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contributions

Happy New Year

By | 2020, Money Matters, Newsletter | No Comments

Making 2020 Count Financially 

I’m not one to harp on New Year’s Resolutions, but I do want to make sure you are aware of opportunities that will help you reach your financial goals. I thought I would share a couple of tips you may want to think about, possibly share with your friends and family, and implement for yourself.

Define your goals

From year-to-year, the top investments are going to rotate. We are often asked, “What should I invest in?” A better question may be, “What am I investing for?”  Defining a goal and then matching your investment strategy to that goal will help you stay on track. Keeping your focus on the goal rather than day-to-day movement in the market will help you manage the emotional side of investing. This is critical when market volatility increases.

Put investing on autopilot

We find that over time investors who have a systematic approach to saving are more consistent in their efforts. Waiting until the end of the week, the month, or the year before deciding to put money aside can diminish the urgency of saving and your ability to reach a goal. The 401(k) is a wonderful example; every pay cycle money goes directly into an investment for the future – automatically. Once you make the initial decision to contribute, no further action is required. The same can be done in an account outside of your retirement plan.

Increase contributions for 2020

If you are not making a maximum contribution to your 401(k), consider increasing the amount you will contribute this year, even if it’s a small increase. The limit for 2020 increased to $19,500. Often employees contribute only enough to get the employer’s full matching contribution – which is great! However, with fewer employers offering pension plans, the burden to save for retirement falls to the employees. Saving smaller amounts early on makes a significant difference in how much you will have when you get to retirement. If your employer doesn’t offer a 401(k), consider putting away up to $6,000 in an IRA or Roth IRA.

Make up for lost time

For anyone who will be 50 or older this year – there is at least one advantage – you can make up for lost time. The catch-up provision allows you to sock away additional money for the future. The 401(k) catch-up limit increased in 2020 to $6,500. For IRA and Roth IRA, the catch-up remains at $1,000.

Simplify your portfolio

It is not unusual to have several jobs throughout the course of your career. That being said, having multiple plans with past employers can be cumbersome and difficult to monitor. Consider consolidating these plans, making it more effective to track your investments, and determine if they are on track to help you reach your goals. 

We wish you a prosperous New Year!

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9 Ways to Reduce Taxable Income This Year

By | 2014, Money Moxie | No Comments

It is hard to believe 2014 is swiftly drawing to a close. At this point, what can you do to better manage your taxes? Here are several ideas you can consider:

9 Ways to Reduce Taxable Income

Maximize retirement contributions.
All contributions to your traditional 401(k) or other tax deferred retirement accounts are made before taxes are calculated. This means that if you make a maximum $17,500 contribution to a 401(k) your taxable income is reduced by $17,500. So, why not pay yourself rather than Uncle Sam? Generally speaking, you can modify your contributions at any time during the year, but check with your benefits office to be sure of your plan’s rules.

Harvest tax losses.
After several years of market growth you may want to lock in some of your investment gains. The downside is you will also trigger a tax on any growth over your initial investment. Consider dumping some of your portfolio losers. This will allow you to offset your taxable gains with losses resulting in a zero tax bill if the numbers are the same. Keep in mind you can only offset long-term gains with long-term losses. The same applies to short-term gains and losses. We can help you identify any tax harvesting opportunities in your portfolio.

Defer income.
If you have control over when you will receive income, consider deferring some of your income until next year. This generally applies to those earning commissions, bonuses, consulting fees, or self-employment income. A quick exercise to determine where you are tax-wise and how much income should be deferred to prevent you from hitting the next marginal tax bracket is recommended. This can be done by consulting with your tax professional. Some programs such as Turbo Tax allow you to run a pro-forma tax filing to get an idea of where you stand.

Make up tax shortfalls.
If you have not paid enough withholding or estimated tax throughout the year, there is still time make up the difference before the year ends. Increasing your tax withholding or making an estimated tax payment will help avoid any underpayment penalties.

Bunch itemized deductions.
Retirement brings with it some unexpected tax situations. For many there are not enough deductions each year to itemize on Schedule A of the tax return, in effect minimizing any tax advantages. By bunching deductions every other year, you can itemize one year and take the standard deduction the next year. This could be applied by prepaying state taxes every other year, making charitable donations every other year, moving up or pushing back a non-urgent medical procedure, and much more. Your tax professional can share ideas that fit your specific situation.

Make stock donations.
If you have held taxable investments for more than a year and they have increased in value, you can donate the stock directly to a qualifying charity. This avoids any capital gains you may owe on the growth of your investment. Nevertheless, you can still itemize the full value of the donation. Even better, the receiving charity pays no tax on the gift. You are then free to invest the cash you would have donated, creating the opportunity for future stock donations.

Be generous to charities.
Gifting cash to a qualified charitable organization also has tax perks. You can deduct the cash donation on Schedule A when you file your return. (Be sure to keep receipts for all cash donations.) You also get the benefit of helping others, while this may be a completely intangible outcome; the good feeling of making a difference in the world goes well beyond any tax advantages.

Maximize gift tax exclusions.
If your estate is growing considerably, you may want to gift something to your children and grandchildren while you can watch them enjoy the gift. You can give $14,000 annually to as many people as you wish. Neither you nor the happy recipients will pay gift taxes or estate taxes. If you are married your spouse can gift the same amount. Get double tax benefits by gifting appreciated stock and avoiding the capital gains taxes. The capital gains basis will transfer to the recipient, who is most likely in a lower tax bracket.

Schedule a financial checkup.
Throughout the year there may have been changes to your personal situation. This is a good time to review beneficiary designations, retirement plan contributions, estate planning options, and investment strategies. Your advisor can make you aware of and help you take full advantage of a wide range of planning opportunities.

For more information and ideas on how to maximize year-end planning opportunities, contact one of our wealth management consultants or your tax professional. Don’t wait too long; there is a deadline for getting everything finalized and some of our suggestions take time.

*Securities America and its representatives do not provide tax advice; therefore it is important to coordinate with your tax advisor regarding your specific situation.
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