How to Turn Your RMDs into Charitable Gifts and Save Taxes

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Over 70 ½? Have a traditional IRA? Give to charities? We have 3 words for you:

Qualified Charitable Distributions.


Most people give because they are passionate about a cause or they want to make an impact for good, not for a financial incentive. Nonetheless, if you desire to give, why not do so with money that you must take out anyway.  If you are fortunate enough to not need all your required minimum distributions for living expenses, or if you are planning to give out of your normal expenses, you can avoid income tax on your required withdrawal by donating your money directly to a qualifying charity.


Let’s review the rules for qualified charitable distributions:

·       You must be 70 ½ or older to make a tax-free charitable contribution.

·       You must give from your IRA subject to RMDs, not a 401k or similar type of retirement account. Inherited IRAs are eligible, but SIMPLE IRA and SEP plans are excluded.

·       If you are age 70 ½ or older, you can transfer up to $100,000 per year directly to an eligible charity; if you file a joint tax return, your spouse can also contribute up to $100,000 for a total of $200,000 from retirement savings excluded from income tax treatment.

·       The charity must be a 501(c)(3) organization.

·       The gift must be transferred directly from the IRA by the IRA trustee to qualify. If you withdraw it and later donate it, it will not qualify for a tax-free qualified charitable distribution.

·       You must make the contribution by December 31.


So, for a retired individual or couple that is 70 ½ or older, own an IRA subject to required minimum distributions, and want to donate to charity, a qualified charitable distribution can be an avenue to preserve an income-tax-reducing charitable deduction under our new tax law.


Why make a qualified charitable distribution (QCD) instead of a normal charitable gift?


The new tax law will see fewer people taking advantage of itemized deductions such as mortgage interest and charitable gifts due to the doubling of the standard deduction possibly being a greater amount. If you do claim the standard deduction, you unfortunately lose any tax benefit from your charitable gift. With that said, a QCD will first count towards satisfying your required minimum distribution for that year.


Secondly, the distribution is excluded from your income, thereby reducing your taxes, which is a real benefit under the new tax law. And an additional bonus of using this strategy is it helps reduce your Adjusted Gross Income. This is important for several reasons. Your AGI determines the amount of your Medicare premiums in the following year, how much of your Social Security is subject to income taxes, and if you will be subject to the Net Investment Income Tax. Reducing your Adjusted Gross Income will help with each of these areas to lower overall income and/or taxes.


A few examples might help to clarify:


·       Kathy, a single taxpayer, has reached 70.5 and is subject to a $25,000 RMD from her IRA for 2018. Her itemized deductions will not exceed $13,600 so she will use the standard deduction. She does not need all her RMD for living expenses and usually gives around $6,000 to charities each year. Kathy will make $6,000 in qualifying charitable gifts directly from her IRA and then take the rest of her RMD as a taxable distribution for herself. Kathy meets her full RMD requirement but will only owe tax on $19,000. She therefore receives the tax benefit of a $6,000 charitable deduction.


·       John, a 71-year-old, has an IRA worth $750,000 as of December 31, 2017. His RMD for 2018 would be $28,302 based on the RMD table which requires the $750,000 to be divided by a factor of 26.5. John decides to use all his required minimum distribution to fund his charitable gifting. If John is in the 25% marginal tax bracket, he could avoid approximately $7,075 in income tax liability through giving.


As you can see, for an individual or couple who are in the 25% tax bracket, even a $1,000 donation can save $250 in taxes. You can also break up the donation and send it to multiple 501(c)(3) organizations. There are no IRS limitations on how many or how small the distributions may be to your favorite organizations if you provide the name, address, and other specific information for the charities.


There are other planning strategies for charitable gifts. It may be possible to bunch itemized expenses into one tax year to enable you to itemize in some tax years while claiming the standard deduction in other years. You may also be holding securities with large unrealized gains. By donating the securities to charity, you can benefit by avoiding capital gains, especially if you are able to itemize in that year.


