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Here's everything you need to know about taxes 401. 0.501 Jump to 33.466
    CARDINAL 401
code. It's over 7 million words long. 1.635 Jump to 71.971
    CARDINAL 7 million
The IRS estimates the average taxpayer spends 12 hours working on it and ends up 1.134 Jump to 77.177
    ORG IRS
    TIME 12 hours
paying an average of $230 to get their paperwork filed. 0.934 Jump to 81.314
    MONEY 230
We have 70,000 pages of rules and we have a deduction or a credit for 2.002 Jump to 125.258
    CARDINAL 70,000
Some argue that having to itemize and identify all these one off deductions is an 1.568 Jump to 235.168
    CARDINAL one
When people talk about the flat tax or just do the one rate tax, you know, that 1.968 Jump to 246.713
    CARDINAL one
may be great for somebody, but somebody with three children who's unmarried, who needs the earned 1.568 Jump to 251.851
    CARDINAL three
complicated. You know, the person over here with just one W-2, they may like the flat tax, but this 0.701 Jump to 261.894
Another common thing that comes up is that many people have more than one job. 1.568 Jump to 281.781
    CARDINAL more than one
And so again, unless you've made adjustments, your second job, let's say you have 1.501 Jump to 286.586
    ORDINAL second
a side gig, the withholding is not being done as if that's your second 1.101 Jump to 291.691
    ORDINAL second
job. It may be being done as if it's your first job. 1.401 Jump to 294.294
    ORDINAL first
Remember, income tax goes back to the 16th Amendment in 1913. 0.867 Jump to 336.169
    DATE 1913
The first reason why our taxes are so complicated is because they never seem to go away, 0.968 Jump to 388.721
    ORDINAL first
This kind of attitude has been great for companies in the nearly $11 billion business of 0.634 Jump to 420.686
    MONEY nearly $11 billion
Every year, taxpayers spend more than $200 on average to prepare 0.066 Jump to 469.936
    DATE Every year
Turbotax, which is owned by Intuit, made over $3.1 billion from its 1.368 Jump to 478.878
    MONEY $3.1 billion
consumer tax segment and fiscal year 2020, up 25% from two years 1.435 Jump to 483.516
    DATE fiscal year 2020
    PERCENT 25%
    DATE two years
earlier. But there is one major headwind to this fast growing for profit tax prep 0.934 Jump to 488.788
    CARDINAL one
More than 20 states offer their own freemium filing portals to allow residents to 1.135 Jump to 503.402
    CARDINAL More than 20
And 70% of Americans are eligible to file their federal taxes for free 0.534 Jump to 512.578
    PERCENT 70%
    NORP Americans
So about 100 million people could be filing their taxes for free. 1.468 Jump to 526.392
    CARDINAL about 100 million
The program got its start in 2003, but a fraction of those eligible actually use it in 1.434 Jump to 531.531
    DATE 2003
2020. Only 4.2 million of the 100 plus million eligible taxpayers 0.433 Jump to 536.903
    DATE 2020
    CARDINAL Only 4.2 million
That was a nearly 50% increase from the previous year, but still a small fraction of the 0.834 Jump to 544.21
    PERCENT nearly 50%
    DATE the previous year
The Treasury Inspector General for Tax Administration released an audit in 2020 to 1.368 Jump to 550.983
    DATE 2020
This report estimates that more than 14 million taxpayers in processing year 1.668 Jump to 559.292
    CARDINAL 14 million
    DATE year
2019 ended up paying for tax prep software that they could have gotten for free. 1.535 Jump to 563.796
    DATE 2019
It takes him all of 2 minutes and 50 seconds. 1.535 Jump to 614.046
    TIME 2 minutes and 50 seconds
I mean, after President Trump's tax overhaul in 2017, now more than 1.568 Jump to 626.025
    PERSON Trump
    DATE 2017
87% of taxpayers just take the standard deduction instead of itemizing their 1.968 Jump to 630.563
    PERCENT 87%
employer sends your W-2 and 1099 to the IRS. 1.935 Jump to 639.138
    WORK_OF_ART W-2 and 1099
    ORG IRS
