Finance & Enjoyment Blog

Year End Retirement Strategies

As we bid farewell to 2015, there are several strategies and deadlines you may need to meet to qualify for credits and tax deductions. As your Denver CPA here at KKB, we put together some year end retirement strategies you can take advantage, as well as things to keep in mind before the start of 2016. After all, we all want to start the New Year off on the right foot.

Last Minute Contribution to 401(k) We have written several blogs on this 401(k) contributions, but it is a very important part of retirement portfolios. As we near the end of the year, you have until December 31st to contribute. In 2015 you can contribute up to $18,000. If you are over 50, you can make catch-up contributions worth an additional $6,000 (or a total of $24,000). So, if you feel you need to catch-up on your contributions, you have until the last day of the year.

Required Minimum Distributions

If you are retired and born before July 1, 1945, you are required to take distributions from your retirement account and 401(k) plans by December 31st. This distribution is calculated by dividing the account balance by an IRS estimate of your life expectancy. If you miss this distribution, the penalty is 50 percent of the amount that should have been withdrawn. So, at the very least, do take the required minimum distribution to avoid such penalties. But…..if you turned 70 ½ in 2015 (born after June 30, 1994 and before July 1, 1945), you can delay your required first distribution until April 1, 2016. However, your second (and all future distributions) will be due by December 31st. However, if you delay and take double distributions in 2016 could cause you to pay more taxes and even put you in a higher tax bracket.

IRA Contributions – Some Extra Time

You have until April 15, 2016, to contribute to your IRA, up to $5,500, that can be applied to the tax year of 2015. Similar to a 401(k), if you are over the age of 50, you can contribute an additional $1,000, or a total of $6,500, in 2015. Essentially, if it looks like you have a tax liability while you are calculating your 2015 taxes, you can choose to pay it now or put some money away for retirement and pay the tax later.

Plan for 2016

Both IRA and 401(k) contributions limits will remain the same in 2016. So, if you were unable to max out your contributions in 2015, consider increasing your contributions in 2016. Also, if you should be fortunate to get a raise, bonus, or refund, direct some of that money into a retirement account. Doing so will help lower your tax bill the following year. Plus, by making one-time contributions for such bonuses will help you max them out.

How to Use this Information

If you have any questions about retirement planning and what to do to better plan for your taxes, give us a call at 303-815-1100 or contact us online. We are more than happy to answer any questions you may have so you can have a successful 2016!

Posted in Retirement and Exit Strategies »

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