Use Your Tax Refund to Fund an IRA

What does the basic process entail?

Tax refundAn income tax refund can be directly deposited to an IRA up to the annual contribution limit. The contribution limit is $5,500 ($6,500 for individuals age 50 or older) for 2016 and 2017. It can also be split among multiple accounts.

— Determine the tax refund amount.  Once you know how big your refund will be, decide how much, if any, you would like to contribute to your IRA or Roth IRA up to the maximum annual contribution allowed.

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Sometimes It Pays to Treat Your Kids Unequally

Treat Your Kids UnequallyAs the father of more than one child, I understand the desire to try and treat children as equally as possible. You certainly don’t want one child to think you love him/her any less, or more, than your other children (though children will inevitably feel that way at one time or another), and you want the best for all of your children. But while children may share the same parents, may grow up in the same house and may be raised in the same manner, they are very much like snowflakes. Each one is truly unique. However, when dividing your estate, it may be beneficial to treat your kids unequally.

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The Roth IRA as an Emergency Fund

ROTH IRA Emergency FundA recent Pew Charitable Trusts study released in March came to the scary conclusion that roughly one-third of Americans would have trouble coming up with $2,000 in the event of an emergency. Clearly, this is a problem. Try as one might, emergencies are bound to happen from time to time. Some of them may not have an impact on your finances, but many emergencies will. With that in mind, let’s talk for a moment about the Roth IRA as an Emergency Fund

So what makes the Roth IRA such a great emergency fund? Quite simply, it has the capacity to “check all the boxes” an emergency fund should have, and then some.

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Roth IRA Recharacterization: 11 Things You Need to Know at Tax Time

What is a recharacterization of a rollover or a conversion?

Roth IRA RecharacterizationA recharacterization allows you to “undo” or “reverse” a rollover or conversion to a Roth IRA. You generally tell the trustee of the financial institution holding your Roth IRA to transfer the amount to a traditional IRA (in a trustee-to-trustee or within the same trustee). If you do this by the due date for your tax return (including extensions), you can treat the contribution as made to the traditional IRA for that year (effectively ignoring the Roth IRA contribution).

1.  It is not too late to recharacterize a Roth IRA conversion done in 2016.

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