All Posts By

Zach Gering, CFP®

401(k) contributions

Pre-tax or Roth 401(k) Contributions—That is the Question

By Blog
The decision of whether to make pre-tax or Roth (after-tax) 401(k) contributions frequently pops up, especially when investors start new jobs. Both pre-tax and Roth 401(k)s offer tax-advantaged investment growth, the same annual employee contribution limits, and both allow the plan participant to receive any available employer match. However, there are key differences between these options, so it is important to understand the pros & cons before electing whether pre-tax, Roth, or a combination of the two is appropriate for you. What is the difference between pre-tax and Roth? There are two primary differences – both of them are tax…
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backdoor roth contribution

The Benefits of a Backdoor Roth Contribution

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It is that time of the year – with tax season comes retirement account contribution season! The most popular retirement account of the current decade is the Roth IRA. It offers tax-free growth, tax-free withdrawals after age 59.5, and no minimum distribution requirements. Unlike traditional IRAs, Roth’s are funded with after-tax dollars. There is no tax deduction for contributing. Evaluating whether to contribute to a pre-tax or Roth IRA is a common exercise. A prevalent misconception is choosing a pre-tax account is the best option. This is mostly because the investor expects that his tax rate will decline in retirement.…
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Do You Know How Your Investments are Taxed?

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Investors generally pay close attention to portfolio allocation, performance, strategy and even fees.  The impact of taxes, however, is often overlooked when evaluating an investment portfolio. This blog post will highlight various ways that investors are taxed, including the capital gains tax, capital gain distributions, net investment income tax, and what the difference is between qualified and non-qualified dividends. There are a few quiz questions along the way so pay attention! Capital Gains and Losses When you sell an asset for more than you paid to acquire it (i.e. your cost basis), the government shares in your appreciation. An asset…
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tax reform

What You Need to Know About the New AMT

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The AMT remains in-force following the Tax Cuts and Jobs Act (TCJA), but it will impact far fewer taxpayers beginning this year. This is welcome news for many households that are concerned about the $10,000 cap on state and local tax deductions. The alternative minimum tax was enacted in 1969 as a parallel tax system to ensure a small group of high income earners paid some federal tax. The idea was to disallow certain types of tax-free income that millionaires were privy too. However, by last year, approximately five million households were affected – many of them had annual incomes…
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college savings

An Unconventional College Savings Account

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If you are looking to set money aside for your child or grandchild’s education you are likely considering a 529 plan, a custodial account, or possibly a trust. Each of those accounts have positive and negative qualities, which my colleague, Eric Dostal, highlighted in a previous blog post. However, there is another account that is a bit unconventional for college expenses – a Roth IRA. I am a big fan of Roths and I have previously written how individuals over the income limit can fund an account annually via a backdoor contribution. Roths offer tax-free growth, virtually unlimited investment options,…
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kiddie tax

What is the Kiddie Tax?

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As an advisor who works with clients in their 30s and 40s, I spend much of my time talking about children. Besides discussing how much fun kids are or how little their parents are sleeping, a majority of these conversations focus on the best way to save for children, now and for the future. We often discuss the pros and cons of 529 Savings Plans, custodial (UGMA/UTMA) accounts, and creating and funding separate trusts, as well as target annual savings rates for specific expenses (e.g. college, camp, etc.). One topic that is often overlooked, however, is the tax rules impacting…
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investing mistakes

What Should I Do With My Old 401(k)?

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It’s a question that comes up often – what should I do with my old 401(k)? There is no one-size-fits-all answer, and responses provided by financial advisors will be increasingly scrutinized if the Department of Labor’s (DOL) fiduciary rule is enacted. The rule mandates that advisors providing retirement advice act in the best interest of the client, which is called a fiduciary responsibility. The purpose is to protect retirement funds from professionals looking to profit at the expense of investors’ interests and ensure that the advice investors receive is right for them. Sontag Advisory, which has been a fiduciary since…
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