Year-End Planning – Retirement Plans

Retirement plans come in many different flavors with many different rules.  Maybe there are fewer than the flavors of coffee at Starbucks, but there are still quite a few flavors of retirement plans.  The end of the year is a good time to review your retirement plan decisions.

A few plans need to be funded before the end of the year; a few plans just need to be set up before the end of the year.  IRAs and 401(k) plans are the two common retirement plans and their rules are different.  The 401(k) plans need to be funded by the end of each calendar year through the payroll.  IRA contributions can be made through the due date of the return and still be tax deductible – a nice benefit.  You can wait until spring and prepare your return to see exactly what your tax situation is before determining how much of an IRA contribution you are going to make.

Retirement plan contributions can be one way to reduce your taxes now that rates are higher.  Contributions that decrease your adjusted gross income could have a double effect of 1) saving you the ordinary income tax plus 2) keeping your income below the threshold for the 3.8% Medicare surcharge on investment income.

In accordance with Circular 230 Disclosure

Open enrollment is often once a quarter, which means the end of the year is the time to make your initial choices for next year’s retirement plan.  Choosing your employee deferrals for your 401(k) plan (plus HSA plans, cafeteria plans, daycare plans, etc.) is something to re-evaluate at the end of each year.  Making a New Year’s resolution to put more money into your retirement plan might be a good idea if you can afford it.

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1 comment on “Year-End Planning – Retirement Plans”

  • I have been working with the mutualfundstore.com and it seems that they have some very good financial advice to give. Your advice has me wondering if I should have another Advisor on the side. Not that the MutualFundStore isn’t good, but having more than one advisor can’t be all that bad either. Should I do this?

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