• tax brackets

    A Simple Explanation of How Tax Brackets Work

    There was a post I saw on Reddit this week. It was about a co-worker who turned down a $2,000 bonus because it put him into the next tax bracket. It spoke of a man who wouldn’t back down in his belief that he did the right thing. More importantly, it spoke to a gross misunderstanding as to how our tax brackets work. It’s a common mistake and I see it all the time. You’ll often even hear it in political discourse when someone suggests a higher tax rate on the rich. That mistake comes from a misconception of how tax brackets work. Let’s take a look at the 2019…

  • 401k contribution limits

    401k and IRA contributions limits for 2019 are going up!

    Our good pal, the IRS has issued guidance on contribution limits for 2019. The news is good for those already maxing out their tax-advantaged space or planning to do so next year. According to the IRS news release, 401k, 403b and most 457 plans are changing from an $18,500 max to $19,000 next year. That’s the second bump in a row after the IRS raised it $500 last year. The 2.7% bump in contribution limits is right in line with inflation. On the IRA front, the $5500 limit rises to $6000. It’s the first bump since 2013 which explains why the bump is larger at 9%. The IRS is just…

  • New IRS withholding tables mean a bigger paycheck for 2018

    There’s nothing better to start a new year than a bigger paycheck. No, I’m not talking about a raise or a bonus. I’m talking about the newly updated IRS withholding tables. Your employer uses these bad boys to make sure you’re paying the right amount in taxes. The recent tax reform legislation enacted major changes to taxes. There were changes to tax brackets and deductions and in general meant lower taxes for most people. These tables are a key component of that reduction as they push those benefits through to tax payers immediately. The idea is that since taxes are now lower then the amount that needs to be deducted…

  • 401k contribution limits for 2018

    The IRS ruling on next year’s 401k, IRA and HSA limits is finally hereĀ and investors who already max out their 401k are getting some good news. For the first time since 2015, the IRS has bumped up the 401k limit. In 2018, it the limit will be $18,500, up $500 from the current $18,000. This new change also applies to other retirement accounts that mirror the 401k limit like the 403b, most 457 plans and the TSP. The catch up contributions for those over 50 remain unchanged at $6000 for 2018 meaning the maximum deferral anyone can make is $24,500 this year, up from $24000 last year. The benefit for…

  • The story behind Health Savings Accounts

    We’re back with another round of yearly open enrollments, benefit choices and premium increases and I thought it’d be a good time to talk about Health Savings Accounts(HSA), an underutilized tool when it comes to saving for you retirement(early or otherwise). An HSA is the most tax-advantaged account available to most investors and has many benefits that make it very attractive to most individuals. However, it is not one that’s commonly discussed in the same areas as IRAs or 401k and that’s a shame because HSAs are probably the best of breed when it comes to retirement savings accounts. The Basics HSAs came into being with the 2003 medicare reform…