Tag Archives: 401k

Time of the year to check your retirement contributions!

As we enter the home stretch of the year, we wanted to remind all to confirm the desired contribution level is being met for your company retirement plan.

Retirement Contribution Levels

401k and similar corporate plans – $18k + $6k if over age 50

Now is a good time to confirm our desired level of contribution is actually occurring. If not, this is the perfect time to adjust.401k-illustration-1637162

  • Bonus offset
  • Pay Raise
  • Company ownership change
  • 401lk/similar plan Provider change
  • Investment options adjustments

All of the above and others, are reasons contribution levels may vary from our desired level.

Take a few minutes to check your latest paycheck and confirm your YTD deferrals …. Contact us with any questions, we are glad to help !

Have a great “Confirmed Retirement Contribution” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

 

April 2017 Podcast Video, Financial Planning Tax Review and Earnings Update- By John Kvale

Whew, that was easy…. tax season is finally mostly over ….

We wanted to look back one last time on our personal taxes before we sunset those tax strategies for the high point of the season….

As a reminder,  we started with an Audio Podcast format for those that are unable to SEE the video or just prefer to listen to the audio… this makes the review slightly longer, but more descriptive.

Enjoy!

April 2017 Video

 

Financial Planning Tip(s)-

AMT Tax Reminder

We ran across a lot of AMT or Alternative Minimum Taxes this season

Here are the key thoughts from our detailed post on AMT earlier this month-

  • Incomes between $170k and $313k joint and singles over $100k – you are in the cross hairs of AMT
  • Deferring income may be useful
  • Accelerate income

There is not a lot of planning changes with AMT, but in this case knowledge may be power!

Possible MAJOR tax reform

Late in the month an overview of major tax reform was released.

Here is a link from the White House

Here is a link from Barron’s that does a pretty good analysis

Here is our article on the possibilities earlier this month

What to do if you overfund your 401k/retirement plan

In our overfunding 401k post here, we discuss how your 401k/retirement plan can get overfunded….. here are the main points

  • Refund the extra amount ASAP
  • Apply the extra to the new year
  • If its a super small amount, its not the end of the world

Capital Market Comments

First Double Digit Earnings growth since 2011 expected

From our friends at Factset, who do a terrific job of outlining historic and future earnings.

Earnings are the ultimate driver of capital markets!

4-27-17 SP earnings estimates - Factset

What is nice about these estimates are that historically companies have been beating the street estimates … if this continues, the actual earnings may be even better double digit growth…. time will tell and we will be watching!

Hello May!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com,

Taxes are Done… Finally … A Few Tips to Remember Before Sticking that Information Back into the Files

After each tax season we always feel relieved, as the pressure builds slowly but surely, much like the frog in the boiling water. This story has a better ending.

Taxes are done!

Here are a few tips that are hot of the presses and good reminders for NEXT years taxes!

HSA’s are Great, as is all pre-tax medical savings plansUncle Sam

If you can do an HSA, do one. If you are not sure, reach out to your employer and find out if you qualify, they will know in very short order. Don’t worry about using all of your HSA during the year, you will eventually need the funds for medical expenses.

We prefer HSA to the FSA’s or other plans that may expire annually. However, all pre-tax plans for medical expenses are great. When using the FSA or other “use it or lose it” type of plan, just make sure you do use it and do not let those hard earned dollars expire as the calendar turns to a new year.

Max that 401k

Now is a great time to make sure you are maxing your retirement plan. Do it evenly if possible! In a perfect scenario you likely want to run out of contributions in late November or early December. There are situations such as retirement, job change or other that may make it more appealing to fund early.

Do not overfund your 401k. This can be done via a job change or plan change. We have a more comprehensive article coming soon, but be reminded we do not want to over fund our 401k plans.

New plans can be aggressively invested. As the amount grows, the portfolio should be slowed down and be better diversified for the long term.

You Owed a bunch

If you owed a large amount of money and this is occurring repeatedly, it may be time to adjust your exemptions on for your employers W-4 records of your personal exemptions. Determine what your exemptions are currently and make an adjustment down in number. After your next paycheck, extrapolate the adjustment and see if that will cover your liability. Reach out to us if you need help!

