Happy New Year.
After eating, drinking and relaxing your way through the holiday, it's time to put all that procrastination aside and take action! Let's start with taxes.
Exceeeeeeeeeeept – all that tax advice that you ignored in November and December is no longer valid and you are no longer able to take advantage of most of the tax minimization and tax loss harvesting strategies that expired on December 31st. OK, so remember that for next year.
What you certainly can do at this point in the year is some planning. Make sure your tax records are all in order, ensure you've made any estimated tax payments, review any tax law changes and ensure you've got the right software and tax forms – all those steps make good sense.
However, there is one tax move that is still available if you didn't get around to it by December 31st – you can still make an IRA contribution for 2016 all the way through the April 17th tax filing deadline, and potentially later if you are a small business and file for an extension.
IRAs can be complicated, but they generally do offer investors a very advantageous way to save for retirement. There are many different types of IRAs with many rules and qualifiers, so you have to be careful on which account you open, how much you invest into the account and then what you invest in once you've deposited the money.
Here are some of the basics:
Traditional IRA – accounts generally for individuals without access to a 401(k) or other retirement plan at work. Money goes in pre-tax (unless you meet an income threshold), grows tax-deferred and is taxed when you withdrawal it. The big advantage here is the tax deferred growth.
Roth IRA – accounts generally for those with longer time horizons. There is no tax deduction for ROTH contributions. So, the money goes in after tax, but it too grows tax deferred and the big advantage of a ROTH is that it comes out tax-free. The ROTH also has income limits, which impact who can contribute.
SEP IRA and SIMPLE IRA – accounts generally for small business owners. These two structures allow for contributions higher than the $5,500 and $1,000 catch up individual limits, but they do have threshold and restrictive provisions that small business owners should be aware of and understand.
If you'd like to learn more or discuss your specific situation, we are available for free consultations. We also have a handy PDF guide that discusses some of the limits and restrictions of each type of IRA.
Once your money has been deposited into your IRA account, it is important to ensure that your investments align with the level of risk that you're willing and able to take. You can also read more about diversification, asset allocation and getting advice from a fiduciary on our Education page.
- INVESTING AND INVESTMENT MANAGEMENT INVOLVES RISK, INCLUDING THE LOSS OF YOUR INITIAL INVESTMENT OR ANY INVESTMENT GAINS.
- PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
- THIS GENERIC INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION FOR ANY INDIVIDUAL TO TAKE A SPECIFIC ACTION.
- PLEASE INVEST PRUDENTLY AND SEEK PROFESSIONAL HELP FROM A FINANCIAL ADVISOR, INVESTMENT MANAGER, ACCOUNTANT, LAWYER OR OTHER PROFESSIONAL ON MATTERS THAT YOU ARE UNSURE OF OR THAT ARE UNIQUE TO YOUR PERSONAL CIRCUMSTANCES.
- FINANCIAL PLANNING AND INVESTMENT MANAGEMENT SERVICES PROVIDED BY J. BRADFORD INVESTMENT MANAGEMENT, NASHUA NH.