Done your taxes? Check. Here are four ways to save taxes for the rest of the year—and maybe much longer.
GIVE YOUR IRA A SECOND WIND
Effective January 2020, Congress made a bunch of changes to the rules governing retirement accounts. For one, if you have earned income, you can now contribute to an Individual Retirement Account no matter your age (the old cutoff was 70½). That’s great if you continue to work part-time after you “retire.” Another boon to Boomers: The age for taking mandatory retirement-account payouts (RMDs) was pushed from 70½ to 72. One new gotcha: Leave your Individual Retirement Accounts to non-spouse heirs, and in most cases they must withdraw the money within 10 years.
TURN YOUR HSA INTO AN INVESTMENT FUND
One of the best-kept secrets about Health Savings Accounts is that they can be used as investment accounts. If you’re covered by an eligible high-deductible health insurance plan, you can contribute up to $3,550 for an individual or $7,100 for a family to an HSA for 2020, reducing your taxable income by that amount. Of course, HSA withdrawals are tax-free when used to pay for medical expenses. But healthy or wealthy HSA holders should invest and grow the stash tax-free to be used for medical costs in retirement. Fidelity and Forbes Fintech 50 member Lively offer investor-friendly HSA platforms. Lively links to a TD Ameritrade account, with free online trading. Fidelity offers free access to 37 funds from six fund families and commission-free ETFs.
USE A RETIREMENT INCOME HACK
Figuring how best to draw annual income from various accounts in retirement can be bewildering. But new hybrid-robo services such as Vanguard’s Personal Advisor, Schwab’s Intelligent Income, Capital One’s United Income and Forbes Fintech 50 member Kindur make it easy. The apps create an individualized asset allocation and tax-optimized income plan (they’ll even send you a monthly “paycheck” and counsel you on when to take Social Security), all under the watch of on-call human advisors. Costs vary, but are usually far less than for a traditional planner.
RIDE THE STOCK MARKET WITH TRAINING WHEELS
Know someone with only $50 to invest? Mobile app Stash offers fractional purchases of stocks, and Acorns, a “round-up” app, moves extra pennies from credit- and debit-card purchases into ETFs (more than 1 million Acorns customers have “Later” retirement accounts). No-fee, no-minimum custodial Roth IRAs are available from both Schwab and Fidelity for youngsters with earned income. Roths grow tax-free for retirement, and original contributions can be taken out without penalty or tax after five years. A word of warning, though: Don’t try this if your kid might qualify for need-based aid from a private college.