retirement

Summer: A Good Time to Review Your Investments

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You may have heard about a proposal in Washington to cut the taxes paid on investments by indexing capital gains to inflation. Under the proposal, the purchase price of assets would be adjusted so that no tax is paid on the appreciation due to inflation.

While the fate of such a proposal is unknown, the long-term capital gains tax rate is still historically low on appreciated securities that have been held for more than 12 months. And since we’re already in the second half of the year, it’s a good time to review your portfolio for possible tax-saving strategies.

The federal income tax rate on long-term capital gains recognized in 2019 is 15% for most taxpayers. However, the maximum rate of 20% plus the 3.8% net investment income tax (NIIT) can apply at higher income levels. For 2019, the 20% rate applies to single taxpayers with taxable income exceeding $425,800 ($479,000 for joint filers or $452,400 for heads of households).

By |July 17th, 2019|business, investment, retirement|0 Comments

Grading the Performance of Your Company’s Retirement Plan

Letter A, Report Card, Test Results

Imagine giving your company’s retirement plan a report card. Would it earn straight A’s in preparing your participants for their golden years? Or is it more of a C student who could really use some extra help after school? Bench-marking can tell you.

Mind the basics

More than likely, you already use certain criteria to benchmark your plan’s performance using traditional measures such as:

  • Fund investment performance relative to a peer group,
  • Breadth of fund options,
  • Bench-marked fees, and
  • Participation rates and average deferral rates (including matching contributions).

These measures are all critical, but they’re only the beginning of the story. Add to that list helpful administrative features and functionality — including auto-enrollment and auto-escalation provisions, investment education, retirement planning, and forecasting tools. In general, the more, the better.

Don’t overlook useful data

A sometimes-overlooked plan metric is average account balance size. This matters for two reasons. First, it provides a first-pass look at whether participants are accumulating meaningful sums in their accounts. Naturally, you’ll need to look at that number in light of the age of your workforce and how long your plan has been in existence. Second, it affects record-keeping fees — higher […]

By |June 28th, 2019|business, retirement|0 Comments

Thinking About Moving to Another State in Retirement? Don’t Forget About Taxes

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When you retire, you may consider moving to another state — say, for the weather or to be closer to your loved ones. Don’t forget to factor state and local taxes into the equation. Establishing residency for state tax purposes may be more complicated than it initially appears to be.

Identify all applicable taxes

It may seem like a no-brainer to simply move to a state with no personal income tax. But, to make a good decision, you must consider all taxes that can potentially apply to a state resident. In addition to income taxes, these may include property taxes, sales taxes and estate taxes.

If the states you’re considering have an income tax, look at what types of income they tax. Some states, for example, don’t tax wages but do tax interest and dividends. And some states offer tax breaks for pension payments, retirement plan distributions and Social Security payments.

Watch out for state estate tax

The federal estate tax currently doesn’t apply to many people. For 2019, the federal estate tax exemption is $11.4 million ($22.8 million for a married couple). But some states levy estate tax with a much lower exemption and […]

By |June 6th, 2019|property tax, retirement, sales tax, tax planning, taxes|0 Comments

Still Working After Age 70½? You May Not Have to Begin 401(k) Withdrawals

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If you participate in a qualified retirement plan, such as a 401(k), you must generally begin taking required withdrawals from the plan no later than April 1 of the year after which you turn age 70½. However, there’s an exception that applies to certain plan participants who are still working for the entire year in which they turn 70½.

The basics of RMDs

Required minimum distributions (RMDs) are the amounts you’re legally required to withdraw from your qualified retirement plans and traditional IRAs after reaching age 70½. Essentially, the tax law requires you to tap into your retirement assets — and begin paying taxes on them — whether you want to or not.

Under the tax code, RMDs must begin to be taken from qualified pension, profit sharing and stock bonus plans by a certain date. That date is April 1 of the year following the later of the calendar year in which an employee:

  • Reaches age 70½, or
  • Retires from employment with the employer maintaining the plan under the “still working” exception.

Once they begin, RMDs must generally continue each year. The tax penalty for withdrawing less than the RMD amount is 50% of the portion […]

By |March 26th, 2019|401k, ira, retirement, tax planning|0 Comments

Many Tax-Related Limits Affecting Businesses Increase for 2019

A variety of tax-related limits affecting businesses are annually indexed for inflation, and many have gone up for 2019. Here’s a look at some that may affect you and your business.

Deductions

  • Section 179 expensing:
    • Limit: $1.02 million (up from $1 million)
    • Phaseout: $2.55 million (up from $2.5 million)
  • Income-based phase-ins for certain limits on the Sec. 199A qualified business income deduction:
    • Married filing jointly: $321,400-$421,400 (up from $315,000-$415,000)
    • Married filing separately: $160,725-$210,725 (up from $157,500-$207,500)
    • Other filers: $160,700-$210,700 (up from $157,500-$207,500)

Retirement plans

  • Employee contributions to 401(k) plans: $19,000 (up from $18,500)
  • Catch-up contributions to 401(k) plans: $6,000 (no change)
  • Employee contributions to SIMPLEs: $13,000 (up from $12,500)
  • Catch-up contributions to SIMPLEs: $3,000 (no change)
  • Combined employer/employee contributions to defined contribution plans (not including catch-ups): $56,000 (up from $55,000)
  • Maximum compensation used to determine contributions: $280,000 (up from $275,000)
  • Annual benefit for defined benefit plans: $225,000 (up from $220,000)
  • Compensation defining “highly compensated employee”: $125,000 (up from $120,000)
  • Compensation defining “key employee”: $180,000 (up from $175,000)

