Mid-Year is an important time to review several significant saving and spending decisions, possibly affecting taxes too. There are slightly over 6 months remaining in the tax year – enough time to make a meaningful difference. Consider:
- Amounts being deferred from compensation pre- or post-tax into 401k and other retirement accounts (and whether to max out?)
- Savings goals versus reality
- Savings goals in need of formation from scratch
- College savings account contributions
- Creating and funding Trusts
These and other important decisions can be evaluated and adjusted with just over half a year remaining to accomplish goals or mini-goals.
- For those contributing to 401k and 403b accounts, take a look at the totals of existing pre-tax money balances including IRA and IRA Rollover accounts. With the guidance of your financial adviser and tax professional, is it time to start making Roth (after-tax) contributions to these accounts? The maximum 401k contribution limit in 2024 bumped up to $23,000 for those under age 50 and to $30,500 for those age 50 and above. If contributions year-to-date are below the max halfway point, there is a meaningful amount still allowed to be contributed – and tax consequences to consider for both short-term and long-term.
- With short-term interest rates on US Treasuries and money markets still above 5% it pays to be saving cash! Whether savings goals are already in place and active or in need of formation, take advantage of these generous interest rates while they still exist. The 5% and higher rates are available for up to 12- to 14-month US Treasury bills and short-term money market funds. And US Treasury rates going out almost 2 years are still in the 4.7% range.
- College savings accounts have annual and 5-year contribution limits with contributions able to be made at any time during the calendar year. Year-end is typically a deadline for annual contributions. Investment changes are limited to two changes per year in most cases, so it is worth looking at investment choices currently in place. Automatic age-based investment choices are available in most cases.
- If funding or creating a Trust is under consideration, there is still plenty of lead time before year-end to strategize and meet with a financial adviser and estate attorney. If a Trust created the need for an extended tax filing, there are several months until the October 15th extension filing deadline.
It turns out the late June to late July time frame can be an excellent time to review critical tax and savings decisions – with ample time to seek out appropriate advice.
Here’s hoping all the dads had an excellent Father’s Day and the good times roll all summer long.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.