The end of the year has a variety of retirement planning deadlines you need to meet in order to qualify for tax deductions and credits. Retirees also need to take action by specific dates to avoid retirement account penalties. Here are some Seneca retirement planning moves you need to make before next year.

  • Make last minute 401(k) contributions
    • All 401(k) contributions are typically due by the end of the calendar year. Employees can contribute up to $18,000 to a 401(k) account in 2015. Workers age 50 and older can make catch-up contributions worth an additional $6,000, or total of $24,000 in 2015, which are also due by December 31. An investor over age 50 who is in the 25% tax bracket and maxes out their traditional 401(k) will save $6,000 on their federal income tax bill but even a smaller contribution of $5,000 would save $1,250 in taxes. At a minimum, double check that you have saved enough to get any employer match offered by your company.
  • Take required minimum distributions
    • Retirees born before July 1, 1945, are required to take distributions from their individual retirement accounts and 401(k) plans by Dec. 31, 2015. The distribution amount is calculated by dividing the account balance by an IRS estimate of your life expectancy, and sometimes a spouse’s age is also taken into account. The penalty for missing a required distribution is a stiff 50 percent of the amount that should have been withdrawn. However, if you turned 70 1/2 in 2015, which is those born after June 30, 1944, and before July 1, 1945, there is a special rule that allows you to delay your first required distribution until April 1, 2016. But the second (and all subsequent) distributions will be due by Dec. 31 of the same year.
  • Extra time for IRA Contributions
    • You have until April 15, 2016, to contribute up to $5,500 to an IRA that can be applied to tax year 2015. Workers age 50 and older are eligible to contribute an additional $1,000, for a total contribution of $6,500 in 2015. As you are working on your 2015 taxes, you can plug an IRA contribution into your tax planning software and watch how it decreases the income tax you owe.
  • Claim the saver’s credit
    • If your adjusted gross is below $30,500 for individuals, $45,750 for heads of household and $61,000 for couples in 2015 and you contribute to a 401(k) or IRA, you may be able to qualify for the saver’s credit. This valuable tax credit is worth between 10 and 50 percent of the amount you contribute to a retirement account, up to $2,000 for individuals and $4,000 for couples.
  • Get ready for 2016
    • 401(k) and IRA contribution limits will remain the same in 2016. But if you weren’t able to max out these accounts in 2015, consider setting your contribution amount a little higher next year. If you get a raise, bonus or tax refund, redirecting part of it to a retirement account will set you up for a lower tax bill in 2016.

As we get ready to closeout another year, make your appointment with Black Harbor Wealth Management to ensure you are the right financial path. We look forward to hearing from you.