CAREFREE – It’s never too early to plan for retirement. With 2017 around the corner, Jim Hundman of Hundman Tax Services LLC offers some considerations for retirement planning.
Hundman explained, “Fully funding your company 401(k) with pre-tax dollars will reduce current year taxes, as well as increase your retirement nest egg. For 2016, the maximum 401(k) contribution you can make with pre-tax earnings is $18,000. For taxpayers 50 or older, that amount increases to $24,000.
“If you have a SIMPLE 401(k), the maximum pre-tax contribution for 2016 is $12,500. That amount increases to $15,500 for taxpayers age 50 or older.
“If certain requirements are met, contributions to an individual retirement account may be deductible. For taxpayers under 50, the maximum contribution amount for 2016 is $5,500. For taxpayers 50 or older but less than 70 1/2, the maximum contribution amount is $6,500. Contributions exceeding the maximum amount are subject to a 6 percent excise tax. Even if you are not eligible to deduct contributions, contributing after-tax money to an IRA may be advantageous because it will allow you to later convert that traditional IRA to a Roth IRA. Qualified withdrawals from a Roth IRA, including earnings, are free of tax, while earnings on a traditional IRA are taxable when withdrawn.
“If you already have a traditional IRA, it would be wise to evaluate whether it is appropriate to convert it to a Roth IRA this year. You’ll have to pay tax on the amount converted as ordinary income, but subsequent earnings will be free of tax. And if you have a traditional 401(k), 403(b), or 457 plan that includes after-tax contributions, a new rule allows you to generally roll over these after-tax amounts to a Roth IRA with no tax consequences. A rollover of a SIMPLE 401(k) into a Roth IRA may also be available. As with all tax rules, there are qualifications that apply to these rollovers that should be discussed before taking any actions.”
So to discuss your financial future further, phone Jim Hundman at 480-625-3134 or visit www.HundmanTax.biz. Hundman Tax Services is located in Pima Norte at 36600 N Pima Rd. #301.