A good plan can take your good intentions and create a winning strategy for you and your non-profit of choice!


A brief introduction to Impact Investing.

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Impact Investing – you may think it’s a new buzzword, but it’s nothing new. It has been around here in the U.S. since the 1700’s and there are many examples of specific investment mandates by many religions for millennia.

Many investors want to be sure their investments are aligned with their values. In recent years, these strategies have become more prevalent. It’s always important to keep the core principles of investing (like diversification, risk management, and fee management) at the center of portfolio construction, and thanks to more options in the last several years, that’s more possible than ever before.

Here are some common impact investing strategies:

Most people would choose to use mutual funds and/or ETFs to achieve broader diversification than what most investors could achieve by using individual stock or bond holdings, so we’ll focus on mutual funds and/or ETFs for now.

Impact Investing is a broad term that is a bit of a catch-all for the category. Within it, you can have any number of screens to determine the right investment strategy to have the impact you’re looking for.

Impact investing may be as simple as choosing to shop locally, or purchase items from businesses that support or advocate for causes that are near and dear to you. It can also mean choosing to invest in companies that share these values and put them to work in their own business practices.

Socially Responsible Investing

The most common form of this kind of investment uses a negative screen to pull out industries associated with alcohol, tobacco, and gambling. Some may also screen out firearms or companies involved with the production of weapons.  There are others that may use a positive screen to invest in companies that have certain worker policies, or show dedication to human rights.

For example, if you’re interested in learning whether a certain fund invests in firearms, there’s a site that will tell you:

Sustainable Investing

Many investors are interested in choosing businesses that promote environmentally friendly business practices, promote preservation, or have governance practices that are aligned with sustainability. These goals may be accomplished through a variety of means, depending on the industry or business involved. It could be a company that offers carbon offset credits, or purchases them for their own activities. It could be a paper company with strong practices tied to the sustainable harvesting practices of timber. There are companies that are focused on developing new advances in solar, wind, or water energy. There are a number of ways to invest in sustainable businesses.


Today there are more choices than ever before, which can be both good and bad. Good, because more specific screens can be applied to reveal investments that are aligned with specific values. Bad, because it can be difficult to decode all the language different investment companies use to develop those screens. 

Each fund manager can choose how they develop the appropriate screens for their fund, so it’s important as an investor to understand the differences of philosophy on how companies are included or excluded. For example, one fund has decided to base their screens on percentage of revenue derived from the exclusion list parameters. So, if a company still sells the offending item, but derives less than 10% of revenue from it, the company may still pass the test and be included in the fund.


We work with our clients to determine the best portfolio for them. It may not always include any of these options, but when it does, we’ll help guide the process to be sure there’s a good match!



Start Here ---> NET WORTH

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So, you want to actively plan for your personal goals and for retirement, but you are not sure where to start? A good place to start is with your net worth. That one simple number is a pretty good indicator of financial health. The process of calculating it will likely tell you a lot about your financial strengths and weaknesses.


What is my net worth?


Your net worth is not about your annual income – in fact, income is not even a component of net worth. A large income and a big house do not equal a high net worth if that big house and everything in it is attached to a lot of debt. And just because an arbitrary target in assets is reached (we see $1 - $5 million being talked about a lot in articles…), does not mean you can retire or that your net worth is where it needs to be if your spending isn’t in line with the assets.

We have seen families with giant salaries struggle to pay their mortgage, and others with modest incomes have money to spare!


It’s not about what you make. It’s about what you keep.


Your net worth is the value of all your assets (what you own) minus the value of all your outstanding liabilities (what you owe).


If you were to ADD the value of your

·       bank accounts

·       investment accounts

·       market value of your home

·       cash value of life insurance policies (not the face amount!)

