benefit from it.
Facts
It's decades of compounding incentive matching. It's filled with deductions and exclusions that Americans can take for engaging in certain activities, such as buying a home, owning real estate, saving for retirement, paying down student debt, having kids, etc.
How 401ks work... Short answer, they don't work and rarely are sufficient for a decent life in retirement.
Longer answer - they are a terrible vehicle for retirement savings as fees are too high and growth is too unpredictable. 401k contributions and growth should be tax free FOREVER, not just tax deferred. The only true positive of 401ks is an employer match if offered.
IRAs are better as fees can be lower and there are more investment options.
Yes, but there are limits to how much you can invest. 6k annually into Roth IRA. Joke!
It must be quite an accomplishment to become a tax attorney.
How come there’s no talk about an IUL???????? That is a better practice for retirement!!!!
Fool's gold . Go figure !
The guy from Jackson Hewitt speaks just like a car salesman.
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Investing in stocks is not like putting your money in a savings account that pays 10% annualy. Returns will fluctuate from year to year, some times dramatically. The 10% return is only an average of some bang up years and some gut wrenching years.
I wonder what the best opportunities to invest now are, there are opinions but a little later I find out these opinions don't matter as a totally different turn of events play out with the stocks they discussed therein...
@@Jme---
@@chris-pj7rk
@@bobbygunz9254< How can one find a verifiable financial Planner, I buy the idea of employing the services of a Financial Advisor because finding that balance between saving and living requires counsel>
@@Jme---
It’s quite simple if you know what you’re doing. I minimize my tax liability every year. Super helpful if you know what’s deductible.
What does it mean when they say 401k is for companies to be competitive? They only match 6% and it's capped by IRS. Does some companies match 100%? I max it out in 1 pay check.
No 6% is the max. All it means that is that they're competitive against companies who offer a smaller match or no 401K match at all (usually startups). It sucks bc EVERY company should offer 401K matching, especially since Reagan's tax reforms forced companies to ditch pensions in favor of 401K.
It's meant as a competitive benefit, like great PTO or insurance options. It's cheaper than offering a pension, which some companies still do but it's not common. If your company also does a Roth, that might be another option to look into, or maxing out your HSA.
@@Erin-rg3dw I know. It just that it's so little that every company I work for offers the same 401k package. Match 1:1 up to 6%. Does anyone even offer more? Most people in tech will cap out quicky. What we lose out on to candidates are stock options and sign up bonuses. I actually don't think 401k is ever discussed during negotiations. Stocks and Bonuses are always the number 1 discussion after Salary.
@@Franklinsone If the IRS has a legal cap on the match, then for a company, their best bet is just find other benefits. I'm not sure if the cap is on all retirement contributions, or just pre-tax. If it's just pre-tax then Roth options would be good. I also don't know if profit-sharing plans are affected by it. If they're not, that could be a good lump-sum option.
For an individual, though it's not as good as matching, funding outside retirement accounts still has benefits.
@@Franklinsone I don't think you can discuss 401(k) in negotiation, other than saying what the program is, because it's going to be the same system across the company. They can show it as part of the overall benefit package, but it's not something they can change person-by-person.
Why is she yelling over zoom
We need to be able to simply log into an IRS web portal, review what we owe, and click pay taxes.
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H&R Block and Intuit have paid congress to say NO to that solution.
It is litterally working that way in France. I only have to log in, check what my employer already declared he paid me, check what my banks declared I gained in my accounts that year, add any data the government don't have (rent collected, daycare expenses, any tax-free house remodeling, etc..), and I am good to go.
The government will then compute how much I own and ask my employer to directly send them money from my salary, so I don't have to.
At the end of the year, I will be sent back any overpayement was sent to the tax agency in my name, or I will have to do a payment in installments if I still own something.
A middle man is only required if you own a company, because it is much more complex in that case.
Oh and there is no penalty if I make a honest mistake, except if it is blatant fraud.
It's too simple for the gov
Pretty simple for us...just take the $25,100 standardized deduction for married filed jointly. Living in Alaska, no sales tax or state income tax.
1:43 why's she paying NJ tax? Just because I worked for Kroger doesn't mean I paid Ohio income tax
Just give everyone a damn pension and leave it at that. That's what social security is, the payout should be bigger. Companies wouldn't have to match a 401 (k) anymore, just pay into social security. Whatever leftover income people have, they could put it into the market if they want.
social security sucks, it is good for people who don't have a habit of saving. It is equivalent of saving in bonds. Even worse, the payout is not guaranteed. The court had ruled that government are not obligated to guaranteed payout social benift equal to what young people put in, meaning if the social security trust fund runs out by the time people retiring after years of contribution they will get much less in the than what they put in.
@@dashdash_peacecampaign
Lol, then the court ruled against your interest, you idiot! Social security is as good as it gets. It's guaranteed money! If you claim the government isn't obligated to look after people, society loses!
