8 Year-End Strategies for Retirement Savers by Kathleen Marteney, CRPC
Thanksgiving is in the rearview mirror and another year is quickly coming to an end, leaving investors with a limited amount of time to maximize their retirement savings in the most tax-efficient manner. Following are some steps to consider taking before Dec. 31, 2018.
- Max out your contribution to a workplace 401(k) retirement plan. For 2018, the maximum amount you may defer from your salary is $18,500 if you are under age 50, or $24,500 if you are 50 or older.
- Consider setting up a traditional individual retirement account (IRA) or a ROTH IRA before the end of the year, especially if you do not have access to an employer-sponsored retirement plan. You will have until April 15, 2019, to make a contribution of up to $5,500, or $6,500 if you are age 50 or older.
- If you are 70 ½ years of age or older and no longer working, you must take a required minimum distribution (RMD) from your 401(k) and/or all of your traditional IRAs, SEP IRAs and Simple IRAs. Missing an RMD is subject to a penalty equal to 50 percent of the undistributed amount. If you are still working, you may postpone the RMD to the following year. RMD’s are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation.
- Confirm that RMDs are taken from IRAs, ROTH IRAs and 401(k) owned by persons who passed away in 2018. If the account owner did not take the RMD before his or her passing, his or her beneficiaries have an obligation to take that distribution or face a penalty.
- Complete all qualified charitable distributions (QCD) from retirement accounts, allowing IRA owners and their beneficiaries age 70 ½ or older to transfer up to $100,000 in IRA funds tax-free to a charitable organization. If you miss the December 31 deadline, you will not receive the tax benefit for the year.
- Set up separate accounts for each beneficiary who inherited IRA accounts from a deceased owner in order to allow the beneficiaries to stretch out their distributions over their lifetimes.
- If you changed jobs in 2018, make sure you account for any and all retirement plans and health savings accounts that you may have had with your previous employer. You may want to roll over those savings plans directly to an account with your new employer or into a separate IRA to avoid losing track of them in the future and having to pay taxes on an early distribution. Under certain circumstances, it may make sense for you to leave your savings in the retirement plan sponsored by your previous employer
- Meet with a financial advisor to make sure that you are making use of all of the retirement savings options available to you based on your income and filing status, among other factors. A qualified advisor can assess your current financial circumstances, address any holes in your existing estate plan and help you map out a strategy for achieving your personal and business financial goals in the future.
About the Author: Kathleen Marteney, CRPC®, is a financial planner with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors and Accountants, and a registered representative with Raymond James Financial Services. She can be reached at 800-737-8804 or via email at firstname.lastname@example.org.
Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.
Kathleen Montgomery is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.
Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors and Accountants.
PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of PWA and not necessarily those of Raymond James. The information contained in this report has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.
Every investor’s situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.