By this time of year, it seems as much as 90% of New Year’s resolutions have gone the way of the dodo. If getting your financial house in order was a resolution of yours, I applaud you! If not, following are some early Spring resolutions you might consider.
- Account Simplification/Consolidation – In our office, we highly encourage living by the KISS principal… Keep It Simple, Silly. If you have multiple IRAs and retirement plans from former employers, there are few good reasons to keep these in multiple accounts, and plenty of arguments to consolidate them to a single IRA Rollover. Be mindful of making a Trustee to Trustee transfer of any IRA assets, and a Direct Rollover of any retirement plan assets in order to maintain their tax deferred status.
Consolidating accounts such as these can result not only in efficiencies with regard to the number of accounts you need to oversee, but can also lead to a more coordinated and, therefore, superior portfolio construction.
- IRA Contributions for 2014 – Have you made your IRA contributions for 2014? Those who are not yet retired and are under certain income limits can still make 2014 contributions up to $5,500 per person ($6,500 if you’re over age 50) to an IRA or a Roth IRA until April 15, 2015.
Joint filers with a Modified Adjusted Gross Income (MAGI) of $61,000 or less and single filers with a MAGI of $30,500 or less can qualify for a nonrefundable tax credit up to $2,000 for these contributions. A tax credit is a dollar for dollar reduction in your tax burden. Simplistically, if you find yourself eligible for this tax credit, the government will pay for half of your contribution by reducing your taxes by 50% of the amount you contribute. In other words, if you contribute $4,000, your tax burden could be reduced by $2,000.
- Retirement Plan Contributions for 2014 – Are you a small business owner who has retained earnings from 2014 yet to be distributed? Before filing your 2014 tax return, you still have an opportunity to make contributions to a retirement plan in order to reduce your 2014 tax burden. Some plans will allow for contributions up to your tax filing deadline, plus extensions. Consult your tax preparer or financial advisor to see if you might have an opportunity in this area.
- Contributions for 2015 – The beginning of the year is a great time to think about increasing your retirement plan contributions, and the limits on contributions has gone up for 2015. While the limits on IRA contributions remain unchanged, elective deferral limits for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan have increased from $17,500 to $18,000/year. Catch-up contributions for those age 50 and over have increased from $5,500 to $6,000.
While there are certainly many more, these are just a few financial items for you to consider in 2015.
– Barry Nelson