December 1, 2017

Practical Planning: Managing your retirement accounts

Overwhelmed with year-end planning? If you are still in your working years, ask yourself these three simple questions about retirement savings to start 2018 in a strong and secure position.

  1. Are my savings in line with my income?

If you had an income increase in 2017, it may be time to revisit the amount you contribute to your retirement accounts. The annual contribution limit for 401(k) plans is increasing from $18,000 to $18,500 in 2018. If you have been contributing to your retirement accounts by a percent-of-salary formula, a salary bump may present an opportunity to max out your retirement contributions to an employer-sponsored plan.

As you review your 2017 spending, look at your savings contributions and determine whether you can grow your planned savings by increasing elective salary contributions into your employer-sponsored plan.

The end of the year is also a great time to check your retirement savings allocation and make sure it’s still in line with your financial goals and time horizon.

2. Am I taking full advantage of my employer-sponsored plans?

Review your employer’s retirement savings options. At the very least, make sure you are contributing sufficient funds to receive the full amount of any employer match.

If your employer offers both pre-tax and Roth retirement plans, consider splitting your savings between the two accounts. In this uncertain tax environment, it may be advantageous to contribute to both pre- and post-tax retirement savings accounts, especially for younger investors. If your employer only offers a pre-tax plan, contributing to a separate Roth IRA (up to $5,500/ per year under age 50, see income phase-out rules here) is an excellent way to supplement pre-tax contributions.

3. Is my family covered? 

Parents with older children who are beginning to earn income can open and fund a Roth IRA for that child with a gift equal to the child’s earned income, up to the $5,500 limit. It’s never too early to start saving!

While reviewing your retirement accounts, double-check that your primary and contingent beneficiary designations are correct and up to date.

In addition to retirement accounts, the end of the year is an excellent time to review your family’s other saving priorities. A top priority should be to maintain an emergency savings accounts with liquid funds equaling 3-6 months of living expenses. Also, consider beginning to fund 529 college savings plans when your children are young.

Questions about your retirement accounts or any other practical planning issues? Don’t hesitate to reach out! Arnerich Massena is here to help you through all of your family’s planning needs. You can also learn more about practical planning with our end of year tax tips.