tax tips — September 19, 2014

Don't Bury Your Treasure

by Bobby Willover

Investment Income, Credits

Who doesn't get a kick out of National Talk Like a Pirate Day? But amidst the many “Arrr, mateys” and “Aye Aye, Captains,” keep in mind that the pirates didn’t get everything right. They just buried their treasure. They didn’t put it to work for them, and they didn’t think about retirement. But you should.

With the help of a couple of key federal tax provisions, retirement savings don't have to pinch so much.

Retirement Saver’s Credit

This federal tax credit allows low and moderate income employees to offset up to $2,000 voluntarily contributed to an IRA, 401(k), or similar retirement account. So, if you think you can’t afford to start investing, keep this credit in mind when filing your federal taxes.

The maximum credit is $1,000 for single and head of household filers, and $2,000 for married couples filing jointly. Keep in mind, though, that every taxpayer’s situation is different, so you may not get the credit maximum. Don’t let that deter you though. Every little bit helps when thinking about your future.


No, this isn’t a new trick for Spot – it's even better, and a lot easier. This is about taking that old 401(k) account from your first job out of college and moving into your “current” retirement account. Do you have to pay taxes? The short answer is no. If you’re simply rolling over money from account to another, then there’s no federal tax withheld. There are several options to roll over that money.

  • Direct rollover – You simply contact your old account administrator and tell them you want to transfer your funds to another account. The administrator may issue you a check made payable to you. Important: If the check is made payable to you, you have 60 days to deposit the check into another retirement account without being taxed. Make sure to check with your plan’s administrators to find out more information.
  • Trustee-to-trustee transfer – This is a payment directly from your old account into the new one. No federal taxes will be withheld. This is also the easiest in terms of paperwork and hassle.

Looking Ahead

So, what does all this mean? It doesn’t mean you go out and start fretting about what you’re going to do for retirement. It means you start by having a serious look at your financial goals, and where you are on reaching them.

Retirement may seem far off, but if you don't prepare, it will come sooner than you're ready. Don’t let Blackbeard’s saving method be yours — “X” doesn’t always mark the spot.

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