Taxes, 401(k) plans and individual retirement accounts, or IRAs, are complicated. If you can master the fundamentals of your personal taxes and understand your retirement savings options, you’ll be able to make informed decisions about your future.
The IRS estimates the average taxpayer spends 12 hours working on their taxes and pays an average of $230 to get their paperwork filed.
“Your tax return is in no way that simple,” said Mark Steber, chief tax information officer at Jackson Hewitt Tax Service. “I don’t care who you are or what economic situation you’re in — high, medium, low, no income or unemployed.”
However, tax experts say all those IRS tax return forms and schedules are actually designed to help people save money.
“If you have knowledge about how it works, you can utilize the tax code to benefit you more in the long run,” explained Sheneya Wilson, founder of Fola Financial in New York. “However, most people don’t have that knowledge, and I think that is what creates this fear of the IRS and paying taxes, when essentially the tax code is not there to harm anyone.”
Retirement plans can impact your annual taxes. Until the 1980s, most Americans planned for retirement through pensions. They were defined-benefit plans, in which employers saved on workers’ behalf and calculated employees’ retirement benefits based on their years of service and final salary. That changed when Congress passed a new tax code in the Revenue Act of 1978. The act included a new provision in the Internal Revenue Code, Section 401(k), which gave employees a tax-advantaged way to defer compensation from bonuses or stock options.
401(k) and other defined-contribution plans like it quickly replaced traditional pension plans. Unlike traditional pensions, 401(k) plans are defined-contribution plans. Employers create a retirement plan in which their employees can contribute a portion of their wages on a pretax basis, up to an amount determined by the IRS.
From 1980 through 2008, participation in pension plans fell from 38% to 20% of the country’s workforce, while employees covered by defined-contribution plans jumped from 8% to 31%, according to the U.S. Bureau of Labor Statistics.
In 2020, there were about 600,000 401(k) plans, with approximately 60 million Americans participating in them. The 401(k) continues to be one of the most popular retirement savings options for U.S. workers.
When people think of retirement savings, in addition to 401(k) plans, IRAs likely come to mind. The key difference is that employers offer 401(k) plans whereas individuals open IRAs. There are pros and cons to both, but if you understand how to contribute and invest those contributions you can maximize your return ahead of your retirement.
Watch the video above to learn about taxes, IRAs and 401(k) plans.
SEGMENTS:
00:00 – Why Taxes Are So Confusing In The U.S. (April 2021)
12:17 – How 401(k) Plans Work And Why They Killed Pensions (March 2021)
24:34 – How IRAs Work And Why They Are More Popular Than 401(k)s (August 2021)
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How Taxes, 401(k) Plans And IRAs Work…(read more)
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Great video. We all strive towards financial stability and a better life. It is easy to achieve this through the right investment, by living frugally and budgeting. I’m glad I learnt early in life to work hard for financial freedom
I have lost everything I have earned in the market over the last ten years in my 401k just this year. I am down 18%. Thanks to politicians not realizing we can’t just print money with no consequences and it is the middle class that suffered.
I think programs that help feed and house people are important, but I'm not down for taxes going towards weapons and war and all that. Is there anyway to choose where one's taxes going toward ?
Intuit was also sued recently after forcing some users to pay when they qualified for a free file. LOL
"tax experts say that all those forms and paper works are design to help us save money" lol… thats not true… since when…?
My 401k rate of return YTD is -11.80%. It's been 7 years contributing. I lost money the entire time have contributed 6%. I would have more just putting into a savings account. I don't understand.
This sounds so incredibly complicated. Over here the government automatically generates a tax report based on your income of the previous year with the data you provided back then. You then check and correct the form online and you are done.
Here's a smart move: retire overseas in a less expensive stable country. Ecuador, Panama, Vietnam, Costa Rica, Malaysia, Indonesia, Portugal are all good spots. A trip to a dematologist that would cost $250-300 in the States costs me $75 for private care here in Costa Rica. Medical insurance with Costa Rica's good socialized medicine system costs me less than $19 a month. Deductibles? None. Co-pay? None. Get outta Dodge, folks.
its that taking the standard deduction is easier but that itemizing is really harder to do since trump made it more of a nuisance
THERE WILL ALWAYS BE TAX BUSINESS, LIKE HE SAYS IN THE END,, YES BUT TAX WAS NEVER SUPPOSED TO STAY. WHEN ARE PEOPLE SUPPOSED TO SEE THE LIGHT IF THEY HAVE LETS SAY EVERYTHING PAID FOR AFTER BUSTING THEIR BUTTS WORKING TO PAY OFF A HOME A CAR ECT WHY IS THAT EVEN ALLOWED TO HAVE TO KEEP BUSTING YOUR BUTT TO PAY TAXES ON YOUR OWN PAID OFF HOME? THATS NEEDS TO STOP
How come there’s no talk about an IUL???????? That is a better practice for retirement!!!!
Courtney it’s not free money. Let’s not forget that 401K are subject to market volatility!
