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2017 Retirement Plan Contribution Limits and Deadlines

In order to get a Traditional IRA deduction or make a Roth or spousal contribution for 2016 - you must do so by the April filing deadline - regardless of whether you file an extension or not. Please see article below for more information.

In order for us to process contributions prior to filing, we would need all paperwork and/or checks completed in our office by 3:00pm CST on Thursday, April 13. Call us if you have any questions or let us know how we can help.

-Your PlanningWorks Team

2017 Retirement Plan Contribution Limits

Minor inflation means small, but notable, changes for the new year.

Each October, the Internal Revenue Service announces changes to annual contribution limits for IRAs and workplace retirement plans. Are any of these limits rising for 2017?

Will IRA contribution limits go up? Unfortunately, no. Annual contributions for Roth and traditional IRAs remain capped at $5,500 for 2017, with an additional $1,000 catch-up contribution permitted for those 50 and older. This is the fifth consecutive year those limits have gone unchanged. The SIMPLE IRA contribution limit is the same in 2017 as well: $12,500 with a $3,000 catch-up permitted.1,2

There are some changes pertaining to IRAs. The limit on the employer contribution to a SEP-IRA rises $1,000 in 2017 to $54,000; this adjustment also applies for solo 401(k)s. The compensation limit applied to the savings calculation for SEP-IRAs and solo 401(k)s gets a $5,000 boost to $270,000 for 2017.1

Next year will bring an adjustment to IRA phase-out ranges. Your maximum 2017 contribution to a Roth IRA may be reduced if your modified adjusted gross income falls within these ranges, and prohibited if it exceeds them.1

 

*Single/head of household $118,000-133,000 ($1,000 higher than 2016)

 

*Married couples $186,000-196,000 ($2,000 higher than 2016)

 

If your MAGI falls within the applicable phase-out range below, you may claim a partial deduction for a traditional IRA contribution made in 2017. If it exceeds the top limit of the applicable phase-out range, you can't claim a deduction.1

 

*Single or head of household, covered by workplace retirement plan  $62,000-72,000 ($1,000 higher than 2016)

  

*Married filing jointly, spouse making IRA contribution covered by workplace retirement plan  $99,000-119,000 ($2,000 higher than 2016)

 

*Married filing jointly, spouse making IRA contribution not covered by workplace retirement plan, other spouse is covered by one $186,000-196,000 ($2,000 higher than 2016)

 

*Married filing separately, covered by workplace retirement plan  $0-10,000 (unchanged)

 

Will you be able to put a little more into your 401(k), 403(b), or 457 plan next year? No. The maximum yearly contribution limit for these plans stays at $18,000 for 2017. (That limit also applies to the Thrift Savings Plan for federal workers.) The additional catch-up contribution limit for plan participants 50 and older remains at $6,000.1

Are annual contribution limits on Health Savings Accounts rising? Just slightly. In 2017, the yearly limit on deductible HSA contributions stays at $6,750 for family coverage and increases $50 to $3,400 for individuals with self-only coverage. You must participate in a high-deductible health plan to make HSA contributions. The annual minimum deductible for an HDHP remains at $1,300 for self-only coverage and $2,600 for family coverage in 2017. Next year, the upper limit for out-of-pocket expenses stays at $6,550 for self-only coverage and $13,100 for family coverage. HSAs are sometimes called "backdoor IRAs" because they can essentially function as retirement accounts for people 65 and older; at that point, withdrawals from them can be used for any purpose.3,4

Are you self-employed, with a defined benefits plan? The limit on the yearly benefit for those pension plans increases by $5,000 next year. The 2017 limit is set at $215,000.1

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - forbes.com/sites/ashleaebeling/2016/10/27/irs-announces-2017-retirement-plans-contributions-limits-for-401ks-and-more/ [10/27/16]

2 - irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits [10/28/16]

3 - tinyurl.com/h4x5cf6 [4/29/16]

4 - cnbc.com/2016/08/19/dont-use-your-health-savings-account-funds-right-away.html [8/19/16]

Are Millennial Women Saving Enough for Retirement?

 

Are Millennial Women Saving Enough for Retirement?

The available data is more encouraging than discouraging.

 

Provided by PlanningWorks

 

Women 35 and younger are often hard-pressed to save money. Student loans may be outstanding; young children may need to be clothed, fed, and cared for; and rent or home loan payments may need to be made. With all of these very real concerns, are they saving for retirement?

