A tax nightmare after retirement | The week


Here are three of the top financial news stories of the week, gathered from around the web:

A tax nightmare after retirement

For some high earners, saving for retirement in a tax-deferred account is a tax time bomb, David McClellan said in Kiplinger’s. Saving “all you can in tax-deferred accounts” for tax-sheltered growth is still good advice for most savers. But ultimately, all retirees must receive required minimum distributions (RMDs) from age 72. For those with significant pre-tax savings, this “represents a growing tax burden.” A couple who have $500,000 in savings at age 40 — and max out their contributions each year — will end up with $7.3 million in their 401(k) and face RMDs exceeding $435,000 in retirement and reaching $739,000 at age 80. Income. How to defuse the tax bomb? Consider transferring money from an existing tax-deferred account to a tax-free Roth IRA. This is a better strategy in low-income years because “the transfer amount is generally fully taxable.”

The fine print of your home policy

You may be less prepared for climate-related disasters than you think, said Tara Siegel Bernard in The New York Times. The first thing you should do is “assess your home’s risk to earth hazards”. An online tool, Risk Factor, “describes the risks of flooding, fire and extreme heat”, estimates the likelihood of catastrophic weather events and “how much repairs could cost”. From there, you need to know your insurance coverage and “always choose ‘replacement value’ coverage when you can.” When Hurricane Ida ripped the roof off Jeanne Gouaux’s Louisiana home, she didn’t learn until later that her wind and hail policy “only provided the depreciated value” of the destroyed property, giving her half the money she needed.

A Hidden Abundance of Forgotten Gifts

If you’re like most people, you’re probably sitting on an unused gift card of considerable value, Lorie Konish told CNBC​. A new survey from CreditCards.com found that 47% of people “currently have at least one unused gift card, voucher, or store credit.” And the credit is not to be neglected. “The average unused amount is $175 per person, compared to $116 last year.” Amid 40 years of high inflation, those sums – a total of $21 billion – “could give consumers’ wallets a welcome boost.” Some companies, like CardCash, Raise, or ClipKard, will even buy unused gift cards if you don’t want to buy anything for yourself.

This article first appeared in the latest issue of The week magazine. If you want to know more, you can try six risk-free issues of the magazine here.


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