·       auto and personal property

·       business interests


and then SUBTRACT your

·       mortgage

·       car loans

·       business loans

·       student loans

·       credit card balances

·       any other amounts you owe


you will find your financial NET WORTH. This is an important number to you for a several reasons:


1)  It gives you a real picture of your current financial condition. Whereas someone can possess many assets, if they owe as much or even more, then their financial situation is not as good as it appears. On the other hand, someone may not have a large value of assets, but if they have little to no liabilities, their financial situation may be better than it appears.


2)  Your personal net worth gives a reference point for you to measure progress toward debt reduction, savings retirement goals, as well as other dreams and aspirations. It reveals to you whether your financial activities including working, saving, spending and borrowing are leading you in the right direction or not. It also shows you whether your financial choices such as your career path, owning a home, or your investments are actually producing the results you want.


3)  Calculating your net worth periodically can motivate you to make wise financial decisions over time as you see your net worth improve. It also reveals trends in your monthly spending habits and their effect on your financial condition.


4)  Determining your net worth forces you to calculate what your assets are worth in the current market if you were to liquidate them.


Net worth is one of the top three numbers you should keep track of, along with your monthly savings targets and your credit score.


Secondly, (and more importantly), how can I increase my net worth over time?


The simple answer is to change your monthly habits to spend less, pay down debt, and save more. Juggling financial priorities can be a challenge, but the effort to work through the process is worth it!


If you start building an emergency fund and keep liabilities stable, your net worth will increase. If you spend next year paying down student loans and/or credit cards, your net worth will go up again. Buying a house should, over time, increase what you own (but be careful to not view your house only as an investment). If your investment accounts increase in value, or you set aside money for retirement, your net worth will reflect that and increase as well.


If you’re a young person, realize that you might start with a negative net worth, especially if you just got an expensive degree that will significantly increase your income for years to come. This does not mean your financial situation is in bad shape. It just means you need to be patient as that net worth begins to become positive over time.


But don’t just buy more to have more. Save more to give yourself the freedom to pursue the goals that are important to you and your family and to become more financially independent. The importance of a financial planner is to help you analyze your financial condition, point you in the right direction, and keep you on track to meet those goals.


So, know your net worth! And schedule a visit with us to review how to increase it.


Are You Ready for A Market Downturn?

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Don’t be alarmed by the title. We do not attempt to, nor could we, predict the short-term or even mid-term direction of the market. But History 101 would tell us that a downturn of some kind will eventually happen; and considering that the current bull market is the longest in history, now is as good a time as any to be sure we are prepared.

Preparation does not include keeping most or all of your money in cash. Again, we are not market timers, but keeping too much money in cash erodes its value over time due to inflation. Think about what your parents spent on a gallon of milk, a car, or even a house 25 years ago. That will give you a good idea of what happens to your purchasing power if you try to buy the same amount of goods and services today compared to what it would have purchased then. Therefore, parking all of your money in a savings account earning little to no interest or hiding it under the mattress are not good options. For money you might need in the short-term, maybe. Otherwise, there must be a better avenue to prepare for an eventual downturn.

Preparation also does not include panicking. Panicking causes investors to make costly investment decisions at the worst possible times. If investors pull out of the market altogether, not only do those decisions cause losses when the market is near a bottom, but then they lose out on the recovery and rally that has historically followed every bear market. The S&P 500 Index dropped roughly 50% during 2007-2009; however, afterwards from its low, the index has gained over 400% and counting. Selling off without a strategy can also cause tax consequences if the transaction incurs short-term gains to be taxed at higher rates than if left to be categorized as long-term capital gains. There are times and situations where it is warranted, but as always, we would recommend you consult your CPA for the best tax advice.

Complacency is the opposite of preparation. It is an enemy of our success when we allow it to keep us paralyzed and non-proactive. Ron Chernow correlates complacency with our finances when he says “You don’t want too much fear in a market, because people will be blinded to some very good buying opportunities. You don’t want too much complacency because people will be blinded to some risk.” Not doing anything and hoping things will work out when it comes to our financial future is not preparation.