Nobody can become financially successful over night. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals.
Watching this video is giving me headache. Cannot imagine how ordinary Americans cope during tax season.
At a very young age, I started to invest in real estate. I started with a single family home which I purchased the home with my sister at the age of 20 years old. Back in 1980, I was able to buy the home in San Francisco for $107,000 when interest rate was at 10%. This started me a career investing in real estate. The downturn in real estate taught me not to over leverage and double down with more real estate investing. I was lucky I never loss any property to foreclosure or a short sale. I have a short list of investment properties that help generate a nice passive income. I have very little debt. The investment properties are valued between the high 7 to low 8 figures. I still continue to live a lifestyle that my daughter calls very frugal. I learn to live this lifestyle from my father who was brought up during the great depression. It is more difficult for the new generation to invest in real estate to create wealth and passive income stream to live on. Most of the new generation is buying and selling crypto, with no taxes but that will stop when the government starts to monitor the transaction.
I can see my HSA as a 2nd retirement behind my 401k. I like it because i can go over my limit on my 401k through another avenue plus mine has monthly employer contributions.
Give that girl a mic please
The tax system is not complex. If you are an adult with access to the internet, you have all the tools to necessary to learn how to do taxes your taxes. I bet everyone here spent more time playing on social media than trying to learn how to save on taxes. The only thing that should be required is adding a tax class to all public education. Probably more important than half of all other schooling
https://youtu.be/acqwg404yBA?list=LL
The system has manufactured to oppress, no one should be taxed for their incomes, it is an immoral reality, money needs to stop being created in debt, the nation owes no one anything but it's people….
The coming revolution will be over ending debt money…it's already begun…
I proved to be too much for the man.
You have witnessed the power of a true Hustler.
RISKS OF GOVERNMENT REGULATION
The Financial Industry Regulatory Authority (“FINRA”) issued a notice on March 8, 2022 seeking
comment on measures that could prevent or restrict investors from buying a broad range of public securities
designated as “complex products”—which could include the leveraged and inverse funds like TQQQ & SQQQ . The ultimate impact, if any, of these measures remains unclear. However, if regulations are
adopted May 09, 2022, they could, among other things, prevent or restrict investors’ ability to buy the funds…
Very complicated in America.
The incoming bull run together with the looming recession will be both interesting and exciting!
The legal system at large in the USA, and to be fair much of the world, holds the same place religion did in Europe during the middle ages. Everyone is prescribed to it, but only the rich really benefit because only they can read the code. Everyone else is actually manipulated by them because of it.
Stop with such a bunch of propaganda. The 401k is a scam. 401k’s average 7% return. But the broker averages a 2% commission. So by the end when you start drawing on the 401k . The broker has received on average 63% of your 401k. This means that over the lifetime of your 401k you end up with only 37% of the earnings. Another way to look at it is that if you had invested that money in property? You would have received 100% of your profit. Stop giving away your money. Pay your taxes save it for a little while and then buy property.
Thanks for this video.I’m a dividend investor, my wife and I have invested in the s&p500, both through my TSP with the government and through fidelity in her 401-k. Cashed out 270k from the S&P and invested with a full service broker.. Until about 3years ago we were 100% in the s&p after over 30 years. I’m retiring at the end of the month at 59, while my wife will retire next year at 54. We currently have 4.7 million in out tex deferred savings.
Wow, holy moly. Did you guys see the volume of TQQQ and SQQQ yesterday 04/26/2022? It was off the charts . I guess, after my sharing with all of you guys how to trade them Up and Down simultaneously a lot of you got involved. Well to say the least, it looks like we can play this game together and stand a better chance in the process. You know what they say, there's strength in numbers. I'm in these stocks at least until the end of the year. My word is bond, just ask someone.
I was asked, is this a good time to buy TQQQ and SQQQ simultaneously. In my opinion any times a good time but for the sake of the question, it's a perfect time right now. The stock market is heavily discounted and this is when you want buy it, hold and remain patient until you've reached your goal.
This is how I play my entry and exit. $1,000 to the upside, $1000 to the downside, that's around 25 Shares on both sides, at the present discount rate, for a total of 50 shares. Now, notice I have a total of around $2,000 invested, give or take a few, my goal is to stay in the play until one side produces $2,000 or more. Once that is achieved, I then have access to my original Total investment of $2000 returned to me.
Now I can make a calculated decision, (1.) I can continue to hold that side until it shows me a profit over my original total $2000 investmen or (2.) close the side that has paid me back my $2,000 original investment and I break even right there.
Here's the hidden prize, I still hold and own indefinitely the losing side that's down $2,000. However, My goal is to hold the losing side until the stock market reverses and pay me on that side as well because we all know, what goes up, must come down and vice or versa.
Now go figure that, I bet a stock market Guru won't share that with you.
The aristocrats running the stock market and that so-called Reddit group ain't got nothing on OG Reggie B.
So do me a favor and remember where you heard it from, peace love and soul.