Strategic Wealth Partners, Ltd.
Bob Gavlak is a Certified Financial Planner professional and Wealth Advisor at Strategic Wealth Partners. Bob employs a holistic approach when working with his clients, ensuring that all aspects of an individual's financial needs are taken care of. He specializes in working with young professionals and pre-retirees through personal interaction, helping to build the ideal plan for navigating a broad range of financial situations.
Bob graduated from Case Western Reserve University with a BS in Business Management. An entrepreneur at heart, he started Fresh Fork Market, a company that connects local farms to consumers, while still in college. When farming lost its luster, he turned to helping young professionals and pre-retirees navigate their financial lives. Bob enjoys the challenge of navigating complex financial situations while simultaneously ensuring that the appropriate risk management strategies are in place.
A lifelong wrester and three-time Academic All-American in college, Bob still avidly follows the sport. He also enjoys golfing, running, discussing Cleveland sports, and spending time with his family. He lives in Delaware, Ohio with his wife, Heather, and their three children, Grace, Mitch and Andy.
BS, Business Management - Finance Concentration, Case Western Reserve University
Assets Under Management:
Retirement Education - INTRO - Episode #001
This is a quick, simple answer - no. You do not need to include that on your taxes.
One of the major benefits of a 401(k) is that you can take loans from the plan. These need to be repaid, but the initial loan is not subject to credit approval or taxation.
Just be sure to be smart with the proceeds!
This will be considered a gift. There are a few steps to this transaction and I'll walk through those with you.
First - the sale of the cabin itself. Your mother may owe taxes on the sale of the cabin depending on what her basis was (amount she paid for the cabin) and what she sold it for. (This is assuming that it is not her primary residence.)
So for that part, you have no responsibility for taxes but your mother may.
Second - the transfer of the cash to you. If she just writes you a check for $227,000 neither you nor your mother will owe any taxes. However, her estate tax exemption will be depleted. Here's how it works:
There is an exemption of $15,000 per year. The $227,000 will be lowered by that amount, so her impact will be $212,000.
She then takes that amount and reduces her lifetime exemption, but still owes no tax.
So the short answer is - your mother may owe some tax on the sale of the cabin, but you will not owe any taxes on the cash you receive.
**Please note - this is only a conversation on federal tax, as I do not know what state you reside in.**
Don't act too quickly! You're safe - don't worry.
The $18,500 limit is based on "employee" deferrals only. So that limit only caps your personal decision to put into the 401(k) plan.
Your employer match will be put into your 401(k) ON TOP of that amount. The limit set by the IRS for 2018 is $55,000 per year total deferral between employee AND employer.
So in short - you're safe. You've maxed out your contribution (unless you're over the age of 50, as then you get an additional $6,000 catch-up) and your employer is still required to put in your matching contribution.
First of all - congratulations! You're doing great taking care of your money and saving for your future.
Since you've already taken care of the "big three" initial steps - matching contributions to 401(k), Roth IRA, and emergency funds - the next step is really up to you.
If you want to save extra money tax-deferred, work towards maxing out your 401(k) contributions. For 2018, that max will be $18,500/year.
If you want to save for "life events" - kids, house, vacations - consider opening up a non-qualified investment account. (If you're comfortable investing just use Vanguard or Fidelity. If you want a little help look into Personal Capital or Betterment. If you want more detailed help, consider looking up a financial advisor.)
If you want to invest in real estate, work towards understanding that market and build up your cash position to be ready to deploy.
If you want to invest in start-ups, consider looking into angel investor groups in your area.
At this point you have great flexibility and a wonderful opportunity to build your wealth for the future. It's a first world problem for sure - but one that is very important to come up with a solution that works for you!
With where savings rates are right now, it's probably better to pay down your car loan debt as opposed to saving for a down payment. Savings rates are still very low and probably do not exceed your monthly interest charge.
Ultimately either one will go towards a new car, but you'd earn less having the money sit in a bank account (and also be tempted to spend it).