@@dashdash_peacecampaign
Social security is risk-free. It's not the same as putting your money into the market and hoping to earn steady returns.
@@gabemendoza1052 no it not
@@Jr2728
Yes, it is! The government guarantees you money just like with T-bonds. No other investment functions that way.
The tax crap is just a mess if 95 percent of everyone either pays someone or buys software for it. No one knows WTH any of it is or means. Its just a giant mess along with all the other major issues our politicians are incapable of fixing
It's on purpose.🤦
I filed via paper for the first time this year and didn't have to pay for software. It's daunting at first but once you realize what's actually needed it isn't too bad
Let's go Brandon!
I Will INTRODUCE YOU TO A LIFE CHANGE
INVESTMENTU🆙🆙☝️🆙💬💵💰.
i use cash app tax filing. completely free. no switch and bait bs like turbotax
Dont even know why I'm watching this, because this only applies to americans🙃
The thing ive never understood about taxes is if they have all the forms I do to check I am telling the truth why dont they just do them?
If you want to do a standard deduction that would make sense. But for some with more complicated deductions, that’s info the IRS needs from you.
Bc tax preparation companies lobbied for their existence by promising they would provide their own free file programs. Cash is king smh
@@denise7001 Still would be a checklist tho, no? They would just tell you to add additional forms if you check out uncommon boxes on their checklist
@@Jose-Luis.Garnica-Sanchez That's what you're doing on your 1040. You're saying "I have a child. Here is the form saying I qualify for a credit for them." You don't have to claim those credits, and there's a lot of things the government doesn't track at the IRS level, so you are communicating it to them. For example, The government doesn't track when I give money to qualifying charities, so I tell them.
I said the same thing on Jose below, but there's a lot the government doesn't know at the IRS level. The IRS knows about a W-2 that gets sent to them, but they don't know that I had a kid or that I'm in the process of adopting. The IRS also doesn't know if you started a company and need to report that income because the business needs to establish itself with the IRS.
A W-2 is only a snapshot or one income source, and doesn't show any other expenses or any other deductions you may have, so you are showing your income & income tax already paid plus potential deductions that are not sent to the government.
As a non-American, the government subsidising/incentivising things via tax breaks, as opposed to just giving people money seems wildly counterproductive. I get that is way things are done for political reasons, but it just seems bizarre to me. It would be simpler for everyone involved, and more effective at supporting those most in need, if the government just applied simple tax rates.
The government shouldnt give anyone money just tax breaks. If the government has enough money to gove to others its taxing too much
They do a little of both - some benefits are done throughout the year (i.e. food benefits and housing vouchers), but others are done based on the tax return (i.e. Child Tax Credit). There's been talk of making some of the children-based ones done throughout the year.
I'm curious - how do other countries distribute the money? Is it direct deposited, mailed, etc.? I ask because when people file their taxes, we're given an option of how to receive the refund (if we get one), and an issue I've seen both when I worked in tax prep and with the pandemic stimulus money is that there is not a common consensus for how people receive money. We have many people who for whatever reason don't have bank accounts, or when the checks are mailed, the person may not be at that address anymore. And that's for a once-per-year payment. How do they do it elsewhere for regular payments?
Retirement accumulation is pretty simple. Retirement distribution is not so simple, mostly due to taxes.
The problem is that tax preparers only take a snapshot of what happened in the previous year.
The other problem is that most financial planners that do tax planning get paid by assets under management.
That’s why we exist. DYI investors who need tax and retirement planning for a flat fee.
i say filing taxes and fund management of IRA and 401k is much complicated then the concept of contributing to them.
I struggle to find a good wealth management without being charged an arm and a leg. I will like to find good CPA for some good tax planning PRIOR to me making tax mistake then trying to fix it during tax filling season.
Industry secret: It does not cost 3x more to manage a $900,000 portfolio than it does a $300,000 portfolio, so why pay $6k more for a dedicated financial advisor?
1% AUM advisors say that the increased cost is due to the complexity increase but (spoiler alert) there isn't much of a difference in complexity.
The future is flat-fee financial advice. That way, you don't have to pay 1% or more of your investments. Over time, the costs savings are gigantic. Not to mention, the flat fee advisor oftentimes invests your money and partners with you to give advice on cash flow, debt, estate planning, insurance, and, of course, tax planning, etc.
It's funny because they left out the tax-free accounts
Why is someone shouting 😅🤣🤣 I feel like she's shouting though - you know who i am talking about hehe
Pretty sure I’ve seen most of these clips last year around the same time
Agree seen most of these clips last year.
The narrator should move away from manhattan sounds like shed save money. Leave high tax areas and they will stop
The easiest way to play this game is not to file at all.
how? elite plan your life
21 %Taxes, car Insurance, health insurance and health care are out of control.
This video is far from what they advertise it to be, or what they portrayed to be.
It's all a scam.
How about abolish the fed and the irs.