 PLANNING is the best preparation! And that is exactly what we do as fee-only fiduciary financial planners. We learn about your values, life story and future goals to help you make wise financial life decisions that allow you to feel more confident in your financial future. Are you overexposed to overvalued areas of the market? Are you diversified among different sectors of the market? Do you have an appropriate blend of U.S. verses international equity and fixed investments? What about large growth stocks/funds vs small value stocks/funds? Do you have too high a percentage of your portfolio concentrated in the stock of your employer? Are you managing the correlations between investments in your portfolio? At Bridge Financial Planning, we help determine what asset classes, allocation ranges and risk profiles are acceptable for your specific needs, risk level and time horizon. We guide you in developing a strategy that you are comfortable with to weather the ups and downs of the market.

How long has it been since you stress-tested the entirety of your financial holdings? We use this tool to illustrate what a downturn in the market could do to your portfolio. This gives insight to tailoring a plan that brings peace of mind with the uncertainties of life. One needs to take reasonable steps to mitigate the effects of a downturn while maintaining enough of an equity mix to negate a loss of purchasing power in the long run and meet long term goals. And that looks different for each individual person and/or family as they plan for their future and strategize to meet their unique goals. But the key is planning and preparation.

So what is your plan and how will you navigate the volatility and unpredictability of the market? We can build a comprehensive plan and investment strategy that connect your goals for tomorrow with today. As fee-only financial planners, you can be confident that you will receive professional advice as well as planning and investment management services that are flexible to meet your needs. Then when the market downturn happens, and it will happen sometime in the future, you will be PREPARED.


Student Loan Considerations

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Student loans are becoming a more common planning topic that our clients want (and need) to address. This time of year seems to bring education back into focus. No one article can cover it all, but we’ve put together a few ideas that can help frame your decisions and options.

More Americans are attending college than ever before. According to the Georgetown Center on Education and the Workforce, 65% of jobs in America will require education beyond a high school diploma by 2020. But along with the increase in college graduates comes an increase in student loan debt. Student debt in America is almost $1.5 trillion which is greater than all outstanding revolving credit card debt. Over 44 million Americans hold this collective debt, which means about 1 in 4 adults are paying off student loans with the average borrower owing $37,172 with an average monthly payment of $351. Most would agree that a college education is still a good investment because of the earning potential over the course of a lifetime compared to the earning potential of someone without a degree or other certificate. However, the financial burden can be overwhelming and must be confronted head on.

So do we just not go to college? Well, it's not for everyone, and there is growing demand for trade and technical skills. Take time to evaluate all the available options for gaining skills, education, and experience!

If we do take the college route, do we just assume we (or our kids) will be stuck with this debt forever? No! There is life after student loans, and ways to minimize the burden.

Here are three recommendations concerning student loan debt.

1.    Avoid and/or limit debt on the front end as much as possible. In May of this year, the College Board reported the average cost of a public college at $25,290/year and $50,900/year for private college. Students and parents should research the costs of college including tuition, housing, meal plans, transportation, and books. Then, before applying for loans, exhaust every grant and scholarship that you could possibly qualify for. It takes a lot of time to research and apply to all the various ones that are available, but it is well worth the effort.

Students can apply for merit-based scholarships (awarded for achievement) and need-based scholarships (for students who need financial assistance). There are also numerous ones you can find through the financial aid office of the college, the U.S. Department of Labor’s Free scholarship search tool, and online that are geared towards particular groups of people, occupations, background, etc. In addition, you must fill out the Free Application for Federal Student Aid (or FAFSA) to apply for any federal aid. This is required by nearly all higher education institutions and must be updated yearly. Some schools may require the College Board’s CSS Profile. Please pay close attention to how the calculations differ! They don’t look at things quite the same way (parental support in a divorce situation, for example).

