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Every year, we head to the doctor for a checkup, and we make sure we go to the dentist every six months for a cleaning and checkup. We change our oil like we’re supposed to so our cars get a checkup. Some people ensure their pets get a yearly checkup as well. How about your finances? Did you know they need a yearly checkup too? Foundry Wealth Advisors recommends conducting a financial checkup at least once a year to make sure your financial plan is on track toward your goals and you’re making the most of your money.
If you run a business, your financial checkup will likely be a lot more complicated and deal with everything from W-2 and 1099 software programs to compliance paperwork. But even for the average consumer, there is a lot to consider.
Retirement
While examining your finances, you want to ensure you’re maximizing your retirement plan contributions, suggests Foundry. In 2014, the IRS limited 401(k) contributions to $17,500 for individuals. They added a $5,500 catch-up provision for anyone over the age of 50. Specific plans can have different limits. Depending on your plan, if you’re a business owner, you can potentially save more retirement money. For example, SEP plan have a maximum contribution limit of $52,000 or 25 percent of your compensation.
Charity
Giving money to charity is admirable, but it can also offer you a dollar-for-dollar reduction to your taxable income. If you have appreciated stock that you would like to sell but taxable gains are holding you back, consider gifting it to charity. “Because of the tax advantage, you can give the full amount of the value of the stock, rather than selling the stock, paying the tax and then giving the amount left over after taxes to the charity,” states Foundry. Since they can sell stocks with no tax consequence, most charities accept them as donations.
Education
Each taxpayer is allowed to gift $14,000 to any individual without having to pay gift tax. However, according to Foundry, “If you’re paying education expenses on behalf of someone else, that amount is outside of the annual exclusion amount.” As long as the payment is going directly to the educational institution, there is no limit. If you want to put money aside to save up for future college expense, a 529 plan is the best way to save because of their tax benefits, says U.S. News.
Stocks and Bonds
When saving for retirement or other far-off goals, one of the best ways to invest your money and give it a chance to grow over a long period of time is through stocks and stock mutual funds, says Fidelity. Younger people should be more aggressive in their investments, leaning more toward stocks. According to Fidelity, despite the regular ups and downs of the market, U.S. stocks have consistently offered the most potential for growth.
If you have stock and/or bonds, match your capital gains with losses, recommends Foundry. The current year may not yield much in terms of capital losses, but you can check to see if you have loss carryforwards from prior years that could be used to offset the taxes from gains this year. “You can offset up to $3,000 in ordinary income with loss carryforwards. But if you do have gains, you could get an even larger offset,” states Foundry.
Contact the Professionals
It’s always best to consult with a retirement plan’s administrator for the most accurate information regarding a plan’s limitations and allowances. If you need help selecting a plan, contact a financial planner. For more ways to make the most of your charitable inclinations, contact a financial advisor. A financial advisor can also assist you with mutual funds, ensuring you’re well informed and don’t fall into the mutual fund tax trap. Before gifting anyone with money, for education or anything else, speak with a tax advisor to ensure you understand the tax impact it may have. For more information about paying for college and using 529 plans, consult a certified public accountant or a college near you.
Author: Jackie Waters
Thank you so much Jackie from Hyper-Tidy.com – we love the guest post – we think having a financial plan is so crucial!
And as always if you need our help with any real estate related needs or a recommendation about where to get a drink – contact us at 615-310-8661!
Xoxo,
Lisa Stigliano
Nashville on the Market Group – Reliant Realty
