NEW YEAR, NEW( FINANCIAL) YOU
By: Katy L. Chase, CFP ®
Whether you refer to it as a‘ New Year’ s resolution’ or you simply use January as a symbolic fresh start, everyone has an annual opportunity to reaffirm our commitment to personal financial wellbeing.
On that note, let’ s get started on the right foot this year.
One way to recommit ourselves to a healthy financial future is to save towards retirement. Some of the most popular types of plans:
• Traditional IRA • Roth IRA
• 401( k) • Solo 401( k)
• 403( b)
• Simple IRA
• TSP
Did you know that the IRS guidelines for the amount you are able to contribute towards retirement can fluctuate on an annual basis due to inflation?
Let’ s quickly review the 2017 contribution limits to see if you are able to squeak out any additional contributions or participate in any additional tax savings for this year.
For Traditional and Roth IRAs the limit is $ 5,500 with an additional $ 1,000 catch up amount permitted for anyone over age 50( or up to earned income). For Simple IRAs, the limit is $ 12,500.
A few points to keep in mind:
• Traditional IRA contributions can be before-tax by deducting the contribution above from your taxes- assuming you are under the earnings limit allowed by the IRS.
• If you are over the earnings limit, you are still able to contribute to a Traditional IRA, you just aren’ t allowed to take the tax deduction.
• Simple IRA contributions are pretax.
• Roth IRA contributions are aftertax and allow for growth while eliminating the capital gains tax required with a withdrawal.
• There is an earnings limit for Roth IRA contributions as well, so be sure to check before making the contribution.
Not everyone has access to an employersponsored retirement plan such as a 401( k) or 403( b), but those who do have a significant savings advantage. There is no earnings limit and the contribution limit is $ 18,000 with an additional $ 6,000 catch up amount allowed for anyone over age 50( or up to earned income).
The participant is typically able to contribute with either pretax or Roth money. A percentage of a participant’ s contributions may also be matched by their employer which provides even more reason to stock money into your retirement plan.
So, in the spirit of New Year’ s resolutions( or a calendar reset), take advantage of the amount you are able to contribute towards your retirement savings. If you aren’ t financially able to contribute the allowed IRS maximum, at least maximize your employer’ s match if you have a 401( k) or 403( b) available to you.
For example, if your employer will match 100 % on the first 6 % of your contribution, contribute at least 6 %. If you don’ t have an employer retirement plan or can’ t reach the IRS maximum allowed, a good goal to set is to save 10 % of your income for retirement.
Make sure to talk with your tax advisor regarding the above as everyone’ s situation is different.
Katy Chase is a financial advisor at Lighthouse Wealth Management. She and her husband, Tom, recently moved into the Lake Linganore community. She can be reached at KATY @ LIGHTHOUSEWLTH. COM with questions.
Securities offered through First Allied Securities, Inc. Member FINRA / SIPC. Advisory services offered through Lighthouse Wealth Management, a registered investment advisor not affiliated with First Allied Securities Inc.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
10 LakeTalk January 2017