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Changes That Will Improve Your Retirement Plan

Got resolutions? Most of us do, but here’s a list of 10 actions that will help make your retirement more successful.

BOOST RETIREMENT CONTRIBUTIONS. The New Year is a great time to boost your retirement contributions, and for 2019 you can contribute more than ever before. The maximum annual 401(k) con- tribution is now $19,000 plus $6,000 if you are older than 50 (for a total of $25,000). If this amount is unaffordable, simply try increasing your contribution, because over time it can be a big deal.

DO YOU NEED A RETIREMENT PLAN OR WANT TO IMPROVE YOURS? Inquire with MDIS about our Multiple Employer 401(k) Savings Plan. Its design and advisors give you personal service, and it’s a great benefit for you and your employees.

MAKE CATCH-UP 401(k) CONTRIBUTIONS. I touched on this above. If you are 50 or older, you have the ability to contribute an extra $6,000/year. It doesn’t have to be all at once—do it each 2-week pay period and you’ll hardly miss it—but you’ll be glad you did when it’s time to retire. You’re getting a break, but you must take advantage of it. Even if your birthday is later in the year, you can start making catch-up contributions anytime during that year you will turn 50.

GO ROTH 401(k). Have you thought about making some of your contributions to a Roth 401(k)? Traditional 401(k) contributions are pretax and grow tax-deferred until retirement where they are then subject to taxation. Roth 401(k) contributions give no immediate tax break, but you won’t pay any taxes on distribution, and these funds are not subject to required minimum distributions which begin at age 70½. Roth IRAs are another possibility, but there are income limits, whereas with Roth 401(k) there are not.

AFTER-TAX 401(k) CONTRIBUTIONS. In addition to making regu- lar 401(k) contributions (traditional or Roth), some plans allow em- ployees to make additional after-tax contributions to bring the total amount to $62,000 (instead of the maximums $19,000 or $25,000).

TAKE TIME TO REVIEW. Review your 401(k) investments and contributions at least every year, but more often if possible. These procedures are often set on auto pilot, but if a mistake is made then the mistake may continue over and over. Review and verify to make sure your retirement plan is working for you like it is supposed to.

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DO YOU HAVE MULTIPLE INCOME SOURCES? If you have several sources of income, consider the various retirement plans that can be connected to those sources. Depending on your circumstances, you may be able to utilize a defined benefit plan where you could put away up to $225,000 each year depending on age and income.

MAX OUT IRA CONTRIBUTIONS. Don’t forget about Individual Re- tirement Accounts. You may be able to contribute to a 401(k) as well as an IRA. Annual limits are $6,000 plus the catch-up contribution of $1,000 if you’re older than 50. You may designate this as a Roth IRA or establish a Roth Rollover IRA by converting traditional funds to Roth. This may require the payment of taxes for the conversion.

INCLUDE A HEALTH SAVINGS ACCOUNT. An HSA should be a part of your retirement plan. They aren’t as well known and are un- derutilized, given they provide triple tax-free benefits. Besides getting a deduction when you fund an HSA, the money comes out tax-free before and after retirement as long as it’s spent on medical expenses. You cannot contribute to an HSA unless you have a High Deductible Health Plan, nor can you contribute if older than 65. Contributions are up to $3,500/year for an individual or $7,000/year for a family.

CONSIDER ROTH CONVERSIONS. These allow you to convert all or some of a traditional IRA into a Roth IRA which provides for tax-free growth in the future and no required minimum distributions. Roth conversions can be advantageous in years you have lower in- come and in market drop years. When converting to a Roth, you must pay taxes because the traditional IRA you’re converting was probably tax deductible. Under the new Tax Cuts and Jobs Act there are no do- overs. Once you convert to a Roth, you cannot take it back. Thus, it requires careful consideration, but still is good for most people.

ROLL OLD 401(k)s INTO IRAs. Do you have old 401(k) retirement plans from past jobs? If so , you may want to consolidate them and roll them into an IRA. This is advisable for several reasons. It simpli- fies things and may provide you with more investment choices, help avoid fees and give you more flexibility regarding Roth conversions. f

The 2018 tax year is the first year under the Tax Cuts and Jobs Act. Although some of the tax change provisions may expire in 2025, it is important that you understand them and use them to your advantage. We’ve only covered a few here. Contact us if you would like the 2019 Key Financial Data: we’ve provided this for more than 10 years and it is a very useful planning reference. Call 800-944-7550 or email info@ This information is not intended to be tax, legal or investment advice.

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