 

The bad news: 44% of millennial women are not saving for retirement at all. This discovery comes from a recent Wells Fargo survey of more than 1,000 men and women aged 22-35. As 54% of the millennial women surveyed were living paycheck to paycheck, this lack of saving is hardly surprising.1

 

The good news: 56% of millennial women are saving for retirement. Again, this is according to the Wells Fargo survey. (A 2016 Harris Poll determined roughly the same thing – it found that 54% of millennial women were contributing to a retirement savings account.)1,2

 

The question is are these young women saving enough? In the Wells Fargo survey, the average per-paycheck retirement account contribution for millennial women was 5.7% of income, which was 22% lower than the average for millennial men. One influence may be the wage gap between the sexes: on average, the survey found that millennial women earn just 74% of what their male peers do.1

  

In the survey, the median personal income for a millennial woman was $28,800. So, 5.7% of that is $1,641.60, which works out to a retirement account contribution of $136.80 a month. Not much, perhaps – but even if that $136.80 contribution never increased across 40 years with the account yielding just 6% annually, that woman would still be poised to end up with $254,057 at age 65. Her early start (and her potential to earn far greater income and contribute more to her account in future years) bodes well for her financial future, even if she leaves the workforce for a time before her retirement date.1,3

 

More good news: millennial women may retire in better shape than boomer women. That early start can make a major difference, and on the whole, millennials have begun to save and invest earlier in life compared to previous generations. A recent study commissioned by Naxis Global Asset Management learned that the average millennial starts directing money into a retirement account at age 23. Historically, that contrasts with age 29 for Gen Xers and age 33 for baby boomers. If the average baby boomer had begun saving for retirement at age 23, we might not be talking about a retirement crisis.4

 

In the aforementioned Harris Poll, the 54% of millennial women putting money into retirement accounts compared well with the 44% of all women doing so. The millennial women were also 14% more likely to voluntarily participate in a workplace retirement plan than male millennials were, and once enrolled in such plans, their savings rates were 7-16% greater than their male peers.2

 

In 2015, U.S. Trust found that 51% of high-earning millennial women were top or equal income earners in their households. That implies that these young women have a hand in financial decision-making and at least a fair degree of financial literacy – another good sign.4

 

Clearly, saving $136.80 per month will not fund a comfortable retirement – but that level of saving in their twenties may represent a great start, to be enhanced by greater retirement account inflows later in life and the amazing power of compound interest. So, while young women may not be saving for retirement in large amounts, many are saving at the right time. That may mean that millennial women will approach retirement in better financial shape than women of preceding generations.

Tips on caregiving for loved ones

A caregiver’s priority is to do what their loved one would want them to do. Here are two more tips for making caregiving for loved ones easier. The article from which these tips are sourced from is located here: http://www.horsesmouth.com/10-financial-tips-to-make-caregiving-easier

  1. Talk with your loved one about their preferences for receiving care
    1. Are they OK with living in an assisted-living or nursing home?
    2. Would they rather live at home?
    3. Is it important for them not to “be a burden” on their children?
  2. Ask your loved one to write a letter
    1. Ask them to write a letter expressing their desires and reasons for wishes
    2. Wills cover wishes and instructions, but this letter can be a reminder to the caregiver of the feelings and sentiment behind their loved one’s wishes

June is Alzheimer's & Brain Awareness Month

Alzheimer’s is not an inevitability in older age. It's a disease that can be defeated with awareness, funding, and research. June is Alzheimer's & Brain Awareness Month! Please enjoy this video produced by Alzheimer’s Research UK. ‪#‎sharetheorange‬

Remember your goals; in times of good and bad

There’s no question that periods of increased market volatility can be unsettling for investors. However, the decisions you make now—choosing to stay the course or move to the sidelines—can have long-lasting implications. In fact, making emotionally-based decisions in regard to short-term market events is one of the fastest ways to derail your long-term investment strategy.

That’s because it’s impossible to accurately time the financial markets. As a result, investors tend to opt out at the worst time, when markets are falling, and buy back in at higher prices when markets begin to rise. On the other hand, those who remain invested and focused on their long-term investment goals, have an opportunity to buy additional shares at lower prices when stock prices drop, which helps to generate long-term portfolio growth.

A time-tested approach to managing investments through periods of uncertainty is to focus on asset allocation:

  • An appropriate asset allocation, aligned with your goals, timeframe, and tolerance for risk allows you to concentrate on your long-term objectives instead of getting sidetracked by short-term market fluctuations.
  • Helps eliminate the potential for emotional decision-making that could have an adverse impact on your long-term investment strategy.

If you’re concerned about the impact of current market conditions on your portfolio, We encourage you to contact PlanningWorks at 512 498-7526 to review your current allocation, and discuss your long-term goals and risk tolerance.
 

Asset allocation, which is driven by complex mathematical models, should not be confused with the much simpler concept of diversification. Asset allocation does not guarantee profit or protect against loss.

The Power of Compounding

Did you know that money saved today is more valuable than money saved tomorrow? That’s due to the amazing power of compounding. To determine how quickly your savings may double, simply divide 72 by your current annual rate of return for a rough estimate. For example, if you make a one-time investment of $7,500 today at an annual growth rate of 7.2%, based on the Rule of 72 (a simplified way to estimate how long an investment will take to double at a fixed annual rate), that one year of savings will potentially grow to:

After 10 years = $15,000
After 20 years = $30,000
After 30 years = $60,000
After 40 years = $120,000