After finding all sources of income through scholarships, grants, 529 plans, and working and saving towards college, then and only then consider loans. Student loans are a combination of Federal and private loan programs. There are federal subsidized loans for undergraduate students, federal unsubsidized loans for undergraduate and graduate students, and PLUS loans for graduate/professional students and for parents of dependent undergraduate students. A subsidized loan is needs-based, and the federal government pays the interest while the student is in college. For unsubsidized loans, interest begins accruing as soon as the loan is taken out. If you do not qualify for a subsidized loan, your next option is to choose between a federal unsubsidized and a private loan. Sometimes private loans can be cheaper depending on credit and individual circumstances, so look in to both options.

2.    While in college, live frugally and if possible, begin to pay down the interest on student loans. College is a great time to learn to budget money. What better time to learn than when you are making possibly the lowest income you will ever earn? As a student, take advantage of free campus activities and free meals, using your student id for events and discounts from local providers. Think cost-effective when you consider housing choices, meal plans, entertainment and transportation.

 And try to pay down your school loan. Often the interest that accrues on your loans while you are in college is capitalized once you graduate; therefore, the interest is added to your loan principal and interest is accruing on interest. So at least try to pay down the interest while you are in school or during the 6-9-month grace period after graduation before repayment begins. It will save you money in the long run!

A part-time job can go along way towards reducing what you will owe when you have completed school. Save automatically through employer withdrawals from your paycheck and take advantage of new mobile apps that will round up purchases and save the difference. You will have peace of mind, and the freedom to choose the job you want instead of choosing the one necessary to pay down debt.

3.    After graduation, commit to paying off student loans systematically and not incurring additional debt. There are three scenarios you might want to compare to pay off the debt: prepayment, changing repayment plans, and loan consolidation. Loan consolidation can be a good strategy but not always. If you refinance Federal student loans into private loans, they can lose the advantages offered by the Federal Direct Consolidation Loan program which can include flexible payment plans and potential for forgiving the loans. This program combines multiple Federal student loans into one that is recalculated as the weighted average interest rate of all the student loans being consolidated, so it doesn’t really change the interest rate, but can change the repayment period. Through this program, a student loan borrower can qualify to use income-based repayment, pay as you earn, revised pay as you earn, and public student loan forgiveness, all of which have requirements. So even though you may be able to get a better rate through a private loan, you will permanently lose the availability of these programs.

Review your Federal loans to see if it would be wise to consolidate. The National Student Loan Data System shows the details of loans that are part of Federal programs. Review your private loans to see if it would be wise to refinance. Another good resource is and you can find repayment estimator tools through the Department of Education.

If you have additional debt, start applying more towards the short-term, high-interest debts, such as credit cards, because these debts grow much more quickly than student loans with reasonable interest rates. Be diligent not to take on any more debt until all is paid off. Live for a while longer on a more frugal budget and it will pay dividends when you are debt free!


Seventy percent of graduates in 2016 carried student debt. You are not alone. You may want the help of a financial advisor to show you how to navigate all your options when it comes to balancing student debt, saving for a home, saving for retirement, and looking at a comprehensive plan to get you on track for your future!


An Advocate for Your Current and Future Self

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According to the dictionary, an advocate is “one who pleads the cause of another” or “one who defends or maintains a cause or proposal”. An advocate stands in the gap, fights for or on behalf of another, and supports or recommends a particular policy or plan.

This is exactly what your financial planner should be! And not only should your financial planner be an advocate for you today so that you can experience financial stability and freedom in the here and now, but they should also be the advocate for your future self! The “you” you want to be with the choices you want to have.

Let’s say you’re just getting started. You have your whole life in front of you. So why do you need an advocate? Because the choices you make today, even the seemingly small ones, can have a BIG impact on your future. It’s natural for your “NOW self” to want to spend more and save less! “NOW Self” wants to put off spending time going through all that boring paperwork of employee benefits, life insurance policies, loans, credit cards, tax returns, wills, and banking/investment statements with confusing fees, yields, transactions, and fine print. But today you’re in the best position to make educated decisions and implement strategies that will absolutely alter the course for your “FUTURE Self”.

