Money & Finance
5 YEAR- END FINANCIAL PLANNING STRATEGIES THAT YOU SHOULD BE CONSIDERING THROUGHOUT 2016 by Marc Schliefer
Another year has come to an end. As we begin the New Year, it is important to financially plan ahead so as to not get caught out next December in a squeeze for time. There are things that you should be looking to do to make sure that your financial life is moving in the right direction. The first thing to do is to try to maximize your retirement planning options, which includes maximizing your 401K plans and any catch-up contribution options that you are able to take advantage of. If you are over age 50, you can add an additional $6000 per year to your 401K. The total that you can contribute is $18,000 for anyone and $24,000 if you are over age 50. This is in addition to whatever match that your employer contributes for you. A lot of people who have the ability
to maximize their contribution sometimes fall short; we recommend that most people should contribute the maximum if your cash flow allows you to. It can help you build up a large retirement portfolio and help you with current tax reductions for the current year. If you are contributing to an IRA or Roth IRA you can contribute $5,500 per year. You need to check with your tax preparer to make sure that you are eligible. There are some income limits that keep you from deducting your IRA and also from making a Roth IRA contribution. If you are over age 50, you can add an additional $1000 as a catch up amount to the IRA or Roth IRA. The next thing is to make any charitable contributions before the end of the year. If you are inclined to make charitable donations, now is a good time to do that before the year end. It should help most people, although some people with Alternative Minimum Tax issues may not be able to use the full deductions. You need to check with your tax preparer to see how it can help your individual tax scenario. If you will have more income this year than last year, it would be a good idea to pay estimated state income taxes. The reason for this is that state income taxes are deductible against your federal taxes unless you fall under alternative minimum tax rules. I would run this by your tax professional. If you are going to owe more in state taxes anyway, you may as well save on federal taxes by paying them earlier. Explore the option of converting your IRA to a Roth IRA. If your income falls into the range where you can take advantage of a Roth IRA, you should consider converting some of your IRA to a Roth IRA account. Traditional IRA owners should consider the tax ramifications, age, and income restrictions in regards to executing a conversion from a traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation. You will be paying taxes on the portion that you convert, but if the rules stay as they are for Roth IRA’s, you may never pay taxes on that pool of money again. You may also want to see if your employer has a Roth option with your 401K and you may want to allocate some of your 401K contribution to a Roth 401K. I hope these strategies help you with your yearend tax planning. If you have any questions or concerns you should always check with your tax professional to see if these strategies can help you in particular. I am happy to discuss the options with you. Please feel free to contact me at marcs@ equityplanning.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a registered investment advisor. US Financial Advisors and Equity Planning Inc. are separate entities from LPL Financial
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