Extension Filers

If you filed and extension, keep your feet moving, especially if you had large transactions or other items that may throw you into an “owed” mode. The longer you wait the more the penalties will be if you are caught by surprise.

Relax and enjoy the rest of the week and the full speed ahead into Summer !

You deserve it!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

When to contribute to a Roth, when not to contribute to a Roth, benefits and limitations

Recently we have received several questions about the Roth IRA. While many studies show only about 1 in 4 would benefit from a Roth, there are times when a Roth is the best choice. There are distinct differences in Roth’s versus other pre-tax plans which make appropiate tax planning very important when implementing a Roth contribution.

Roth Versus 401k or other Pre-tax Plans

The most important factor in determining to contribute to a Roth or not is understanding one key component:

A Roth is a bet your tax rate will be higher at retirement or in the future rather than currently!

Due to the tax benefits, all other items being equal, a Roth is most beneficial when one expects to be in a higher tax rate later or at retirement. Under normal circustances most families are in a LOWER tax bracket at retirement than during their working years, making a pre-tax plan more appropriate.

As a refresher, a Roth is an after tax contribution that grows tax deferred until used. No tax deduction up front makes for less immediate tax benefits but greater benefits during retirement or later in life when draws are taken on a tax free basis, under current tax laws.

Roth plans have less stringent RMD (Required Minimum Distribution) requirements than many other IRA/401k type plans. Pre-tax plans have mandatory distribution requirements due to their “never taxed” status. Since the contributions to funds and growth in pre-tax plans are without taxes, the IRS wants to get their taxes. 70.5 is the latest age one can defer the distributions of a pre-tax plan in most cases. Contrasting that to a Roth; Since taxes were originally paid on the contributions, distributions are not mandatory in most cases as the IRS receives no benefit under current law and thereby deems no mandatory distributions unless a Roth has been received as a beneficiary in which is it subject to similar mandatory distributions of pre-tax plans.

When a Roth is correct? 

Since a Roth is a bet taxes will be higher in retirement or later in an earning career, lower income periods of employment/careers tend to be the most beneficial for making contributions. Think early in a career or on off years of regular work for most tax beneficial Roth contribution times.

In a year of negative or low income the conversion of IRA to Roth may be an optimal strategy. Under certain situations a regular IRA may be converted to a Roth showing the income from the IRA. This would essentially pull forward the taxes from the IRA to the current year, which may be beneficial during very low or even better during a negative earning year. There are very few limitations on converting a IRA to a Roth as the IRS is benefiting early from the pull forward to taxes. These conversions, done correctly are without the normal early IRA 10% penalty.

Since a Roth is after tax and growth is tax deferred, the earlier the better for maximizing a Roth’s full potential. Tax deferred growth over longer periods of time will have greater benefits than short periods of time. In fact, VERY short periods of tax deferred growth in a Roth make it MUCH less appealing, if even appropriate at all!

Roth contribution limits

Single filers cannot make a Roth contribution once their income is greater than $133k in 2017 and married filing joint cannot make a contributions with incomes greater than $196k.

Roth contribution limits in total are $5500 regular plus $1000 catch up for those greater than age 50. Some employers offer Roth 401k plans which allow higher contribution amounts similar to the $18k and $6k catch up of regular 401k plans, however mandatory RMD distributions do come with these types of plans.

Conversion from IRA as mentioned above has no limits on income or earnings to qualify. Since the IRS is receiving tax dollar early, all other things considered, the rules are much more flexible for converting an IRA and creating a tax liability earlier than may otherwise have occurred (as mentioned above, carefully timed conversions may lead to very little tax liability if other outside factors have lowered the tax exposure.)

In closing, we agree with the studies that most do not need a Roth and many may never have the option for a Roth at all. This being the case, there are always certain circumstances that may make a Roth or a Roth conversion an ideal tax planning tool to offset unique income years as mentioned above.