Let’s say you are mid-career. You have more responsibilities than you have ever had: careers, growing children, aging parents. You need a vacation! You also need a financial advocate. “NOW Self” is extremely busy spinning many plates and has substantial expenses. You may not feel like there’s time or money for an advocate, but the need is pressing. “NOW Self” either has made some good decisions but needs an objective set of eyes and expertise to maximize the potential or has not been able to make such good decisions and needs to make major adjustments so that the journey is smoother, and the destination is where “FUTURE Self” wants to go.  

What if you're near or already in retirement? You have more to offer than ever – especially your wisdom and experience! You may be at the top of your game, thinking about retiring soon or maybe never, starting a second career, aspiring to work on the side for a cause that’s close to your heart, or simply relax! “NOW Self” may be in the best financial position of their life OR may regret not making financial decisions earlier and feel like they cannot make new changes. No matter your financial situation, you need an advocate to give you a vision of the possibilities you have with what you have worked hard to achieve. Planning is crucial at this point to take advantage of tax laws, retirement income and social security strategies, and investment portfolio allocation so that “FUTURE Self” can do and be all they ever desired.


A good financial planner will advocate for not only your “NOW Self”, but your “FUTURE Self” as well, challenging clients to take action toward their best lives.


One of our most important jobs is to LISTEN. We cannot effectively be your advocate if we do not know you, your unique situation, and what you truly need and want today and in the future. We want to know you and your family, your history and what your dreams and goals are. How else can we help you achieve your goals and get to where you want to go if we do not listen to your story?

Our initial consultation (no cost or obligation) is about listening to why you are looking for a financial planner in the first place, and then listening to hear what YOU want to tell us. Information is powerful. Wisdom to know what to do with that information is even more powerful!

After listening and understanding, we use our knowledge and technical skills to design plans and strategies for outcomes that are in line with what you want to achieve. Our goal is to educate and encourage clients to make the decisions and choices that will improve their financial lives. This includes providing advice and implementation support to make that happen. As your financial advocates we can encourage you to stay disciplined and make choices now and in the future that align with your vision of success.

We do this through evaluating topics like cash flow, investments, retirement, insurance and tax planning, and by providing ongoing professional support. By making you aware of the possible strategies and outcomes, we can guide you to a plan that is tailored to your needs and priorities, helping you be confident in the decisions you’re making now, for now and later!

We want to be the advocate for both your “NOW Self” and your “FUTURE Self”, intentionally helping you create a life you love, full of purpose and financial freedom that gives you choices. So that when you look back, you will have achieved your goals and are living life to the fullest.




Choose Your Retirement Accounts with Confidence!

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We all know and have been told that we need to save for retirement. The IRS recognizes the need to save for retirement so much that they have created several tax-advantaged accounts such as the 401(k) and individual retirement accounts (IRAs). There are a lot of choices when it comes to retirement saving. The number of choices can sometimes intimidate us so that we are not sure which is the better choice for ourselves or our family. But waiting until we “have more time” or until we get to that “dream career” or until we move to that “next stage of life” can cost us big-time in lost earning years and compound interest. Now is the time to take specific steps to plan and save for the future.

For most people, especially those who are young in the workforce, the best place to start is with the 401(k) retirement plan at work. This is particularly enticing if your employer matches a portion of your contribution. For all practical purposes, the match is essentially free money. Contribute at least enough to achieve the match, and then try to increase the amount contributed over time. Currently, the 2018 annual participant contribution limit is $18,500 or $24,500 for those 50 or over. The money is withheld through payroll deduction and you can save up to the contribution limit of your pretax income, in a Traditional 401(k), or after tax in a Roth IRA. If you leave your job, you can typically keep it in the plan, roll the account over into a new employer’s 401(k) (if allowable), or rollover to your own IRA. This type of retirement plan is more typical, employees of nonprofits may be offered a 403(b) instead. They have similar rules.

