Millionaires are multiplying inside America's 401(k)s, and headlines are throwing a party. But buried beneath the celebration is a less glamorous stat: the average balance is still barely over six figures. Fidelity's latest report, released in September, shows a record-breaking 654,000 accounts now hold over $1 million, a nearly 10% jump from the previous quarter. It's the highest number ever recorded. Yet despite the surge, the average 401(k) balance sits at just $144,400—a record in its own right, but ...

Contributing to an IRA can make your retirement years more comfortable, but it can also lower your tax bill for the year you contribute. To deduct your IRA contributions, you need to have a traditional IRA instead of a Roth IRA. Additional restrictions apply based on your income and whether you or your spouse are eligible for a retirement plan through work. Read on to learn the rules for deducting IRA contributions. We’ll cover when you can take the deduction, how much you can deduct, and a few other fact ...

Contribution Limits Changes - The IRS announced that contribution limits for 401(k) and 403(b) plans, as well as governmental 457 plans and the federal Thrift Savings Plan, will increase to $24,500 in 2026, up from $23,500 in 2025 [1] - The IRA contribution limit will rise to $7,500 in 2026 from $7,000 in 2025 [1] Catch-Up Contributions - Individuals aged 50 and older can contribute an additional $1,100 to their IRA starting in 2026, an increase from $1,000 in 2025, due to the SECURE 2.0 Act's cost-of-living adjustment [2] - For workers aged 50 and up participating in 401(k), 403(b), government 457 plans, and the federal Thrift Savings Plan, the catch-up contribution limit will increase to $8,000 in 2026 from $7,500 in 2025, raising their total contribution limit to $32,500 [5] - Workers aged 60 through 63 will have a higher catch-up contribution limit of $11,250, which remains unchanged in 2026 [6] Phase-Out Ranges for IRA Deductions - The phase-out range for single taxpayers covered by a workplace retirement plan will increase to between $81,000 and $91,000 in 2026, up from $79,000 to $89,000 in 2025 [9] - For married couples filing jointly, the phase-out range will increase to between $129,000 and $149,000 if the spouse making the IRA contribution is covered by a workplace retirement plan [12] Roth IRA Phase-Out Ranges - The phase-out range for individuals contributing to a Roth IRA will rise in 2026 to between $153,000 and $168,000 for singles and heads of household, an increase of $3,000 [13] - For married filers, the phase-out range will increase to between $242,000 and $252,000 in 2026, an increase of $6,000 [13] Expert Commentary - A national director of strategic wealth and business advisory noted that the new 2026 retirement plan limits provide more room for savings, which is beneficial as retirement becomes longer and more expensive [15]

Core Points - The article discusses the rules and strategies surrounding Required Minimum Distributions (RMDs) from pre-tax retirement accounts, emphasizing the importance of compliance to avoid penalties [4][25]. - It outlines methods to potentially reduce the tax impact of RMDs through strategies like Qualified Charitable Distributions and Roth conversions [12][15]. RMD Rules - RMDs apply to pre-tax retirement portfolios such as 401(k), 403(b), and traditional IRAs, with no RMDs required for taxed portfolios or Roth accounts [4][25]. - Starting at age 73, individuals must withdraw a minimum amount from each applicable pre-tax portfolio by the end of the year [3][4]. - The RMD amount is calculated based on the account balance at the end of the previous year divided by a distribution period set by the IRS [8][9]. Tax Implications - Failure to take the minimum distribution results in a 50% excise tax on the amount not withdrawn [1][6]. - Withdrawals from pre-tax portfolios are subject to income taxes, which is the primary reason for the RMD requirement [2][6]. Strategies to Manage RMDs - **Qualified Charitable Distribution (QCD)**: Allows individuals to transfer funds directly to charity, which counts towards the RMD and is not taxable [13][14]. - **Roth Conversion**: Converting pre-tax assets to a Roth IRA eliminates future RMD requirements on the converted amount, though taxes must be paid on the conversion [15][18]. - **Withdrawal Structuring**: Taking income from pre-tax portfolios first can reduce the value subject to RMDs, allowing other assets to grow [20][21]. - **Investing in Annuities**: Income generated from annuities can satisfy RMD requirements, providing a potential strategy to manage distributions [22][23]. Conclusion - RMDs are mandatory withdrawals from pre-tax retirement accounts, and while current year obligations cannot be reduced, future RMDs can be managed through strategic planning [25][28].

Core Insights - The article discusses IRS-approved tax shelters that can legally reduce tax liabilities for individuals, emphasizing the importance of compliance with tax laws [1][2] Tax Shelters Overview - Retirement accounts such as 401(k) and IRAs allow taxpayers to defer taxes until retirement, potentially lowering their tax burden when they withdraw funds [3][6] - The projected contribution limits for IRAs in 2026 are $7,500 for individuals under 50 and $8,600 for those 50 and older, reflecting an increase from 2025 limits [4] - Real estate investments provide tax advantages through various deductions, including mortgage interest and property taxes, although itemizing deductions is necessary [4][5]

Group 1 - A 27-year-old finance worker inherited $1 million and is conflicted about continuing 401(k) contributions despite having significant assets in a trust [1][2] - The individual earns $120,000 annually and plans to use the trust primarily for purchasing a house, expressing uncertainty about the purpose of life after his mother's passing [2] - Reddit commenters encouraged continued investment to take advantage of the 6% company match, emphasizing the importance of maximizing retirement contributions [3][4] Group 2 - Fidelity's quarterly retirement analysis indicates that average 401(k), 403(b), and IRA balances reached record highs, increasing by an average of 8% year over year [5] - The report noted that only 5.5% of retirement savers altered their 401(k) allocations in the quarter, indicating stability in investment strategies despite market fluctuations [5] - Vanguard's report highlighted that 61% of defined contribution plans now utilize automatic enrollment, which has been linked to higher participation rates in retirement savings [6]

Core Insights - The article discusses the importance of understanding Required Minimum Distributions (RMDs) for retirees, particularly those with pre-tax retirement accounts [3][4]. Group 1: RMD Overview - RMDs are mandatory withdrawals from pre-tax retirement accounts that must begin at age 73, ensuring that taxes are eventually paid on these funds [3][4]. - The IRS imposes strict rules regarding the timing and amount of RMDs, with significant penalties for non-compliance, including a 25% penalty on amounts not withdrawn in time [4]. Group 2: RMD Calculation - RMD calculations are based on the year-end balance of retirement accounts and the retiree's life expectancy, using the IRS Life Expectancy Table to determine the RMD factor [7]. - An example illustrates the calculation: a retiree with a $150,000 IRA balance at year-end would have an RMD of $5,882.35 for the following year, based on a factor of 25.5 [8]. Group 3: Withdrawal Flexibility - Retirees are not required to take their RMD in a single payment; they can opt for multiple withdrawals throughout the year and can withdraw more than the minimum if needed [9].