Have a Great Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

New Retirement Limits – Same as before … well almost !

The IRS recently released the updates for the 2017 Limitations on retirement benefits.

It was pretty easy… THE SAME as 2016!

From the IRS Release:

Highlights of limitations that remain unchanged from 2016irs

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
  • The limit on annual contributions to an IRA remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

 

There were a few changes that were long on words, but short on substance… here they are.. again from the IRS release..  Print – Click this link to Print this page

Highlights of changes for 2017

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the saver’s credit all increased for 2017.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions.  If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.)    Here are the phase-out ranges for 2017:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $62,000 to $72,000, up from $61,000 to $71,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $99,000 to $119,000, up from $98,000 to $118,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $186,000 and $196,000, up from $184,000 and $194,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $118,000 to $133,000 for singles and heads of household, up from $117,000 to $132,000.  For married couples filing jointly, the income phase-out range is $186,000 to $196,000, up from $184,000 to $194,000.  The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the saver’s credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $62,000 for married couples filing jointly, up from $61,500; $46,500 for heads of household, up from $46,125; and $31,000 for singles and married individuals filing separately, up from $30,750.

 

Pat yourself on the back if you are still awake at this point… my apologies if you fell over… Bottom line, not a lot of changes!

Have a Great Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

November 2016 Video, Financial Planning Tip and Economic Review- By John Kvale

Here is our November 2016, Financial Planning Tip and Monthly Economic Review, along with a Video for your viewing and listening pleasure. Hope you enjoy!

November 2016 Video

 

Financial Planning Tip –

Check that 401k or other retirement plan for maximum contribution

  • $18k is the maximum deferral for most 401k and other similar plans, especially in the corporate arena
  • Those at age 50 or greater get another $6k- added to above is $24k total!
  • Without regard to the company match, max this total amount if possible
  • Taking a peek at your YTD paystub will confirm your deferral amount
  • If you are not there, turn the jets on and up your withholdings
  • When January comes, be sure to lower the deferral rate

Capital Market Movement

Stunning Move in Interest Rates

We have crowed for months (maybe longer) that too low of rates could be a hamper on the Economy, doing more harm than good. We are not changing our tune now!

This from our Mid-Year 2016 Newsletter and JPMorgan:

jpmorgan-rates-too-low-graph

Initial headwinds, may occur but eventual greater fixed income returns may be around the corner.

When rates first go up, bond prices drop…the longer the term (i.e. 30 year) the more they drop. Eventually as bonds mature and re-invest at higher rates, the net result is bigger income …. ignore the top line for a while, just enjoy soon higher income may be advisable.

5 Year (Shorter) Rates Move

 

11-29-16-5-year-treasury

This is the 5 year treasury…. yea the 5 year, that is a short time frame. It was under 1% just a bit back in our rear view mirror. Today, near 1.8%, which is where the 10 year was recently.

Barring some type of crisis, a rate increase in the super short fed funds rate (think checking accounts) should be on the docket for December. 

Oh, did we mention there was election this month?

Have a Great Day!

See you in 2017 !

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com
JK Street Cents Logo

 

401k Reminder – Friday – Travels Abound

Tis the season for many new and replacement investment options for 401k plans. While our fancy New Vault, which we are still establishing connections does a fantastic job of reporting, it has one catch.

401k:  New Options = Needed Review401k

Be sure to let us know if you have a new investment option in your 401k. ESPECIALLY important to let us know if your current option is being replaced with a new fund.

We will do a complete analysis to determine the appropriate action.

Hat-tip GA from the field …thanks for the reminder of the season!

Friday – Travels

Next week starts a two week trip out of the state for business, friends, family, tennis, Newsletter creation, and lastly a little R & R.

Expecting to be heavily tethered next week, but as a family favor lightly tethered the following week.

Always connected

…. Oh, some terrific articles coming here too…one VERY IMPRESSIVE research related post from Donald “The Brain” that we have never seen completed…such the research and neat findings.

But …. that is all next week, and today is a Friday, heading into a summer weekend! ENJOY!!!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com