Anyone can contribute to an Individual Retirement Account (IRA). The 2018 annual limit is $5,500 and $6,500 if you are 50 or over. The money grows tax-free. You can contribute to both an IRA and a 401(k), but if you are covered by a plan at work, you cannot deduct your IRA contributions from your taxable income if you earn more than $73,000 for individuals (phase out from $63,000-$73,000) and $121,000 for married couples filing jointly (phase out from $101,000-$121,000). If you are not covered by a retirement plan at work, you get the full deduction no matter your income, unless you file jointly with a spouse who has a retirement plan at work.

With a Roth IRA, you are contributing with after-tax dollars and there is no tax deduction for your contribution. The money you earn grows tax-free, but unlike Traditional IRAs, you pay no tax on withdrawals after you reach 59 ½ and there is no mandatory withdrawal at age 70 ½. You can also withdraw the amount you contributed (not earnings, though) at any time with no penalty or no taxes due. The contribution amounts are the same as a Traditional IRA, but to contribute to a Roth IRA, you must make less than $135,000 for singles and $199,000 for married filers. If your income is more than or equal to $120,000 (single) or $189,000 (married filing jointly), your allowed contribution is reduced. You can contribute to both a Roth IRA and a traditional IRAs, but the limits apply to your total contribution.

Another less known way to save where you can also minimize taxes and prepare for health care costs is with a Health Savings Account. You can use the money for medications and doctor visits not covered by insurance, but you can also pay those expenses out of pocket and leave the money in your HSA to grow. If you need the money later, you can be reimbursed for past expenses. The annual HSA contribution limit is $3,450 for singles and $6,850 for families covered under qualifying family medical plans, with an additional $1,000 contribution if you’re 55 or older. If you leave the money in the account, it can stay in the account, unlike FSA accounts that must be used by the end of each year.  Once you are 65, you can withdraw money for any reason without penalty, but you must pay income taxes on the money you withdraw if it’s not for qualified medical expenses. Or, you can use it for qualified medical expenses tax-free. If you withdraw the money before you are 65 for any reason other than qualified medical expenses, you will have to pay taxes plus a 20 percent penalty, thus the need to save medical receipts!

If you are a sole proprietor, you can set up an individual 401(k) or solo 401(k) and make contributions as both the employee and employer. The business owner can contribute elective deferrals up to 100% of compensation up to the annual contribution limit of $18,500 ($24,500 if age 50 or over) plus employer nonelective contributions up to 25% of compensation as defined by the plan. Total contributions cannot exceed the 2018 limit of $55,000 (not counting catch-up contributions for those 50 and over). Self-employed individuals must make a special computation using the rate table in Chapter 5 of IRS Publication 560 to figure out the maximum amount of elective deferrals and nonelective contributions.

A SEP IRA is used primarily by the self-employed or small business owner. SEP stands for simplified employee pension and is usually easier to set up than a solo 401(k). Contributions are made to an Individual Retirement Account established for each plan participant and it follows the same investment, distribution, and rollover rules as traditional IRAs. The contributions you can make to each employee’s SEP-IRA cannot exceed the lesser of 25% of compensation or the 2018 limit of $55,000. The same percentage the employer contributes to the owner’s plan must be given to employees too. Again, if you are self-employed, you must use special rules to calculate contributions for yourself.

Simple IRAs allow employers with fewer than 100 employees to set up IRAs with less paperwork. Employers must either match employee contributions or make unmatched contributions. Employees can contribute/defer up to $12,500 annually with catch-up contributions of $3,000 for those 50+.

 So many good choices! Which plan, or combination of plans is right for you? If you have limited funds to start with, what to do first? If you have contributed the max to one, which is next? As financial planners our job is to walk you through your particular situation, needs and goals to determine the better choice(s) for you and your family. It is not only about dollar amounts, though that is a significant factor. Retirement is also about quality of life, expectations, and what is truly important to you.  Is it family? Health? Travel? Giving? What is important to you now and in the future needs to match where and how you spend and invest those dollars. No more putting it off. Start today.