Year End Retirement & Wealth Planning Steps

Paul FennerPersonal Finance


At the end of the year, we strongly encourage people to make the most of their retirement savings options.  A few simple and easy to do steps can go a long way in helping you defer unnecessary taxes for this calendar year while setting yourself up for success in the upcoming year.

  • Focus on maximizing 401(k) Contributions – this year individual under 50 can contribute $17,500 while individuals over 50 can max out at $23,000.  In 2015 these limits increase to $18,000 and $24,000 respectively.
  • Take Minimum Required Distributions (RMDs) – You generally have to start taking withdrawals from your IRA or retirement plan account when you reach age 70½. Roth IRAs do not require withdrawals until after the death of the owner.  If you do not take any distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required.
  • Assess 2015 Contribution Levels – Begin planning for 2015 today.  If you have maxed out 401k and/or IRA contributions for this calendar year make sure your automatic contributions are set to kick in when the clock strikes midnight on January 1st.  As noted below 401k limits increase next year while your IRA contributions stay at $5,500 for individual under 50 and $6,500 for those over 50.

One last piece of advice is to not put off acting upon these simple but critical steps today.  Waiting to the last minute puts you at risk of derailing your wealth management plan.

Social Security: Finding your best filing strategy – Deciding what your best course of action is when it comes to filing for Social Security benefits is still largely a game of assumptions.  I see more and more articles discussing the file and suspend option for couples but most people still do not understand what this means.  The basic principle to understand about Social Security is, the longer you wait the more that you will receive as the program stands today.  Some people for financial reasons need to take their benefits early while others apply the “bird in the hand is worth two in a bush” philosophy.  The final decision is based upon a plethora of personal factors so don’t try to put yourself into a one size fits all line of thinking.  When it comes to developing a Social Security strategy, working with an advisor can turn a small investment into a financial life preserver.

The data in this piece, The Cost Matters Hypothesis Wins Again , emphasizes the correlation between what you pay in mutual fund fees and the return that you receive; the higher the expenses the lower your return.  If you have a 401k and mutual funds are your only investable option, be sure to pay close attention to the expenses that those investment options charge.  One of the key principles that I emphasize to the people regarding TAMMA is the customized approach I take to building portfolios for individuals.  I do not utilize mutual funds but instead perform my own proprietary analysis to select individual stocks, bonds, and some ETF’s to be held in individual portfolios.  This approach provides additional value to clients in the form of lower fees typically and the benefit of having an advisor who can oversee all of your investable assets.

Most people may not realize that Psychology is probably one of the largest impacts that can affect an individual’s return.  Yes the price that you pay certainly has an impact as well but the thought process that drives buy and sell decisions is largely affected by our own bias’ whether we realize them or not.  This Motley Fool article, 15 Biases That Make You Do Dumb Things With Your Money addresses some of those bias’ that may affect your investment portfolio.  We are very keen on the last one within this list

  • “The most important and powerful bias of them all, “bias bias” is the belief that you are less biased than you really are. If you read this article without realizing I’m talking about you, you’re suffering from bias bias.”