Good Morning, –

I hope the New Year is treating you fantastically!  Obviously, we’re getting close to Tax Season, W-2s will be sent out in the next week and the early filers are already ringing the phones. 

Before me and the team get lost in preparation, though, I wanted to take a few minutes today to share some thoughts about retirement. 

Now, I’ve discussed this plenty of times before, but to me, the first step in retirement is to know and execute the right accounts.  There’s a couple of obvious reasons, but the main, short-term reason is simple – those contributions reduce your tax bill. 

With that in mind, are you maximizing those contributions?  How about those accounts? 

Today, nearly every employee has access to an employer-created 401(k) and while most taxpayers will enroll in those accounts, many aren’t sure how much to take. 

In fact, there’s a lot of misinformation about that. 

Some people will advise to maximize your personal contribution – depending on your age, that could be up to $19,000 a year.  Others say to only maximize it to the degree you’ll still be getting a contribution from your employer.  If they contribute a percentage up to, say, $6,000, then you should only contribute $6,000.

Here’s what I think – there are a lot of ways to save for retirement and the contributions you make to one account are a direct reflection on where your total contributions are earmarked to go. 

If you feel good about the mutual funds your employer offers in their 401(k) program and you can manage those effectively yourself, then maximize the contribution and manage the monies you make from those investments. 

On the other hand, if your employer’s 401(k) is … maybe not so good … then you’d be wise to look elsewhere. 

Truth be told, you’re probably smart to look elsewhere anyways, because in the grand scheme of things, you’re not maximizing your tax refund (or minimizing your tax bill, if you like).

For example, even though we’re past the New Year and you’re not allowed to make any contributions to your 401(k), with a Roth IRA, you’d have until April 15th to continue to make contributions.  The nice part about that?   By using the two accounts, you can manage what fiscal year contributions were made in, so, if you anticipated a major event in one year – the birth of a child, buying or selling a home, or marriage, you and I could sit down and plan the best way to minimize your tax bill for two years, not just one. 

Another account I’ve spoken about often in these emails and many employers are offering is the Health Savings Account, or HSA.  With an HSA, you’ve essentially got a “slush fund” for healthcare, especially if you have a high deductible.  In most cases, though, that account doesn’t have a specific timeframe for the funds to be used – and your family can contribute up to $7,100. 

Again, lowering that potential tax bill. 

The last account I don’t see a lot of employees utilizing to the fullest extent is the 529 College Savings Fund.   These contributions aren’t tax-deductible on the federal level, although invested funds grow tax free.  The nice part, though?  In many cases, you may be able to deduct 529 contributions from your state taxes.  Oh, and you even have to have a child to set these up – it could be for you, a grandchild, niece, or nephew. 

Now, let’s get down to the real reason I’m writing this – the long-term goal.  Everybody has to pay taxes and the “game” is often only thought of in terms of how to minimize your taxes this year.  As I mentioned last week, though, there’s a longer play at hand – the quality of life you have in retirement and the legacy you leave to your family. 

Each of the accounts I’ve listed above has an “employer-based” root, but can usually be expanded considerably for the self-employed.  By taking the time this year to not only set these accounts up or reimagine how they can work together, you can do something many Americans aren’t successfully planning for – retire wealthy.

If you’re ready to get your retirement back on track and minimize your taxes this year, then let’s sit down and have a talk.  My team and I have a lot of tricks up our sleeve to help you and one hour of your time could change everything.

Happy New Year!

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