Offered by T. Lloyd Worth
The end of a year makes us think about last-minute things we needed to address and good habits we want to start keeping. To that end, here are several aspects of your financial life to consider as you look forward into 2017.
Investments. Review your approach, portfolio positions, and asset allocation to make sure it suits your objectives.
Retirement strategy. Does it still seem practical? Are you able to max out contributions to IRAs and workplace retirement plans like 401(k)s? Is it time to make catch-up contributions? Consider Roth IRA conversion scenarios, and whether the potential tax-free retirement distributions tomorrow seem worth the taxes you may incur today. If you are at the age when a Required Minimum Distribution (RMD) is required from your traditional IRA(s), be sure to take your RMD by December 31 of each year to avoid penalties assessed on top of the taxes you already pay on that income. (You can postpone your first IRA RMD until April 1 of the following year, but it means taking two RMDs in the same year, both taxable events.)¹
Tax situation. How many potential credits and/or deductions can you find before year end? Do a year-end projection including Alternative Minimum Tax (AMT). In years past, some business owners and executives didn’t really look into deductions and credits because they assumed they would be hit by the AMT. The recent rise in the top marginal tax bracket (to 39.6%) made fewer high-earning executives and business owners subject to the AMT – their ordinary income tax liabilities grew. Look closer at accelerated depreciation, R&D credits, Work Opportunity Tax Credit, incentive stock options, and certain types of tax-advantaged investments.² Review sales of appreciated property and realized/unrealized losses/gains. Look at last year’s loss carry-forwards. If you’ve sold securities, compile cost-basis information. Look for transactions that could potentially enhance your circumstances.
Life insurance coverage. Review polices, premium costs, beneficiaries, and life events that may, or have altered your coverage needs.
Life events. Get married/divorced, move, change jobs, buy a home or business, move aging parents into assisted living, have a child, receive an inheritance/gift? These can financially impact your life, and are worth discussing with your financial or tax professional.
Reach any of these financial milestone ages this year?
70½: You must now take Required Minimum Distributions (RMDs) from your IRA(s).
65: You are likely now eligible to apply for Medicare.
62: You can choose to apply for Social Security benefits.
59½: You may take IRA distributions without a 10% penalty.
55: You may be allowed to take distributions from your 401(k) account without penalty, provided you no longer work for that employer.
50: You can make “catch-up” contributions to IRAs (and certain qualified retirement plans).¹ ³
The beginning of the year is a key time to review your financial “health” and well-being. You can reach me at (303) 558-0214 to discuss strategies.
¹ –fool.com/retirement/general/2016/04/11/required-minimum-distributions-commonquestions-ab.aspx [4/11/16]
² – nerdwallet.com/blog/taxes/income-taxes/federal-income-tax-brackets/ [9/8/16]
³ – merrilledge.com/Publish/Content/application/pdf/GWMOL/retirementdeadlines-checklist.pdf [11/7/16]
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