Other employee benefits

  • Qualified transportation fringe-benefits employee income exclusion: $265 per month (up from $260)
  • Health Savings Account contributions:
    • Individual coverage: $3,500 (up from $3,450)
    • Family coverage: $7,000 (up from $6,900)
    • Catch-up contribution: $1,000 (no change)
  • Flexible Spending Account contributions:
    • Health care: $2,700 (up from $2,650)
    • Dependent care: $5,000 (no change)

Additional rules apply to these […]

By |January 22nd, 2019|business, deduction, deductions, retirement, tax planning|0 Comments

You May Be Able to Save More for Retirement in 2019

Retirement plan contribution limits are indexed for inflation, and many have gone up for 2019, giving you opportunities to increase your retirement savings:

  • Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans: $19,000 (up from $18,500)
  • Contributions to defined contribution plans: $56,000 (up from $55,000)
  • Contributions to SIMPLEs: $13,000 (up from $12,500)
  • Contributions to IRAs: $6,000 (up from $5,500)

One exception is catch-up contributions for taxpayers age 50 or older, which remain at the same levels as for 2018:

  • Catch-up contributions to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans: $6,000
  • Catch-up contributions to SIMPLEs: $3,000
  • Catch-up contributions to IRAs: $1,000

Keep in mind that additional factors may affect how much you’re allowed to contribute (or how much your employer can contribute on your behalf). For example, income-based limits may reduce or eliminate your ability to make Roth IRA contributions or to make deductible traditional IRA contributions.

For more on how to make the most of your tax-advantaged retirement-saving opportunities in 2019, please contact us.

By |December 27th, 2018|retirement|0 Comments

Act Soon to Save 2018 Taxes on Your Investments

Do you have investments outside of tax-advantaged retirement plans? If so, you might still have time to shrink your 2018 tax bill by selling some investments • you just need to carefully select which investments you sell.

Try balancing gains and losses

If you’ve sold investments at a gain this year, consider selling some losing investments to absorb the gains. This is commonly referred to as “harvesting” losses.

If, however, you’ve sold investments at a loss this year, consider selling other investments in your portfolio that have appreciated, to the extent the gains will be absorbed by the losses. If you believe those appreciated investments have peaked in value, essentially you’ll lock in the peak value and avoid tax on your gains.

Review your potential tax rates

At the federal level, long-term capital gains (on investments held more than one year) are taxed at lower rates than short-term capital gains (on investments held one year or less). The Tax Cuts and Jobs Act (TCJA) retains the 0%, 15% and 20% rates on long-term capital gains. But, for 2018 through 2025, these rates have their own brackets, instead of aligning with various ordinary-income brackets.

For example, these are the thresholds […]

By |December 19th, 2018|investment, retirement, tax planning, year-end|0 Comments

Catch-Up Retirement Plan Contributions Can be Particularly Advantageous Post-TCJA

Will you be age 50 or older on December 31? Are you still working? Are you already contributing to your 401(k) plan or Savings Incentive Match Plan for Employees (SIMPLE) up to the regular annual limit? Then you may want to make “catch-up” contributions by the end of the year. Increasing your retirement plan contributions can be particularly advantageous if your itemized deductions for 2018 will be smaller than in the past because of changes under the Tax Cuts and Jobs Act (TCJA).

Catching up

Catch-up contributions are additional contributions beyond the regular annual limits that can be made to certain retirement accounts. They were designed to help taxpayers who didn’t save much for retirement earlier in their careers to “catch up.” But there’s no rule that limits catch-up contributions to such taxpayers.

So catch-up contributions can be a great option for anyone who is old enough to be eligible, has been maxing out their regular contribution limit and has sufficient earned income […]

By |November 27th, 2018|contributions, New Tax Laws, retirement, tax planning, year-end|0 Comments

It’s Not Too Late: You Can Still Set Up a Retirement Plan for 2018

If most of your money is tied up in your business, retirement can be a challenge. So if you haven’t already set up a tax-advantaged retirement plan, consider doing so this year. There’s still time to set one up and make contributions that will be deductible on your 2018 tax return!

More benefits

Not only are contributions tax deductible, but retirement plan funds can grow tax-deferred. If you might be subject to the 3.8% net investment income tax (NIIT), setting up and contributing to a retirement plan may be particularly beneficial because retirement plan contributions can reduce your modified adjusted gross income and thus help you reduce or avoid the NIIT.

If you have employees, they generally must be allowed to participate in the plan, provided they meet the qualification requirements. But this can help you attract and retain good employees.

And if you have 100 or fewer employees, you may be eligible for a credit […]

By |November 27th, 2018|retirement, tax planning|0 Comments

Charitable IRA Rollovers May Be Especially Beneficial in 2018

If you’re age 70½ or older, you can make direct contributions — up to $100,000 annually — from your IRA to qualified charitable organizations without owing any income tax on the distributions. This break may be especially beneficial now because of Tax Cuts and Jobs Act (TCJA) changes that affect who can benefit from the itemized deduction for charitable donations.

Counts toward your RMD

A charitable IRA rollover can be used to satisfy required minimum distributions (RMDs). You must begin to take annual RMDs from your traditional IRAs in the year you reach age 70½. If you don’t comply, you can owe a penalty equal to 50% of the amount you should have withdrawn but didn’t. (Deferral is allowed for the initial year, but you’ll have to take two RMDs the next year.)

So if you don’t need the RMD for your living expenses, a charitable IRA rollover can be a great way to comply with the RMD requirement without triggering the tax […]

By |October 11th, 2018|charity, deductions, ira, New Tax Laws, retirement|0 Comments