Between the hectic holiday season, rife with spending, stretching budgets and bargaining with bottom lines, the New Year if often met with angst. Given the uncertainty surrounding the proposed - now passed - tax reform, perhaps the coming year feels even harder to navigate, financially. Fortunately, a little guidance goes a long way.
In this three-part series, we share what you need to know in order to enhance, protect, and target your assets for a stronger start to 2018. Here, we take a look at taxes and how best to manage your funds so that you skate through tax season, penalty-free, with your assets protected.
Give Yourself a Break
A tax break, that is. consider your employer’s 401(K) contribution plan and set aside enough funds to contribute the maximum allowable amount that your employer is willing to match. If you don’t know whether your company offers such a plan or what it takes to qualify, just check in with your employer’s Human Resources Division. Contributing as much as you possibly can - based on the maximum allowable amount, will pay off when tax season rolls around. Offset what you would pay in income tax by allocating as much of that income as you comfortably can to your 401(K).
This way, you’ll reap a two-fold benefit. By investing in your 401(K), you’ll not only save for your future, you’ll also avoid unnecessary tax payments, presently.
Age. It’s More than a Number.
With respect to your Required Minimum Distribution (RMD), your age could result in a penalty come tax time. If you have 70.5 years of age under your belt, you need to be keenly aware of your Required Minimum Distribution. The IRS has established how much money you need to pull from your retirement account, annually. If, for whatever reason, you neglect to withdraw this amount, the IRS will assess a 50% tax on the amount that should have been withdrawn.
No idea what your Required Minimum Distribution is? There is no universal figure when it comes to your RMD. To play it safe, consult with Chatterton & Associates and trust our expertise to keep you on top of your financial tax obligations.
Chatterton & Associates, The Wealth Management Team, Inc.