For many Gen Xers, the late 40s and 50s are a time of higher salaries, higher investment growth and progress on long-term goals. But relying on old tax strategies or making assumptions about retirement contributions can put Gen Xers in a tough tax position. Experts explained the most common tax mistakes Gen Xers make and how to avoid them. 1. Letting Peak Earning Years Outpace Your Tax Strategy As incomes rise, so does tax complexity, and many Gen Xers run straight into phaseouts and income limits, ac ...

Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. Quick Summary A 53-year-old with $2.45 million saved may be financially secure, but the shift from saving to spending makes tax and timing decisions far more important than raw returns. Test your retirement and tax strategy with a financial advisor through SmartAsset's free matching tool to help clarify how contributions, Roth conversions, and withdrawals fit together over the next decade. Build flexib ...

Core Insights - More U.S. parents are establishing custodial Roth IRAs for their young children, leveraging favorable tax rules and long time horizons to secure their financial future [2][3] - A custodial Roth IRA allows contributions from a child's earned income, with a contribution limit of either the child's earned income or $7,500 for 2026 [4] Benefits of Custodial Roth IRAs - Compound Growth: Contributions made at a young age can grow significantly over time due to compound interest, potentially benefiting the child for over 50 years [5] - Tax-Free Growth on Withdrawals: Qualified earnings can be withdrawn tax-free in retirement, providing future income without tax implications [6] - Tax Strategy and Flexibility: Children often face low tax rates, making it advantageous to pay taxes now rather than later when they may earn more [7] - Financial Education: Establishing this account serves as a practical lesson in earned income, investing, and long-term financial planning for children [8]

Core Insights - The article discusses the challenges of early retirement when relying on index funds, particularly the tax implications of capital gains when withdrawing funds for living expenses [2][4][5] Tax Efficiency of Index Funds - Index funds are tax-efficient during the accumulation phase due to minimal taxable distributions, but this efficiency diminishes when withdrawals are needed for early retirement [2][4] - A $50,000 withdrawal can lead to a $7,500 tax bill, significantly reducing the actual spending power [3][6] Capital Gains and Withdrawals - As portfolios grow, the tax burden increases; for example, a $60,000 withdrawal with 65% embedded gains could trigger a $39,000 capital gains tax, resulting in a federal tax bill of $5,850 [7] - The article emphasizes the importance of considering taxes in retirement planning, especially for those with large unrealized gains in taxable accounts [4][6] Early Retirement Access Issues - Many early retirees have significant balances in tax-deferred accounts, which incur penalties and ordinary income taxes if accessed before age 59.5 [8] - The Roth conversion ladder is presented as a workaround, allowing for tax-efficient access to funds, but requires careful planning and a five-year waiting period [9] Optimal Index Fund Strategy - A recommended strategy for early retirees is to diversify across account types, such as having $400,000 in taxable index funds, $300,000 in Roth IRAs, and $800,000 in traditional 401(k)/IRA accounts [12] - Incorporating dividend-producing assets can also be beneficial, as they generate qualified dividend income, reducing the need to sell shares and lowering capital gains taxes [13]

Group 1 - The IRS taxes investment income, including interest from bonds and dividends from stocks, similar to wages [1][2] - Selling an investment at a higher price than the purchase price incurs a capital gains tax, which is calculated based on the difference between the selling price and the initial investment [2] - Capital gains are categorized into short-term and long-term, with short-term gains taxed at ordinary income rates and long-term gains taxed at lower rates [3][4] Group 2 - Long-term capital gains apply to investments held for more than one year, while short-term gains apply to those held for one year or less [3][4] - In 2025, the tax rates for long-term capital gains are 0%, 15%, or 20%, depending on filing status and taxable income, while short-term gains are taxed at rates ranging from 10% to 37% [5] - Gains in regular brokerage accounts are taxed annually, whereas gains in traditional IRAs or 401(k)s are tax-deferred, and gains in Roth IRAs or 401(k)s are tax-free [6]

