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Retirement Planning Starts Early in 2017


Retirement Planning Starts Early in 2017

Sometimes, the simplest ideas can be the most rewarding, even when it comes to retirement planning. While it’s too late to take advantage of some 2016 opportunities (although there a few exceptions), check out these ideas from Forbes’, “Checking Out Simple Year-End Retirement Planning Opportunities,” that you’ll be able to apply in 2017.

IRA Contributions: when saving for retirement, it pays to be consistent. If you put away just a few dollars a day, it can result in some real retirement wealth in the future. If you’re self-employed or have a small business with no full-time employees, think about a solo 401(k) plan. It allows you to defer up to $53,000 or $59,000, if you’re over the age of 50. A Solo 401(k) plan must be adopted in 2017 to make contributions for 2017; employee deferral contributions should be made to the plan by December 31. Employer profit sharing contributions, on the other hand, can be made until the business’s tax return deadline. A SEP IRA may also be something to consider. It’s a retirement plan for the self-employed or small business owner that can be made up to the tax return filing of the business. Therefore, a SEP IRA can be established in 2017 and still make a 2016 contribution.

Saver’s Credit: low- and moderate-income individuals who save for retirement in a 401(k) or IRA are eligible for the saver's credit, worth up to $2,000 for individuals and $4,000 for couples. Those who are age 18 and older and not full-time students or dependents on someone else's tax return, can use the tax credit until their income is more than $62,000 for couples.

President-Elect Trump: generally, expect that a Trump Presidency will usher in lower personal and business taxes for most Americans. As far as retirement planning, lower tax rates could make the Roth IRA more attractive because the financial benefit of a tax deduction would typically have less of a financial impact. In addition, lower tax rates in 2017 make conversion attractive, because the conversion amount would be treated as taxable income to the recipient.

Roth IRA Conversion… yes or no: converting a pre-tax IRA to a Roth can give you some nice tax planning opportunities, but you need to consider the immediate tax impact.

Required Minimum Distributions (“RMDs”): if you’re 70½ or older, you must take a required minimum distribution (RMD) from your traditional 401(k) plans and traditional IRAs by December 31. Income tax is due on each withdrawal. Note that the penalty for missing a RMD is a hefty 50% of what should’ve been withdrawn, plus the income tax due.

Roth IRAs don’t require RMDs, but a Roth 401(k) account does. Those with a Roth 401(k) account and are at the RMD age of 70½, can roll all of their Roth 401(k) funds tax-free to a Roth IRA before December 31. That will give the Roth 401(k) plan a zero balance at the end of the year, and let you avoid the required RMD requirements on the Roth 401(k) assets.

IRA Charity Contributions: those who are age 70½ and older, typically must withdraw money from their traditional IRAs and pay income tax on those distributions. However, retirees who don’t need the money in their IRA can avoid paying income tax on their RMDs by donating up to $100,000 of their distributions to charity. To qualify, charitable distributions for this year must be paid directly from the IRA to a qualified charity by December 31. The Qualified Charitable Distribution is now permanent.

You have until April 15, 2018 for your 2017 IRA and Roth IRA contributions.

Making a habit of reviewing retirement plans at least once a year, even when retirement feels far away, can have a significant impact on your retirement finances.

Do you have Retirement Assets and live in Miami-Dade, Broward, or Palm Beach counties in Florida? Laws are constantly changing-- has your estate plan been reviewed in the last 2-3 years? Call me (954-888-1747) right away for peace of mind. I can help!

  • My practice is exclusively estate planning and probate,
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Reference: Forbes (December 20, 2016) “Checking Out Simple Year-End Retirement Planning Opportunities”

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

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