Taking
Advantage
of Your
Year-end
Benefits
By Daniel T. Newquist,
CFP®, AIF®
Dan Newquist, CFP®,
AIF®, Principal & Senior
Wealth Advisor with RNP
Advisory Services, Inc.,
a registered investment
advisor, Morgan Hill. He
can be reached at 408-
779-0699 or dnewquist@
RNPadvisory.com.
Securities offered through
Foothill Securities, Inc.,
member FINRA/SIPC, an
unaffiliated company.
92
As the end of the year approaches, it’s important to take advantage of any
annual benefi ts that are available to you before the end of the year. Here is
a short list of some of the more popular items to consider.
Maximize Retirement
Contributions
When contributing to a company
retirement account, like a 401(k), fi rst
consider investing up to your company’s
match level and then consider maxing out
your contribution limit. The contribution
limit for 2016 is $18,000 for participants
under the age of 50; participants over the
age of 50 can contribute an additional
$6,000. Retirement accounts are a great
way of putting money away that can grow
tax deferred or tax-free (depending on your
account type). While individual retirement
accounts (IRAs) allow you to contribute
for this calendar year up until the April
tax fi ling date of next year, it is a good
thing to check if you are eligible to make
a contribution and if so, make a plan to
invest. Individual contribution rates are
$5,500. Individuals age 50 and older can
contribute an additional $1,000.
Give to Charity
If you are planning to donate money or
goods to a charity, be sure to do so by the
end of the year to potentially quality for a
tax deduction. Taxpayers that itemize their
deductions (i.e., you or your tax preparer
lists out all of your deductions instead of
using the fi xed dollar amount standard
deduction) may be able to lower their tax
bill by donating to qualifi ed charitable
organizations. You can also donate
securities (e.g., stock) that have a low cost
basis to avoid paying the capital gains tax
on those securities. And, you still may
be able to receive a tax deduction for the
market value of your donation.
GILROY • MORGAN HILL • SAN MARTIN
Take your Required Minimum
Distribution (RMD )
If you are age 70 ½ or older, you are
required to take a minimum distribution
from your retirement accounts. This
is possibly the most important task
to remember about your retirement
accounts. If you fail to take your RMD in
a year you are required to do so, you may
face a 50% tax penalty on that required
distribution amount. You have saved a
long time, and paying penalties is a waste
of your nest egg.
Spend Down Flexible
Spending Account
A Flexible Spending Account is an
account your company may allow
you to put money into to help pay for
medical expense with before-tax dollars.
Unfortunately, the money in this account
can only be used during the year it was
deposited, and any remaining balance
disappears when the ball in Times Square
drops. So, now might be a good time to
get those new glasses, or have any dental
work you have been putting off done.
Open An Educational
529 Savings Plan
These accounts can be set up to help save
for educational expenses. They enjoy tax free
growth, and may even provide income tax
advantages, depending on your state. It is
important to note that these accounts must
be used for educational expenses, otherwise
a hefty tax could be owed.
NOVEMBER/DECEMBER 2016
gmhtoday.com