The beginning of October means we are in the 4th Quarter… and the countdown begins to year-end. The following are excerpts from the Year-End Tax Planning Checklist.* Several of these items, if addressed now, could make a big difference to your 2019 tax filing AND add to your savings.
More on the topic of 401k saving: Can there be an “optimal amount” to have in a traditional 401k? At the very least, adjustments can be made to get close-to-optimal. And timing wise with the calendar approaching mid-year there is ample time (unless you have already maxed out your 401k) to make meaningful adjustments to your 2019 401k elections and start the optimizing process.
This topic is especially important for those who take saving seriously and who have at least $400,000 TODAY in a 401k or IRA Rollover accounts combined with a 401k account. (For those with less, these concepts still matter but with less urgency.)
First: How old are you?
Age matters because TIME is one of the biggest determinants of how much a 401k balance can potentially grow.
If you are younger than 40, these concepts could affect you A LOT as the power of compounding can kick in over multiple decades (this does not mean trading; rather saving, allocating and allowing compounding to do its work).
If you are older than 60 and nearer to retirement or selling a business, these concepts matter greatly but the solutions will be slightly different.
If you are in your 50’s, a combination of strategies can work – and keep in mind the “catch up” that allows you to save more.
As we roll full steam into the New Year 2019 it helps to be aware of a handful of changes related to taxes and tax-deductible contributions to 401k plans, IRAs and the like.
Important to recognize (when in a calm state of mind) is that with last year’s introduction of one of the most sweeping tax law changes in decades, filing for tax year 2018 may contain both pain, in terms of lost SALT deductions, and valuable lessons for how to proceed in tax year 2019. In the meantime, consider the following.*
Are you familiar with the saying, “Even a blind squirrel finds a nut every once in a while”?
The year of 2017 (and every year since 2009) in the stock markets could fall under this category – and prove dangerous to those not recognizing or admitting this reality. In other words when the S&P 500, the index of the largest and most recognizable companies in America, rises every year (including dividends) for 9 years in a row (and was up over 13.5% in 6 out of those 9 years) we have been given a slightly false sense of security that investing is easy.
AS IF we need to hear any further “noise” about the debate in Washington, DC regarding tax policy. There is a basic silver lining (or two) to the discussion worth pointing out. First, a quick review of the big-picture elements in the limelight:
The number and rate of Individual tax payer brackets (15%, 25%, 35%, etc.)
The corporate tax rate (20%? 35%? pass-through? etc.)
Individual retirement savings vehicles and allowances (IRAs, 401k, “Roth-i-fication”, etc.)
Might I offer TWO “silver linings” to this prolonged, politically entrenched back-and-forth on tax policy:
Tax planning is important stuff. Not as exciting as the markets, but saving money on taxes can be more exciting than you think. The beginning of October means we are in the 4th Quarter…and the countdown begins to year-end. The following is a handy Tax Planning Checklist.* Some of these items, if done now, could make a big difference to your 2017 tax situation AND add to your savings.Continue reading “Year-End Tax Planning”