It’s that time of year again, and you have much more to plan for than just holiday shopping. It’s time to buckle down and take a look at what’s going on with your income, taxes, and retirement funds so you can maximize your gains and secure your financial future for another year.
Retirement planning is always a challenge, but when you know what to prepare for you are better able to plan ahead. You’ll also be able to save more to ensure you are well provided for when it’s time to stop working. Here are some of the best tips to remember for 2016 year-end retirement planning:
Remember to take Required Minimum Distributions (RMDs) before the year-end.
If you are a retiree who has reached or surpassed the age of 70 ½, then you are required to take distributions from your IRA and/or 401(k) by December 31, 2016. The IRS determines the amount of distribution you must take by dividing the account balance by their estimate of your life expectancy. In some cases, your spouse’s age may be considered as well. If you miss a required distribution, the IRS will require you to pay 50% of the amount you were supposed to withdraw, so make sure to remember!
Max out your contributions for the year.
If you have a 401(k) and/or an IRA, then you probably know that there is a cap on the amount of money you can deposit into them each year. If you are an employee contributing to a 401(k), you may contribute up to $18,000 this year. If you are a worker that is 50 years of age or older, you can make up to $24,000 in contributions.
Employer match amounts do not count toward your cap, so make sure that you have contributed the maximum amount possible for the year by December 31 to get the maximum match benefits. Another benefit for investors 50 years and older applies if they fall in the 25% tax bracket, because if you max out your 401(k) contributions you can save $6,000 on your federal income taxes!
Don’t forget to claim your saver’s credit.
If you have an adjusted gross income that is below $30,500 (or double that amount if you are married), making 401(k) contributions can be even more helpful come tax time. The saver’s credit is worth 10–50% of your retirement contribution amount, which can be up to $4,000 for married couples. The best way to take advantage of this is to contribute enough money to max out this credit.
Start your retirement planning for next year.
Remember these four tips, and you’ll be well on your way to maximizing your retirement benefits. Once you have this year wrapped up neatly, you can begin planning for 2017’s retirement contributions and concerns. The earlier you put a plan in place, the more likely you are to follow it for the greatest effect.
Don’t forget to factor in anything you’ve learned this year. If your contributions were a little short at the end of the year, you can raise your amounts for next year so you don’t run into that again. You can also use retirement planning as a method for lowering your taxes each year. No matter how you look at it, retirement planning is a sound financial decision.
There is a lot to think about when nearing retirement or navigating through it. JEHM Wealth & Retirement is here to help you along the way. Call us at (864) 527-0482.