Thinking about gifting assets to a loved one? A financial gift can be a great way to make a difference in a loved one’s life. It can also be an effective estate planning strategy, as gifting allows you to transfer assets to your friends and family before you pass away. That could reduce the amount of assets that face probate and the estate tax.
Gifting doesn’t come without its own set of risks, though. There’s actually a thing known as a gift tax. Depending on the size of your gift, you could face a tax of up to 40 percent of the gifted amount.1 If you fail to pay the tax, the recipient may face additional tax obligations.
Are you thinking about retiring early? Maybe you’ve accumulated enough savings to retire in your 50s. Or maybe you’re facing a health issue or job loss that’s pushing you into retirement. No matter the reason, early retirement can present a number of unique challenges.
One of the biggest issues that early retirees face is taking distributions from their qualified retirement accounts, such as IRAs and 401(k) plans. These accounts are tax-deferred, which means there are no taxes on growth as long as the funds stay inside the account. However, distributions may be taxed as income. Additionally, if you withdraw funds from a 401(k) or an IRA before age 59½, you could face a 10 percent early distribution penalty.