That’s a compelling reason to begin saving early in life! Here’s another: a 40-year-old who begins saving $5,500 a year for retirement at a hypothetical 7.2% annual rate of return in a tax-deferred savings vehicle, like an IRA or 401(k), would accumulate $415,076 (vs. $312,914 in a taxable savings account) by age 65. A 25-year-old saving the same amount at the same growth rate would accumulate $1,328,204 (vs. $817,630 in a taxable savings account) by age 65. To reach the younger saver’s tax-deferred savings total, the 40-year-old would have to save about $17,600 a year—more than three times the annual savings amount of the investor who began saving at age 25.*

While the Rule of 72 is a reasonably accurate shortcut for estimating growth rates that fall between 6% and 10%; the higher the projected growth rate beyond 10%, the less accurate the calculation becomes. To calculate earnings growth rates above 10%, use an online compound interest calculator, or set up an appointment with PlanningWorks to discuss strategies for pursuing your long-term retirement savings goals. PlanningWorks can be reached at 512 498-7526 or info@planningworks.biz

Remember your goals; in times of good and bad

There’s no question that periods of increased market volatility can be unsettling for investors. However, the decisions you make now—choosing to stay the course or move to the sidelines—can have long-lasting implications. In fact, making emotionally-based decisions in regard to short-term market events is one of the fastest ways to derail your long-term investment strategy.

That’s because it’s impossible to accurately time the financial markets. As a result, investors tend to opt out at the worst time, when markets are falling, and buy back in at higher prices when markets begin to rise. On the other hand, those who remain invested and focused on their long-term investment goals, have an opportunity to buy additional shares at lower prices when stock prices drop, which helps to generate long-term portfolio growth.

A time-tested approach to managing investments through periods of uncertainty is to focus on asset allocation:

  • An appropriate asset allocation, aligned with your goals, timeframe, and tolerance for risk allows you to concentrate on your long-term objectives instead of getting sidetracked by short-term market fluctuations.
  • Helps eliminate the potential for emotional decision-making that could have an adverse impact on your long-term investment strategy.

If you’re concerned about the impact of current market conditions on your portfolio, we encourage you to contact PlanningWorks at 512 498-7526 to review your current allocation, and discuss your long-term goals and risk tolerance.

Asset allocation, which is driven by complex mathematical models, should not be confused with the much simpler concept of diversification. Asset allocation does not guarantee profit or protect against loss.

Getting the Most from Social Security

Social security is a critical component of retirement planning, and one that can be overwhelming and potentially costly if you are uninformed.

Principal Financial Group provides a great guide here to help you navigate the ins and outs of Social Security. Included in the guide is a worksheet that you can complete to help you create your retirement action plan.

If you have any questions or wish to discuss this further, please contact PlanningWorks to set-up an appointment.

Who will be hit the hardest by recent Social Security changes?

The Bipartisan Budget Act of 2015 shut down two popular Social Security claiming tactics that may adversely impact the amount of income many pre-retirees were counting on in retirement. The restricted-application and file-and-suspend strategies enabled married and divorced couples to receive spousal benefits while delaying and continuing to grow the higher wage earner’s benefits. While the Budget Act eliminated the restricted application effective December 31, 2015, eligible married couples and divorced spouses can still take advantage of the file-and-suspend tactic if they take action prior to May 1, 2016.

The file-and-suspend strategy is particularly advantageous for married couples with a non-working or lower-earning spouse, or a divorced spouse, who want to begin receiving a portion of Social Security income prior to reaching full retirement age. To be eligible to file-and-suspend before May 1, 2016, you must have been born after May 2, 1950, but before Jan. 2, 1954, and take action to file for and suspend benefits prior to May 1, 2016. But what if you’re not eligible? If you factored one of these claiming strategies into your retirement income planning projections, you may need to reevaluate and adjust your income projections. While you can still suspend your Social Security benefits at any time, no other beneficiary, including a spouse or child, will be able to continue receiving benefits during the time your benefits are suspended.

If you need assistance in determining your eligibility for the file-and-suspend tactic before it’s phased out effective May 1, 2016, or help with projecting or reassessing your income needs in retirement contact PlanningWorks for a consultation at your earliest convenience.

How Are Your Tax Dollars Allocated?

Have you ever wondered where your tax dollars have gone?

According to the Tax Foundation, a Washington, D.C. based think-tank, Americans worked until April 24, 2015 just to earn enough money to pay their federal taxes.

Wondering what you get in return for your hard work? Roughly 66% of the $3.5 trillion in federal spending for 2014 was used for Social Security, Medicare, defense, and related programs. Here’s how it breaks down:

24% - Social Security
24% - Medicare, Medicaid, CHIP, marketplace subsidies
18% - Defense and international security assistance
11% - Safety net programs
8% - Benefits for federal retirees and veterans
7% - Interest on debt
3% - Transportation infrastructure
2% - Education
2% - Science and medical research
2% - All other
1% - Non-security (international)

Source: Center on Budget and Policy Priorities, 2015

And, yes, for those of you paying close attention, those numbers add up to 102%. The Center on Budget and Policy Priorities notes that category percentages are estimates based on the most recent historical data released by the Office of Management and Budget for the 2014 federal fiscal year (October 1, 2013, to September 30, 2014).

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