Core Insights - The U.S. tax system primarily taxes income rather than wealth, allowing billionaires to grow their wealth through asset appreciation without immediate tax implications [2][6] - Billionaires utilize a strategy known as "buy, borrow, die," which involves purchasing appreciating assets, borrowing against them, and passing them to heirs to avoid capital gains taxes [3][5] Taxation Mechanisms - Billionaires do not earn traditional income; their wealth increases through assets like stocks and real estate, which are not taxed until sold [2][4] - When billionaires borrow against their assets, the borrowed money is not considered taxable income, allowing them to access significant funds without incurring tax liabilities [5] - Upon death, assets transferred to heirs receive a "step-up in basis," eliminating prior capital gains taxes and allowing heirs to inherit assets at current market value [5] Tax Rate Comparisons - Capital gains tax rates for billionaires are significantly lower than income tax rates for average Americans, with capital gains taxed at 0%, 15%, or 20% compared to income tax rates of 10% to 37% [6][7] - This disparity in tax treatment is exemplified by Warren Buffett's statement about paying a lower tax rate than his secretary due to the nature of capital gains taxation [6] Real Estate Strategies - Real estate investors can use depreciation to offset taxable income, allowing them to report losses on paper even when properties generate cash flow and appreciate in value [8]

Group 1 - The contribution limit for 401(k) plans will increase to $24,500 in 2026 from $23,500 in 2025 as per IRS guidelines [1] - The Secure 2.0 Act of 2022 introduces changes specifically affecting high earners over 50, requiring them to make catch-up contributions after taxes to a designated Roth 401(k) account starting in 2026 [3] - This new rule allows for tax-free withdrawals in retirement for eligible individuals, although it requires paying taxes on contributions upfront [3] Group 2 - Financial advisors suggest that paying taxes on contributions now may be beneficial if future tax rates are expected to rise or if individuals desire more flexibility in managing taxable income during retirement [4] - A balanced approach that combines traditional and Roth contributions can help manage tax exposure effectively across retirement [5] - Many individuals over 50 do not currently make catch-up contributions to their 401(k)s, indicating a potential area for increased retirement savings [6]

NASHVILLE, Tenn., Dec. 11, 2025 (GLOBE NEWSWIRE) -- Truxton Wealth is pleased to announce the addition of Matt Winn as Vice President and Wealth & Tax Strategist. In this role, Matt will deliver comprehensive tax planning solutions tailored for high-net-worth individuals, families, and business entities. "We are thrilled to welcome Matt Winn to Truxton Wealth," said Drew Mallory, Chief Fiduciary Officer. "Sound comprehensive tax strategy is fundamental to delivering our client value proposition. Matt's expe ...

Core Insights - Qualified Charitable Distributions (QCDs) allow retirees to donate directly from their IRAs to charities, which can reduce their taxable income more effectively than standard deductions [5][16] - A significant majority of Americans, 91%, opt for standard deductions, which means their charitable donations do not lower their taxable income [2][4] - Retirees aged 70½ or older can donate up to $108,000 annually through QCDs, with the limit adjusting for inflation due to the Secure Act 2.0 [3][4] Group 1: QCD Mechanism and Benefits - QCDs are direct transfers from a pretax IRA to a registered charity, keeping the transaction off the tax return and avoiding taxable income [5][8] - For retirees who must take Required Minimum Distributions (RMDs), QCDs can fulfill this requirement while avoiding tax implications [7][16] - QCDs are particularly beneficial for retirees with IRA balances in the mid-six figures or higher, although those with smaller IRAs can still see some tax benefits [4][16] Group 2: Implementation and Considerations - To execute a QCD, funds must be in an IRA; if held in a 401(k), a rollover to a traditional IRA is necessary [14][15] - Timing is crucial, as IRS rules require rollovers to be completed within 60 days to avoid penalties [15] - It is essential to verify that the charity is a qualified 501(c)(3) organization, as donor-advised funds and private foundations do not qualify for QCDs [18]

Core Insights - Upper-middle-class Americans are in a financial gray zone, enjoying some comfort but needing to manage their finances carefully [1] Financial Metrics and Definitions - The upper-middle class is defined by specific financial metrics, with median annual income ranging from $94,001 to $153,000 and median net worth at $269,100 [7] Financial Management Strategies - Households are advised to move excess cash from low-interest bank accounts into short-term Treasuries or Treasury ETFs, which yield 4% or more, to avoid "dead money" [3] - With interest rates trending downward, short-term Treasuries offer safety, liquidity, and better yields [4] Tax Strategy - Most upper-middle-class earners will fall into the 24% tax bracket in 2026, with standard deductions increasing by $350 for single filers and $700 for joint filers compared to 2025 [5] - Recommendations include maximizing retirement savings and strategically aligning deductions, such as charitable donations, to offset high income [6][8]