Well, that partnership had one big catch. 1.402 Jump to 686.852
    CARDINAL one
The IRS for almost 20 years promised not to offer a rival product 0.734 Jump to 691.924
    ORG IRS
    DATE almost 20 years
that is up until it stopped making that promise in 2020 amid 0.3 Jump to 696.896
    DATE 2020
$33.1 trillion. 1.134 Jump to 739.572
    MONEY $33.1 trillion
As of September 2020, about six and one half trillion of that is held in 401 1.468 Jump to 746.479
    DATE September 2020
    CARDINAL about six
    CARDINAL one half trillion
    CARDINAL 401
k accounts, representing nearly one fifth of the US retirement market. 1.368 Jump to 750.783
    CARDINAL nearly one fifth
    GPE US
For one case are an employer sponsored retirement plan, and it's 1.469 Jump to 755.387
    CARDINAL one
part of what we call one part of the three legged stool of the US retirement system. 0.767 Jump to 761.26
    CARDINAL three
    GPE US
The other two parts being Social Security and private savings. 1.035 Jump to 764.93
    CARDINAL two
    ORG Social Security
Since 1984, one K plans have quickly grown to become one of the most popular 0.868 Jump to 770.402
    DATE 1984
    CARDINAL one
    ORG K
however. A recent survey shows that nearly two thirds of Americans don't exactly understand 0.5 Jump to 782.915
    CARDINAL nearly two thirds
    NORP Americans
how a 401 k works. 1.835 Jump to 783.449
    CARDINAL 401
That changed when Congress passed the tax code with the Revenue Act of 1978. 1.568 Jump to 849.215
    ORG Congress
    DATE 1978
401k devise, the first 401 k retirement plan for his clients. 0.935 Jump to 868.3
    ORDINAL first
    CARDINAL 401
So what happened was, in the fall of 1980, I was helping the Philadelphia area 0.834 Jump to 873.906
    DATE 1980
    GPE Philadelphia
pioneering. So the first plan we did was in our own little consulting 0.701 Jump to 893.225
    ORDINAL first
company, beginning in January one of 1981, our employees were 0.934 Jump to 898.097
    DATE January one of 1981
Unlike traditional pensions that were defined benefit for one case were defined 1.969 Jump to 910.075
    CARDINAL one
Now, in most for one K plans, employers also offer to match the employees 1.468 Jump to 938.237
    CARDINAL one
    ORG K
contributions most commonly $0.50 for every dollar saved and up to 6% 0.568 Jump to 944.109
    MONEY 0.50
    PERCENT up to 6%
Your company is saying, Hey, if you contribute to the 401. 1.168 Jump to 948.714
    CARDINAL 401
So if you put in 4% and your company manages 4%, you have 8% going towards your 0.935 Jump to 957.389
    PERCENT 4%
    PERCENT 4%
    PERCENT 8%
goals and only 4% was out of your pocket. 0.501 Jump to 960.392
    PERCENT only 4%
For one K and other defined contribution plans like it quickly replace traditional 1.434 Jump to 965.331
    CARDINAL one
pension plans. From 1980 through 2000, eight participants in pension plans 1.368 Jump to 970.135
    DATE 1980
    CARDINAL eight
fell from 38% to 20% of the US workforce, while employees covered 0.734 Jump to 975.541
    PERCENT 38% to 20%
    GPE US
by defined contribution plans jump from 8% to 1.368 Jump to 979.378
    PERCENT 8%
31%, according to the Bureau of Labor Statistics in 2020, about 60 1.535 Jump to 984.183
    PERCENT 31%
    ORG the Bureau of Labor Statistics
    DATE 2020
    CARDINAL about 60
million American workers were participants in a 401 k with about 600,000 0.667 Jump to 989.955
    NORP American
    CARDINAL 401
    CARDINAL about 600,000
The majority of workers overall were in a 401 k rather 2.002 Jump to 995.761
    CARDINAL 401
So that might be one of the reasons, but I think the biggest reason is probably to be competitive 0.634 Jump to 1035.534
Typically 41k plans can be invested in four ways employer stocks, 0.901 Jump to 1044.977
    CARDINAL four
Mutual funds still remain the most popular option, accounting for 62% of 0.868 Jump to 1056.922
    PERCENT 62%
401k plan assets as of September 2020. 1.101 Jump to 1060.192
    DATE September 2020
