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Savvy Year-End Tax Moves for Retirement Owners


As the end of 2014 quickly approaches, retirement plan owners are advised to look at strategies to cut their tax bills now rather than wait for future acts of Congress. Here are some suggestions to consider from Kiplinger’s:

Max out on tax-deferred retirement savings plans. The limits for contributions to a 401(k) or other employer-based retirement plan for 2014 is $17,500; additionally if you are over the age of 50, you can contribute up to $5,500 more. Contributing the maximum is also a smart move if you plan to convert a traditional IRA to a Roth IRA since it lowers your taxable income. IRA contribution limits in 2014 are $5,500; those over 50 can stash away $6,500.

Make gifts before 2014 ends. The federal estate tax exemption for 2014 is $5.34 million per person, and the annual gift tax exclusion amount is $14,000. These numbers, adjusted annually for inflation, matter to wealthy folks who are trying to whittle down their estates by making gifts to family members. It’s an annual exercise, done at year-end or the first of the year, depending on the family. The federal estate tax exemption—that’s the amount an individual can leave to heirs without having to pay federal estate tax—currently at $5.34 million for this year, up from $5.25 million for 2013, will rise to $5.43 million in 2015 . That’s another $90,000 that can be passed on tax-free. The top federal estate tax rate is at 40%.

Postpone RMDs as long as possible. With the exception of Roth IRAs, retirement account owners must begin taking RMDs from their retirement accounts for the year they reach 70 ½ and continue for every subsequent year. An exception applies to employer sponsored qualified plans, 403(b)s and governmental 457(b) plans, allowing participants who are still employed by the plan sponsor to defer beginning RMDs past age 70 ½ until they separate from service with the plan sponsor. Rolling over amounts from your Traditional IRA to an employer sponsored retirement plan can allow you to defer RMDs as well as allow the amounts to continue accruing earnings on a tax-deferred basis. So postponing your RMD as long as possible (but not past mid-December) may pay off. However, whether that is the most suitable option for you depends on your financial and tax profile.

If you’d like to learn more about retirement and estate planning strategies, call our office today at 727-537-6818 to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, we’ve decided to waive our fee is when you call to schedule your planning session with us, you mention this article. Call today and mention this article!