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One silver lining in the current bear market is that this could be a good time to convert assets from a traditional IRA to a Roth IRA. Converted assets are subject to federal income tax in the year of conversion, which might be a substantial tax bill. However, if assets in your traditional IRA have lost value, you will pay taxes on a lower asset base when you convert. If all conditions are met, the Roth account will incur no further income tax liability for you or your designated beneficiaries, no matter how much growth the account experiences.
Tax Trade-Off
The logic behind deferring taxes on Taylor Morrison Home retirement savings is that you may be in a lower tax bracket when you retire from Taylor Morrison Home, so a current tax deduction might be more appealing than tax-free income in retirement. However, lower rates set by the Tax Cuts and Jobs Act (set to expire after 2025) may have changed that calculation for you. A cost-benefit analysis could help determine whether it would be beneficial to pay taxes on some of your IRA assets now rather than later. One strategy is to 'fill your tax bracket,' meaning you would convert an asset value that would keep you in the same tax bracket. This requires projecting your income for 2022.
Lower Values, More Shares
As long as your traditional and Roth IRAs are with the same provider, you can typically transfer shares from one account to the other. Thus, when share prices are lower, you could theoretically convert more shares for each taxable dollar and would have more shares in your Roth account to pursue tax-free growth. Of course, there is also a risk that the converted assets will go down in value. You may have the option to take taxes directly out of your converted assets, but this is generally not wise.
Two Time Tests
Roth accounts are subject to two different five-year holding requirements: one related to withdrawals of earnings and the other related to conversions. For a tax-free and penalty-free withdrawal of earnings, including earnings on converted amounts, a Roth account must meet a five-year holding period beginning January 1 of the year your first Roth account was opened, and the withdrawal must take place after age 59½ or meet an IRS exception. If you have had a Roth IRA for some time, this may not be an issue, but it could come into play if you open your first Roth IRA for the conversion.
Assets converted to a Roth IRA can be withdrawn free of ordinary income tax at any time, because you paid taxes at the time of the conversion. However, a 10% penalty may apply if you withdraw the assets before the end of a different five-year period, which begins January 1 of the year of each conversion, unless you are age 59½ or another exception applies.
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More Favorable RMD Rules
Unlike a traditional IRA, Roth IRAs are not subject to required minimum distribution (RMD) rules during the lifetime of the original owner. Spouse beneficiaries who treat a Roth IRA as their own are also not subject to RMDs during their lifetimes. Other beneficiaries inheriting a Roth IRA are subject to the RMD rules. In any case, Roth distributions would be tax-free. The longer your investments can pursue growth, the more advantageous it may be for you and your beneficiaries to have tax-free income.
All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful for Taylor Morrison Home employees.
What is the 401(k) plan offered by Taylor Morrison Home?
The 401(k) plan at Taylor Morrison Home is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.
How can I enroll in the 401(k) plan at Taylor Morrison Home?
Employees can enroll in the 401(k) plan at Taylor Morrison Home by completing the enrollment process through the company’s benefits portal or by contacting the HR department for assistance.
What is the employer match for the 401(k) plan at Taylor Morrison Home?
Taylor Morrison Home offers a competitive employer match for the 401(k) plan, which typically matches a percentage of employee contributions up to a certain limit.
Are there any eligibility requirements to participate in Taylor Morrison Home's 401(k) plan?
Yes, employees must meet specific eligibility criteria, such as being a full-time employee and completing a certain period of service, to participate in Taylor Morrison Home's 401(k) plan.
What types of investment options are available in the Taylor Morrison Home 401(k) plan?
The 401(k) plan at Taylor Morrison Home offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles to help employees grow their retirement savings.
Can I take a loan from my 401(k) plan at Taylor Morrison Home?
Yes, Taylor Morrison Home allows employees to take loans from their 401(k) plan, subject to specific terms and conditions outlined in the plan documents.
How often can I change my contribution amount to the 401(k) plan at Taylor Morrison Home?
Employees at Taylor Morrison Home can change their contribution amount to the 401(k) plan at any time, typically through the benefits portal or by contacting HR.
What happens to my 401(k) if I leave Taylor Morrison Home?
If you leave Taylor Morrison Home, you have several options for your 401(k), including rolling it over to an IRA or a new employer’s plan, cashing it out, or leaving it with Taylor Morrison Home.
Is there a vesting schedule for the employer match in Taylor Morrison Home's 401(k) plan?
Yes, Taylor Morrison Home has a vesting schedule for the employer match, which means that employees must work for a certain number of years before they fully own the matched funds.
Can I contribute to my 401(k) plan at Taylor Morrison Home if I am also contributing to an IRA?
Yes, employees can contribute to both a 401(k) plan at Taylor Morrison Home and an IRA, as long as they adhere to the contribution limits set by the IRS.