Lamont Financial Services, a Marin County financial and wealth management firm serving the San Francisco Bay Area.

Did you know that there are 11 types of Individual Retirement Accounts (IRAs)? That’s right, there are 11 ways to set aside money for retirement as an individual. Most are versions of two types of IRAs–traditional and Roth, but it’s important to understand all of your investment options. Let’s start with those two and move on from there.

1. A Traditional IRA is an account in which an individual sets aside money for retirement prior to paying taxes. This has the dual benefit of lowering one’s taxable income while saving money for retirement. It was introduced with the Employee Retirement Income Security Act of 1974 (ERISA) and made popular with the Economic Recovery Tax Act of 1981. The money will be taxed when it is withdrawn. You can invest this money in stocks, bonds, or savings accounts through a qualifying financial institution. 
2. With a Roth IRA, contributions are made with after-tax assets and all transactions within the IRA have no tax impact, and withdrawals are usually tax-free. Many savers have found that by the time they started withdrawing funds from a traditional IRA, income taxes were higher than they would have been if they paid the taxes prior to setting aside retirement funds. Named for Senator William V. Roth, Jr., the Roth IRA […]

Social Security retirement benefits are meant to provide monthly income to eligible workers, as well as their spouses, survivors, and dependent children. There are a variety of strategies around when to claim benefits that can have a significant impact on the amount of money you can receive.  In order to enjoy financial security and make the most of your retirement, it’s important to think hard about when to claim your benefit.

Eligibility Requirements

You are eligible for Social Security benefits at age 62, considered “full retirement age” by the Social Security Administration. For every year you put off collecting between age 62 and 70, you’ll increase your benefit between 5 percent and 8 percent. Many elect to work longer or to rely on other sources of retirement income to maximize social security benefits.

According to the Social Security Administration, almost 75 percent of taxpayers apply for social security benefits between age 62 and full retirement age. Some regret this decision, or simply had a change of plans. Prior to 2010, retirees could that changed their mind about electing Social Security benefits were allowed to “un-elect” their benefits and re-file at a later age, provided that they pay back all the benefits received up to the point of changing their minds.

Rules Have Changed

According to the Center for Retirement Research at Boston College, this loophole cost the Social Security […]

Tax laws regarding home sales have shifted in the past two decades. Prior to 1997, capital gains on a home sale were taxable. The only way to avoid capital gains tax was to buy another home for the same amount of a home sale, or higher. This practice is called a “1031 exchange,” named after the IRS code that allowed for the deferral of capital gains taxes. There are some restrictions on 1031 exchanges. First, you had to buy a “similar” type of property as what was sold–residential or commercial. Second, you had just 45 days to identify the property you wished to buy, which can be difficult in hot real estate markets where properties don’t last long.

Taxpayer Relief Act of 1997

But when the Taxpayer Relief Act of 1997 became law, the home-sale tax burden eased for millions of residential taxpayers. Now, the first $250,000 gain on any home sale is tax-free. A married couple can double that exemption to $500,000. The exemption is available for any property you have lived in for at least two of the previous five years.

The 1031 exchange can still be used for gains that are higher than what is the common exemption. This can be valuable in California, especially for people that have owned their homes for many years. In the San Francisco Bay Area, for example, someone that has owned a home for twenty or more years is likely to see a gain higher than $250,000 and could seek tax deferral for the gain with a 1031 exchange. If you’ve used a 1031 exchange in the […]