Tune-up your 401(k) for 2017

A 401(k) plan is a remarkable retirement tool, but it requires a little routine maintenance. Here’s what to look for.

First, verify you are contributing the maximum possible. The most an employee can contribute for 2017 is $18,000. But the catch up amount for those ages 50 and older is $6,000. Every dollar you contribute lowers your current taxable income. If you think your tax rate will actually be higher
in retirement, consider switching to a Roth 401(k). Your contributions won’t reduce taxable income, but later withdrawals will be tax-free.

With the recent stock market fluctuations, now is also a good time to review your 401(k) investment allocation. You might find your portfolio out of balance or too concentrated in certain areas. For convenience and peace of mind, consider investing in funds that do the re-balancing for you based on how long you have until retirement.

And while you are looking at your investments, take a peek at the fees you are paying. Recent law changes require investment companies to disclose their fees, and you could be surprised at what you pay. Next to taxes, investment fees are one of the biggest threats to your retirement earnings over time. Of course, investment fees should be compared to performance history for a complete picture.

Something many people forget to update is their 401(k) beneficiary information. Changes in family members, married status, or other life events may require a revision to your plan records. Beneficiary information should also be updated for new contact information. You may even decide to donate your plan after you pass away and list your favorite charity as a beneficiary.
Finally, don’t forget to review and update those retirement accounts you have kept at previous employers.

For help with these and other retirement issues, contact our office. ♦

Client Alert: Tax strategies for an uncertain 2017


Taxes, like death, might be certain, but strategies to lower your taxes might be quite fluid this year in light of changes in Washington.  

◗ Let’s start with what we know
The tax extenders law passed in 2015 made permanent many rules that used to hinge upon last minute passage by Congress. These include the rule allowing taxpayers age 70½ or older to distribute up to $100,000 from an IRA direct to charity. Also made permanent was the American Opportunity Tax Credit, which provides a credit of up to $2,500 for qualified higher-education expenses for yourself, your spouse, or a dependent in the first four years of college. Be aware that the AOTC phases out at $180,000 for married joint filers and at $90,000 for unmarried taxpayers. It is not available if you are married and file a separate tax return.

Business owners can also count on permanent tax breaks such as the generous Section 179 deduction of up to $510,000 for qualified new or used business equipment. However, the deduction is limited for every dollar spent on equipment in excess of $2,030,000. In addition, new equipment purchased in 2017 may qualify for 50% bonus depreciation.
In 2018, this bonus rate drops to 40%, so plan your acquisitions accordingly. Light duty vehicles placed in service in 2017 will be eligible for an $8,000 first-year bonus depreciation.

Some tax strategies are tried and true and unlikely to change in 2017.

Contributing the maximum to your retirement plan is solid advice year in and year out. The limits for a 401(k) remain unchanged in 2017 at $18,000, plus another $6,000 for ages 50 and older. Holding appreciated securities more than one year before selling will likely qualify you for lower
long-term capital gains rates. And gifting securities to charity remains an effective tax strategy to avoid capital gains taxes, while creating a charitable deduction to boot.  

Tax breaks related to home ownership should be on solid footing again this year as well. Mortgage interest, real estate taxes, and qualified points are perennial taxpayer perks. However, the deduction for private mortgage insurance (PMI), is not currently available in 2017.

◗ On the other hand
Changes in Washington may turn some trusted strategies completely on their head in the coming months. If individual or corporate income tax rates are lowered, you might want to increase 2017 taxable income rather than defer it if you have flexibility in this area. This might also be a good year to convert your regular IRA to a Roth and pay the taxes due now rather than on future withdrawals.

The slippery nature of this year’s tax scene requires nimble tax planning. Contact our office for up-to-the-minute tax planning tips.

5 Steps to more retirement savings

5 Steps to more retirement savings

Due to low inflation, most indexed thresholds for qualified plans don't budge at all in 2016. For example, the maximum deferral for 401k plans remains at $18,000, while IRA contributions are still limited to $5,500. If these "flat" thresholds are frustrating you, here are five steps to help you save more for retirement

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