Tag: 401k

Year-End Tax Planning 2025

The countdown to year-end will begin soon. With nearly four (4) months remaining in 2025, consider the following Year-End Tax Planning Checklist.*  Several of these items, if addressed now, could make a meaningful difference come tax filing season AND add to savings.

  1. How are you doing on maxing out your 401k? Many people do not know they can temporarily increase their 401k contributions through December 31st to reach the $23,500 maximum contribution (higher max for those age 50, and even higher for those age 60-63).
        • Lots of 401k or 403b plans allow participants to contribute 25-30% of pay – or even 100% of pay (100% can be a temporary measure in order to max out for 2025).
        • These 401k contributions can be tax-deductible, unless you are contributing to a Roth 401k. It is not too late!

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Mid-Year Tax Tips

The calendar is about to turn to June – and that means nearing the halfway point of 2025. For those contributing to 401k, 403b and TSP accounts, adjustments or tweaks at this time can make a real difference overall for the current tax year and future savings overall.

The most basic considerations are in the dollar amount and tax classification of how 401k/403b/TSP contributions are made.

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Key Upcoming Changes to 401k & IRA Rules

There are a bunch – almost too many to count – of important details that a valued financial adviser can obsess over, so clients do not have to. One of those details is the 2022 SECURE Act 2.0 which continues to unfold, in two short months starting on January 1, 2025.

A number of the changes affect rules around two items:

  • 401k saving
  • RMDs (required minimum distributions) from Inherited IRAs.

Changes to both will also have present and future tax consequences.

 

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Actionable Tax & 401k Info

Compelling statistic–

Three recent editions of TGIF 2 Minutes were at or near the “all-time most read”. ALL THREE editions covered mostly basic topics related to personal finance. Here they are:

3. “Decluttering Financially & In Real Life”
2. “Timely Tax & 401k Info”
1. ….and the all-time most read TGIF 2 Minutes in 11 years (drum roll, please) was “Reining In the Amount Your Kids Spend”.

Of these, #1 was not shocking, and #2 is still actionable. Please check out the following abbreviated points (originally published on August 30, 2024).

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Mid-Year & Critical Decisions

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.

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Tax Season Time Crunch

It is tax season, which means time is at a premium. TGIF 2 Minutes is designed for this concept. Therefore, a 1-minute read today!

Preparing tax documents, expense spreadsheets, records of charitable deductions, W-2 forms, 1099’s, K-1’s and all the rest can really be a hassle. Here are a few bright spots:

  • Learn something right now this year from every time you find yourself saying, “I am going to do this differently next year!“
  • Whether it is your filing system for tax documents and charitable deductions or set-up of online folders for rental property files, go overboard with keeping better track along the way, starting now for tax year 2024.
  • Make sure to ask your financial adviser about tax loss harvesting this calendar year. Last year there were UP months in markets and DOWN months. Make sure your adviser is possibly using the market’s down months to a tax advantage in non-IRA accounts.
  • If it is not already obvious, have a CPA.
  • Ask your financial adviser for assistance in compiling or finding tax documents. This task is always something with which I am happy to assist – with advance notice – for my clients.
  • Look at ways to make changes and tweaks to the way you are contributing to 401k and IRA accounts while it is still early in 2024. Changes can involve:
  • increasing/decreasing contribution rate
  • creating a mix of before- and after-tax (Roth) contributions
  • spreading contributions over the course of the entire year
  • Consider Roth IRA conversions in 2024.

Tax time is not always the most pleasant time of the year but all we can do is make the best of it. Thank you for all the positive feedback in recent weeks!

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.

Timely 401k Contribution Info

Today’s edition will take 2 minutes and 38 seconds to watch and could save you a bundle of taxes in the long run. Simply understanding better – at lower and higher income levels – the taxes around 401k, 403b (and TSP) contributions is an advantage. Early in the year timing is key. Why? Please ask me and watch the video.

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.

 

Year-End Tax Planning 2023

Year-end tax planning is a sort of double-event this year, due to 1) the approaching 2023 year-end, and 2) the 2017 TCJA tax cuts expiring at the end of 2025 (sooner than it sounds) – meaning limited time to take advantage of Roth IRA conversions and certain gifting strategies. There are a number of items and trust strategies that can be planned in advance. This week will be Part 1 and next week Part 2.

Part 1 includes basic, yearly items that can be addressed in these final months of 2023:

  1. Have you maxed out your 401k? Many people do not know they can temporarily increase 401k contributions through December 31st to reach the $22,500maximum contribution (those age 50 and older get an extra $7,500 catch-up contribution, for a total of $30,000). Lots of 401k or 403b plans allow participants to contribute 25-30% – or even 100% of pay – and then revert to a lower contribution rate on January 1st of next year.
  • These 401k contributions can be tax-deductible unless you are contributing to a Roth 401k (which can be an excellent idea too).
  • It is not too late!

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Under the Radar Tax Law Changes

Consider this edition of TGIF 2 Minutes an “automatic Part 1” in a 2-part series on changes to the taxation of 401k contributions.

Calling these tax changes “under the radar” may be underestimating the level of attention paid by the average TGIF 2 Minutes reader to tax news. But fear not! Missing these tax changes is common and mostly due to

  1. the IRS typically making substantial tax law changes overnight in the last two weeks of December (see: 2015, 2017, 2020, 2021, 2022 and prior) thus easily missed by the most attentive of savers amidst year-end and holiday activity,
  2. the complicated language used in the changes, confusing both savers and employers and their HR departments.

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Year-End Tax Planning Tips 2021

Tax planning is important stuff. Perhaps not as exciting as the markets but saving money on taxes can still be exciting! Mid-November begins the countdown to year-end. The following is a handy Tax Planning Checklist.*  Some of these items, if done now, could make a big difference to the 2021 tax year AND add to savings.

1. How close are you to maxing out your 401k? The max is $19,500 for those under age 50 and an extra $6,500 for those age 50 and above. The deadline is December 31st and lots of 401k and 403b plans allow contributions of as much as 25-30% or even 100% of pay. Contribution rates can be lowered again in the new year.

There is still time remaining in 2021 to accomplish tax-deductions and/or create new savings vehicles!

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