What made them very appealing to 401k plans because for one K 0.768 Jump to 1069.034
    CARDINAL one
For one case also come in a different form known as Roth for one case where contributions are 1.202 Jump to 1112.911
    CARDINAL one
    PERSON Roth
    CARDINAL one
What's called a pretax account or a traditional IRA just depends on which one you're using. 1.735 Jump to 1149.815
its effect on for one case, it hasn't been too severe. 0.567 Jump to 1178.01
    CARDINAL one
According to a 2018 report from Pew Research Center. 1.334 Jump to 1192.391
    DATE 2018
    ORG Pew Research Center
About 29% of American adults live in lower income households, 0.701 Jump to 1196.461
    PERCENT About 29%
    NORP American
52% in middle income, and just 19% in upper income, according 0.1 Jump to 1202.501
    PERCENT 52%
    PERCENT just 19%
Only 15 to 20% of the entire working age population is classified 0.134 Jump to 1208.473
younger, and they're also less likely to have access to a41k or employer sponsored plan in the first place. 1.935 Jump to 1219.351
    ORDINAL first
However, about 8% of employers have cut 401. 1.502 Jump to 1229.394
    PERCENT about 8%
    CARDINAL 401
K contributions in 2020 in order to pare back expenses amid the coronavirus 1.501 Jump to 1234.333
    DATE 2020
crisis. That equates to more than 51,000 plans, according to federal data. 1.502 Jump to 1238.77
    CARDINAL 51,000
they assume they are expecting more than 200,000 1.234 Jump to 1252.451
    CARDINAL more than 200,000
contributions to employees for one day plans. 0.701 Jump to 1270.769
    DATE one day
If there's any good news, it's a 4 to 1 case have historically fared pretty well during times of 2.036 Jump to 1275.974
    CARDINAL 1
41k participants who made consistent contributions from 2010 to 2018 1.334 Jump to 1286.385
    CARDINAL 41k
    DATE 2010 to 2018
saw a compound annual average growth of 13.9% over that time 1.535 Jump to 1291.223
    DATE annual
    PERCENT 13.9%
If you're 80 or 90% invested in the stock and based on your age, you should 0.533 Jump to 1309.308
    PERCENT 80 or 90%
savings. The CARES Act, passed in 2020, sought to help workers suffering from the pandemic 1.668 Jump to 1332.164
    LAW The CARES Act
    DATE 2020
by allowing individuals to withdraw up to 100,000 from eligible retirement plans 1.068 Jump to 1337.736
    CARDINAL 100,000
without the 10% early withdrawal penalty applying. 1.936 Jump to 1339.771
    PERCENT 10%
One thing that many retirement experts were very nervous about was that during this pandemic, 1.268 Jump to 1345.177
    CARDINAL One
For one case, there was some fear that there would be a lot of people taking money out. 1.134 Jump to 1352.284
    CARDINAL one
because they aren't eligible or because they don't have one offered to them. 1.802 Jump to 1374.272
    CARDINAL one
A lot of companies have ten year requirements and then a lot of companies don't give access to plans to part time 1.502 Jump to 1387.552
    DATE ten year
of 2019. Congress also passed the Secure Act that allows small businesses to work 1.335 Jump to 1409.307
    DATE 2019
    ORG Congress
MEP's estimates say the Secure Act could lead to the creation of 600000 0.801 Jump to 1418.617
    ORG MEP
    LAW the Secure Act
    CARDINAL 600000
to 700000 new retirement accounts. 1.402 Jump to 1421.219
    CARDINAL 700000
You have the option of a solo 401. 1.468 Jump to 1444.91
    CARDINAL 401
K, which acts just like a regular for one K through a regular plan. 0.567 Jump to 1449.281
not the actual form one K itself. 8.375 Jump to 1464.663
Are you one of the 60 million Americans actively using a41k plan to save for 1.335 Jump to 1478.076
    CARDINAL 60 million
    NORP Americans
Despite their immense popularity, 401 k plans aren't the standard for all retirement 1.769 Jump to 1485.383
    CARDINAL 401
saving for retirement, accounting for more than a third of all U.S. 0.5 Jump to 1495.694
    CARDINAL more than a third
    GPE U.S.
