Are There Really Tax-Free Retirement Plan Distributions?

A look at some popular & obscure options for receiving money with little or no tax. Will you receive tax-free money in retirement? Some retirees do. You should know about some of your options for tax-free retirement distributions, some of which are less publicized than others. Qualified distributions from Roth accounts are tax-free. If you own a Roth IRA or have a Roth retirement account at work, you can take a tax-free distribution from that IRA or workplace retirement plan once you are older than 59½ and have held the account for at least five tax years. One other nice perk: original owners of Roth IRAs never have to take Required Minimum Distributions (RMDs) during their lifetimes. (Owners of employer-sponsored Roth retirement accounts are required to take RMDs.)1,2 Trustee-to-trustee transfers of retirement plan money occur without being taxed. In a rollover of this kind, the custodian financial firm that hosts your workplace retirement plan account makes a payment directly out of the account to an IRA you have waiting, with not a penny in taxes levied or withheld. Trustee-to-trustee transfers of IRAs work the same way.3 If you are older than 80, you might get a tax break on a...
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WHAT THE MARKET IS TELLING US ABOUT THE ELECTION

Burt White Chief Investment Officer, LPL Financial Jeffrey Buchbinder, CFA Market Strategist, LPL Financial Election years have historically been good for stocks, and this year has been no different, although with less volatility than we would expect during the summer of an election year. That relative calm may partly reflect that the market is increasingly pricing in greater certainty that would come with a Hillary Clinton victory, as her support has climbed in the polls. This week we look at what the stock market and some politically sensitive industry groups may be telling us about the potential outcome of the presidential election in November. WHERE’S THE ELECTION YEAR VOLATILITY? Election years have historically been good for stocks, though with some volatility, as we wrote in our election themed Weekly Market Commentary back in May (“What Might Trump the Election Year Pattern?”). That volatility during election years has historically come during the middle and late summer months — in other words, about now. Although each cycle is different (especially 2008), in recent decades we have observed that the volatility tends to subside, and a late-year rally ensues, when markets have more clarity on the candidates’ platforms and start to price in a winner. So where has the volatility been this summer? As shown in...
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The Many Benefits of a Roth IRA

Why do so many people choose it rather than a traditional IRA? The Roth IRA changed the whole retirement savings perspective. Since its introduction, it has become a fixture in many retirement planning strategies. The key argument for going Roth can be summed up in a sentence: Paying taxes on retirement contributions today is better than paying taxes on retirement savings tomorrow. Here is a closer look at the trade-off you make when you open and contribute to a Roth IRA – a trade-off many savers are happy to make. You contribute after-tax dollars. You have already paid federal income tax on the dollars going into the account. But, in exchange for paying taxes on your retirement savings contributions today, you could potentially realize great benefits tomorrow.1 You position the money for tax-deferred growth. Roth IRA earnings aren’t taxed as they grow and compound. If, say, your account grows 6% a year, that growth will be even greater when you factor in compounding. The earlier in life that you open a Roth IRA, the greater compounding potential you have.2 You can arrange tax-free retirement income. Roth IRA earnings can be withdrawn tax-free as long as you are age 59½ or...
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