Contribute to IRAS & HSAs Before Tax Day

Presented by 

Marc Aarons

I hope you’re doing well. With Tax Day on the horizon, I wanted to share a quick reminder to ensure you’re making the most of your tax-advantaged savings options for 2024. Here are two key contributions to consider:

Maximize Your IRA Contributions

You can still contribute to your 2024 individual retirement account (IRA) until April 15, 2025. Review the annual contribution limits to ensure you’re on track to take full advantage of this opportunity to save for retirement. Contributions may also be tax-deductible depending on your income and filing status.

Contribute to Your Health Savings Account (HSA)

 If you have a high-deductible health plan, you can contribute to your HSA for the 2024 tax year until April 15, 2025. HSAs offer triple tax benefits. In addition to contributions being tax-deductible, withdrawals for qualified medical expenses are tax-exempt and any growth is tax-free.

 These strategies can help you maximize tax savings while building a strong financial foundation for retirement and health care expenses.

 If you’d like to discuss your options or need assistance reviewing your contributions, don’t hesitate to reach out. I’m here to help ensure you’re making the most of these financial opportunities.

Please don’t hesitate to reach out with any questions or concerns.

Marc Aarons may be reached at 714-887-8000 or Email Marc

Money Managers inc. Website

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

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The SECURE Act and CARES Act may complicate the decision.

Provided by Marc Aarons

As a small-business owner, figuring out retirement choices can be a little intimidating. How do you pick the most appropriate retirement plan for your business as well as your employees?

There are three main types of retirement plans for small businesses: SIMPLE-IRAs, SEP-IRAs, and 401(k)s. Read on below to learn more about each type of retirement plan. Also, keep in mind that recent legislative changes that occurred with the passing of the SECURE Act and CARES Act may complicate the decision.

SIMPLE-IRAs. SIMPLE stands for Savings Incentive Match Plan for Employees. This is a traditional IRA that is set up for employees and allows both employees and employers to contribute. If you’re an employer of a small business who needs to get started with a retirement plan, a SIMPLE-IRA may be for you. While this plan doesn’t require an employee to contribute, employers must contribute 2% of their employee’s salary to a retirement fund. If you do choose to offer a matching contribution to your employee’s SIMPLE-IRA plan, you can match up to 3% of your employee’s compensation. Employees can also participate in a SIMPLE-IRA plan by having automatic deductions go straight from their paycheck to their SIMPLE-IRA.^1,2,3

Distributions from SIMPLE-IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. However, during the 2020 calendar year, the CARES Act allows eligible participants to take an early distribution of up to $100,000 without paying the 10% penalty. Generally, once you reach age 72, you must begin taking required minimum distributions.

For a business to use a SIMPLE-IRA, it typically must have fewer than 100 employees and cannot have any other retirement plans in place. There are also no filing requirements required by the employer.²

SEP-IRAs. SEP plans (also known as SEP-IRAs) are Simplified Employee Pension plans. Any business of any size can set up one of these types of retirement plans, including a self-employed business owner. This type of retirement plan may be an attractive option for a business owner because a SEP-IRA does not have the start-up and operating costs of a conventional retirement plan. It also allows for a contribution of up to 25% of each employee’s pay. This is a type of retirement plan that is solely sponsored by the employer, and the contribution to each employee’s SEP-IRA must be the same amount. Employees are not able to add their own contributions. Unlike other types of retirement plans, contributions from the employer can be flexible from year to year, which can help businesses that have fluctuations in their cash flow.⁴

 Much like SIMPLE-IRAs, SEP-IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. The CARES Act applies to SEP-IRAs too. Generally, once you reach age 72, you must begin taking required minimum distributions.

 401(k)s. 401(k) plans are funded by employee contributions, and in some cases, with employer contributions as well. In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 72. Withdrawals are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. As of right now, the CARES Act exemptions apply only in the 2020 calendar year.⁵

Because of the recent legislative changes, resulting from the passage of the SECURE Act and the CARES Act, let’s talk further about which of these plans may work best for you and your business.⁵

Marc Aarons may be reached at(714) 887-8000 or marc@ocmoneymanagers.com

^{MMI Disclosure This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

^Citations

^{1 – IRS.gov, January 15, 2020}

^{2 – IRS.gov, January 8, 2020}

^{3 – IRS.gov, January 9, 2020}

^{4 – IRS.gov, January 15, 2020}

^{5 – U.S. Chamber of Commerce, February 20, 2020}

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2017 Retirement Account Limits

How much can you contribute this year?

Provided by Marc Aarons

In 2017, you have another chance to max out your retirement accounts. Here is a rundown of yearly contribution limits for the popular retirement savings vehicles.

IRAs. The 2017 limits are the same as in 2016: $5,500 for IRA owners who will be 49 and younger this year, $6,500 for IRA owners who will be 50 or older this year. These limits apply to both Roth and traditional IRAs.¹

What if you own multiple IRAs? This $5,500/$6,500 limit applies to your total IRA contributions for a calendar year. So, for example, should you happen to have five IRAs, you could make an equal contribution of $1,100 (or $1,300) to each of them in 2017, or unequal contributions to them not exceeding the applicable $5,500/$6,500 limit.¹

Keep in mind that you can fund your 2016 IRA(s) until April 18, 2017 (the 2017 federal income tax deadline). It is best to fund your IRA for a particular year right as that year starts, but if you procrastinated for any reason in 2016, you still have time.²

High earners may find their ability to make a full Roth IRA contribution restricted. This applies to a single filer or head of household whose modified adjusted gross income (MAGI) falls within the $118,000-133,000 range, and to married couples with a MAGI of $186,000-196,000. If your MAGI exceeds the high ends of those phase-out ranges, you may not make a 2017 Roth IRA contribution. (For tax year 2016, the respective phase-out ranges are $117,000-132,000 and $184,000-194,000.)³

401(k)s, 403(b)s, & 457s. Each of these workplace retirement plans have 2017 contribution limits of $18,000, $24,000 if you will be 50 or older this year. If you are a participant in a 457 plan and within three years of what your employer deems “normal” retirement age, you can contribute up to $36,000 annually to your plan during the last three years preceding that “normal” retirement date.^3,4

SIMPLE IRAs & SEP-IRAs. In 2017, the contribution limit for a SIMPLE IRA is $12,500; those who will be 50 or older this year may contribute up to $15,500. Federal law requires business owners to match these annual contributions to at least some degree; self-employed individuals can make both employee and employer contributions to a SIMPLE IRA.⁵

Business owners and the self-employed can contribute to SEP-IRAs, which accept contributions of pre-tax dollars. As a consequence of contributing pre-tax dollars, you reduce your taxable income. The annual contribution limit on a SEP-IRA is very high – in 2017, it is either $54,000 or 25% of your income, whichever is lower.⁵

Marc Aarons may be reached at (714)887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

^Citations.

^{1 – fool.com/retirement/2017/01/17/roth-vs-traditional-ira-which-is-better.aspx [1/17/17]}

^{2 – money.usnews.com/money/retirement/iras/articles/2016-12-19/how-saving-in-an-ira-can-reduce-your-2016-tax-bill [12/19/16]}

^{3 – forbes.com/sites/ashleaebeling/2016/10/27/irs-announces-2017-retirement-plans-contributions-limits-for-401ks-and-more/ [10/27/16]}

^{4 – fool.com/retirement/2016/12/19/457-plan-contribution-limits-in-2017.aspx [12/19/16]}

^{5 – money.cnn.com/2017/01/13/retirement/ira-myths/ [1/13/17]}

^{This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.}

_{Marc Aarons Disclosures}

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