Retirement Account Check Up…Prepare For Year-end.
Lower your taxable income.
Boost your retirement savings.
Grow your money tax deferred.
1. Business Owners.
Solo 401k – These are great for single owner/employee businesses.
SEP IRA – Good for single owner/employee and also small businesses.
Traditional 401k – Tax credits are available for new plans, up to $5000.
For simplicity’s sake, all three options have a maximum contribution limit of $66,000 for 2023, $73,500 if you are over 50 (only the SEP IRA does not have a catch up provision). However, the rules are different in terms of how to meet the limit for each plan type. If you own a business and don’t already have this sorted out — I’d be happy to help.
https://www.irs.gov/retirement-plans/retirement-plans-startup-costs-tax-credit
2. If you are an employee.
Reach for the max in your 401k: $22,500, $30,000 if you are 50 or older. Plus the match.
3. Don’t forget about the IRA and ROTH IRA.
If you are maxing out your employer sponsored plan you can still contribute to a
IRA or ROTH IRA $6500, $7000 if you are 50 or older. Income / deduction limits apply for both – be sure to check the numbers.
https://www.irs.gov/retirement-plans/ira-deduction-limits
https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2023
4. Advanced Retirement Strategies.
The Back Door ROTH is not well known, yet it is a smart strategy for high earners. It allows you to convert your IRA contribution to a ROTH IRA. An even more special maneuver can allow you to convert 401k assets into a ROTH. Be sure to work with a qualified advisor to get this done correctly. It’s not a couple clicks on the desktop, it is quite a bit more involved and worth the effort.
5. IRA conversions to ROTH IRA.
Converting IRA assets to ROTH is a wise choice. The amount converted is treated as income, so consider boosting your conversion in a low income year. Also be sensitive with regard to your tax bracket – don’t trigger a higher bracket inadvertently. Most people usually spread these conversions out over a few years.
Reminder:
Why ROTH over IRA…both growth tax deferred, but only the ROTH can be withdrawn in your retirement years tax-free.
A quick reminder: Tighten up your banking.
It is quite the contradiction, but a bank is a terrible place to keep your money. Get off the 0.5% interest rates in your checking and savings accounts. A Money Market Fund is considered a cash equivalent. There are a few types of Money Market Funds and in general, they are currently paying over 4.5% interest. Buying 4.5% CDs at your bank is not the equivalent – ask me why.
I often meet people with large sums of cash at the bank who can benefit from consolidating your assets with a firm like Charles Schwab. Their platform has amazing Money Market, Treasury Bill and bank issued CDs for short-term cash management options, low fees and a great interface.
Here are the scary charts about banks losing deposits:
https://twitter.com/biancoresearch/status/1693048718189113761
Enjoy the fall season…beautiful days here in Northern Nevada.