First introduced in 1974, IRAs have seen explosive growth over the last 0.434 Jump to 1511.009
    ORDINAL First
    DATE 1974
five decades. 1.468 Jump to 1511.476
    DATE five decades
Individual retirement accounts totaled an estimated $12.6 trillion in 1.335 Jump to 1516.181
    MONEY an estimated $12.6 trillion
assets during the first quarter of 2021, compared to just $2.6 0.267 Jump to 1520.986
    DATE the first quarter of 2021
    MONEY 2.6
trillion back in 2000. 1.602 Jump to 1522.687
    DATE 2000
Contributions similar to traditional for one k's or IRAs, they go in 1.335 Jump to 1550.949
    CARDINAL one
possible. These include 401 K and four or three B plans, which are 1.769 Jump to 1588.753
    CARDINAL 401
    CARDINAL four or
When thinking about the first best place to save for retirement, for 1.469 Jump to 1602.133
    ORDINAL first
most people that will actually be there for one K or for a3b plan at 1.334 Jump to 1606.805
work. And the reason is, nine out of ten participants are in 1.035 Jump to 1611.676
    CARDINAL nine
    CARDINAL ten
I think for one case are great because typically they have lower 0.668 Jump to 1619.784
    CARDINAL one
And especially if your company is offering a match, then for one case are the way 1.535 Jump to 1628.293
    CARDINAL one
are not offered a 401 k due to its limited matching and lower contribution 1.302 Jump to 1637.902
    CARDINAL 401
limit in 2020 1401k plans had a contribution limit of $19,500 0.267 Jump to 1643.608
    DATE 2020 1401k
    MONEY 19,500
a year for employees younger than 50, while IRA contribution limits were 0.568 Jump to 1649.547
strictly set at $6,000. 1.302 Jump to 1651.282
    MONEY 6,000
You first need to understand how all the different plans work. 0.901 Jump to 1724.355
    ORDINAL first
So traditional IRAs were first introduced as a part of a race back in 1.568 Jump to 1728.86
    ORDINAL first
1974, and the goal was to really enable those without an employer sponsored plan 0.7 Jump to 1734.666
    DATE 1974
mid 2020. More than half of all traditional IRA owning households had accounts. 1.468 Jump to 1772.437
    DATE mid 2020
    CARDINAL More than half
and who want to consolidate that money into one spot, put it into 1.368 Jump to 1785.917
Most IRAs have a 10% penalty for any early withdrawal before the age of 0.434 Jump to 1812.043
    PERCENT 10%
59 and a half. 1.669 Jump to 1812.51
    DATE 59 and a half
insurance, if you are unemployed and up to $10,000 for a first home purchase. 1.668 Jump to 1822.12
    MONEY up to $10,000
    ORDINAL first
for traditional Roth SEP and simple IRA, each one 0.701 Jump to 1860.091
    ORG SEP
So retirement industry has evolved quite a bit over the last 25 1.067 Jump to 1880.445
    DATE last 25
account. In 2020, 36.8 million US households or 0.7 Jump to 1893.892
    DATE 2020
    CARDINAL 36.8 million
    GPE US
28.6% owned a traditional IRA. 1.669 Jump to 1896.06
    PERCENT 28.6%
Roth IRAs are the second most frequently owned type of IRA, held by 26.3 0.7 Jump to 1965.33
    PERSON Roth
    ORDINAL second
    CARDINAL 26.3
million US households or 20.5%. 1.935 Jump to 1967.799
    GPE US
    PERCENT 20.5%
And then as long as you hold it for more than five years and your 1.335 Jump to 1987.318
    DATE more than five years
retirement after 59 and a half, you can pull those assets tax 1.869 Jump to 1992.123
    DATE 59 and a half
Now, SEP and simple IRAs are two employer sponsored plans reserved for 1.035 Jump to 2009.807
    ORG SEP
    CARDINAL two
In 2020, 8.6 million or 6.7% of US 1.302 Jump to 2016.814
    DATE 2020
    CARDINAL 8.6 million
    PERCENT 6.7%
    GPE US
contributions up to 3% of the employee's compensation, or at least 0.967 Jump to 2063.528
    PERCENT up to 3%
1% for no more than two out of five years. 1.602 Jump to 2066.397
    PERCENT 1%
    CARDINAL no more than two
    DATE five years
The simple is restricted to small employers, so fewer than 100 participants. 0.567 Jump to 2071.736
    CARDINAL 100
If you think about retirement savings plans such as for one case and IRAs probably come to 1.835 Jump to 2136.467
    CARDINAL one
A health savings account is one of them. 1.101 Jump to 2144.075
    CARDINAL one
First introduced in 2003 HSAs were originally created to incentivize 0.801 Jump to 2158.356
    ORDINAL First
    DATE 2003
ten years out, that are planning for retirement, said, hey, listen, I want to defer some 1.368 Jump to 2198.062
    DATE ten years
Unlike traditional for one kids and IRAs, they're also not taxed upon 1.302 Jump to 2237.668
    CARDINAL one
7% of health savings accounts in 2019 held investments other than 1.268 Jump to 2266.998
    PERCENT 7%
    DATE 2019
Think about this. I've deferred dollar for dollar 10,000 into 0.3 Jump to 2268.299
    CARDINAL 10,000
my HSA over five years, and that 10,000 has been 1.134 Jump to 2276.941
    ORG HSA
    DATE five years
invested into a portfolio that is now grown to 15,000. 1.335 Jump to 2281.245
    CARDINAL 15,000
You've had the capital appreciation of five grand because your cost basis was ten. 1.168 Jump to 2286.617
    CARDINAL five
    CARDINAL ten
Now you have 15,000 available to you to take care of medical 0.434 Jump to 2291.689
    CARDINAL 15,000
He also proposed the creation of Automatic for one case that would provide workers 1.268 Jump to 2340.237
    CARDINAL one
We've got $35 trillion earmarked for retirement and we are going to 1.202 Jump to 2367.264
    MONEY $35 trillion