It’s Not Too Early to Start Planning to Maximize Your Retirement Accounts in 2016!

It’s Not Too Early to Start Planning to Maximize Your Retirement Accounts in 2016!

With the end of the year coming soon, now is a good time to take a look at your retirement savings and make any necessary changes for the new year to ensure you are maximizing your opportunities.  Here are a few tips to consider:

  1. If your employer has a 401(k) plan, be sure you have contributed enough to claim any matching funds your employer offers.  So if your employer matches up to 6% of your total pay, then make sure you are contributing 6% of your pay to your 401(k) plan to get the full match.
  2. Along these lines, if you are able to, max out your 401(k) contributions.  Workers can contribute up to $18,000 of their pay to 401(k) plans in 2016.   If you are participating in a traditional 401(k) plan, the amounts you contribute are not included in your taxable wages for 2016 (you pay tax on the distributions from the account when you take the money out of the account at retirement).
  3. If you are over the age of 50, make the catch up contribution.  Workers over age of 50 are allowed to contribute an additional $6,000 to their 401(k) plan in 2016, making their total contribution $24,000.
  4. Take advantage of IRA’s.  If your adjusted gross income is less than $71,000 ($118,000 for married couples) you can defer income tax on another $5,500 of your income.  If you are over age of 50, you can contribute an extra $1,000.
  5. Consider making a Roth IRA contribution.  The limits are the same as the traditional IRAs, and eligibility phases out for taxpayers with adjusted gross income between $117,000 and $132,000 ($184,000 and $194,000 for married couples). Roth IRA contributions are made with after tax dollars, and investment earnings are not taxed.  Withdrawals after the age of 59 ½ are tax free.
  6. If you are getting a raise at the start of 2016, consider putting the entire amount of your raise to your 401(k) plan and keep your net check the same as you received in 2015.  You’ll likely never notice the difference and this small change could have big impact on your retirement savings!

As with all tax planning items, you should seek the advice of a professional before making any changes.  Our team is ready to assist if you have any questions or would like to seek planning services related to maximizing your benefits.

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