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2019 IRS Limits Affecting Qualified Plans and IRA’s

IRS Limit Changes

Do you have a retirement or pension plan established for your company? Are you part of your employer’s retirement plan? Do you contribute to an IRA? Do you pay into the social security system? Chances are, unless you are retired, you answered yes to at least one of these questions and you will want to know about changes taking place in 2019.

On an annual basis the IRS will review changes in the Consumer Price Index and make adjustments to the amount that can be contributed to qualified plans, individual retirement accounts, the income limitations for contributing, as well as social security taxable wage base.

On November 1, 2018, the Internal Revenue Service announced cost-of-living adjustments, based on changes to the Consumer Price Index (CPI), affecting dollar limitations for pension plans and other retirement-related items for the 2019 tax year. Many of the pension plan limits are increasing for the 2019 plan year due to Consumer Price Index (CPI) increases.

We are providing you with an overview of the updates to the 2019 IRS limits and how they will change from 2018. You can find a complete overview of the changes by visiting the IRS Notice 2018-83.

 2019 IRS Limits Affecting Qualified Plans & IRA's

PLAN LIMITS

2019

2018

Traditional/Roth IRA Limit

$6,000

$5,500

Traditional/Roth IRA Catch-Up Contribution Limit

$1,000

$1,000

SIMPLE Maximum Annual Elective Deferral Limit

$13,000

$12,500

SIMPLE 401(k) or SIMPLE IRA Catch-Up Contribution Limit

$3,000

$3,000

401(k)/403(b) Elective Deferral Limit

$19,000

$18,500

401(k)/403(b)/Catch-up Limit

$6,000

$6,000

Defined Benefit Plan Dollar Limit

$225,000

$220,000

Defined Contribution Plan Limit

$56,000

$55,000

Annual Compensation Limit

$280,000

$275,000

Highly-Compensated Employee Limit

$125,000

(HCEs in 2020)

$120,000

(HCEs in 2019)

Key Employee Officer Limit

$180,000

$175,000

Social Security Taxable Wage Base

$132,900

$128,400

 

We have some key takeaways that should be reviewed. You may benefit by increasing your contributions for 2019.

  • The Traditional and Roth IRA deferral limits have been increased to $6,000. Be sure to contact your advisor if you are contributing to your account on a periodic basis. You may need to adjust those amounts to coincide with the new limits in order to max out the contribution. The increase from $5,500 was the first time since 2013 that we have seen the contribution limit change.
  • There were no changes to the catch-up contributions for IRA’s, it remains at $1,000.
  • The 401(k) elective deferral limit was raised to $19,000. Be sure, if your intention is to max out, that you have the correct deferral percentage elected.
  • Keep in mind that catch-up contribution limits for employees 50 and over who participate in 401(k), 403(b), most 457 plans and the federal governments Thrift Savings Plan remains unchanged at $6000.
  • The SIMPLE maximum has been increased from $12,500 to $13,000.
  • Catch-up contribution limits for employees 50 and over who participate in a SIMPLE 401(k) or SIMPLE IRA remains unchanged at $3,000.
  • Those that maintain or participate in a Defined Contribution or Defined Benefit plan will want to be familiar with the new dollar, plan, annual compensation, highly compensated employee and key employee limits.
  • The social security wage base has been increased from $128,400 to $132,900. People who earn more than $128,400 will be contributing more to social security than they have in the past. Those beneath that threshold will not see any change in the coming year.

Be sure to discuss these changes with your financial professional and CPA. You may need to make some adjustments to your deferral strategy based upon the new limits released for 2019. It is important to make sure, especially if your intentions are to maximize your contributions, that you are contributing what you need to on an ongoing basis in order to max out your allowable contributions.

We would be happy to answer any questions you may have regarding these changes and how they may impact you. In addition, we would be happy to discuss the benefits of implementing a retirement plan for your business or a retirement account for you personally. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

5 Tax Planning Steps to Take Before the Year Ends

As we enter the final quarter of 2017 (yes the last three months of the year are here), I am sure you feel the same way we do and cannot believe how fast this year has gone by. Keep in mind that the year is not going to slow down and there are several things you should be thinking about as the final days of the year pass us.

We are going to provide you with five things that you should review in the next couple of weeks to ensure that you are prepared for 2018 and filing your 2017 tax returns.

     1) Take caution before making investments in a non-qualified (or non-retirement) account(s). This time of year mutual funds begin to announce their plans to distribute capital gains to their shareholders. The last thing you want to do is make a significant investment in a mutual fund and then get hit with large capital gains after only owning the fund for a few weeks. Does this mean you should or should not invest in these types of accounts until January 1st? No, you can certainly invest between now and the end of the year, but you must be aware of the potential consequences. In addition, there are strategies that you can use to invest your funds now and avoid these capital gains distributions before the end of the year.

      2) Review your non-qualified account mentioned above. Take note of your year-to-date capital gains or losses due to sales of investments over the course of the year. You may want to sell some of the investments that are not performing well in your portfolio (take the loss) to offset gains you currently have in your account year-to-date. Another option may be to take some gains in your account if you have a net loss for the year thus far. This type of review will allow you to put yourself in a better tax position for the year.

      3) Do you have carryover losses from previous years on your tax return? You may want to take some profits in some of your holdings if you have carryover losses reported on your return. The IRS only allows you to take a loss of $3,000 after you net out your gains and losses, so utilizing this strategy will allow you to capture a gain without tax liability to the extent you have a carryover loss.

     4) Take a look at your retirement plan(s) and see if you are on course to maximize the benefits of the plan(s). Although you can make IRA, Roth IRA, SEP IRA contributions in 2018 for 2017, your 401(k) contributions (in most cases) need to be contributed in the 2017 calendar year. You should review the extent to which you have contributed this year vs. the maximum contribution allowed ($18,000 if you are under 50 years old, and $24,000 if you are over 50). You may want to increase this contribution towards the maximum if you are going to be in need of a tax deduction.

      5) Stay alert.....Tax reform is being spoken about on almost a daily basis at this point. There have been debates as to whether this reform will go through in 2017, retroactive back to January 1, 2017, or will we see it passed in 2018. It is important to stay alert because we do not know what tax reform will look like or what it will mean to you because it is so fluid at the moment. You will want to know what it means for you when (or if) it is passed. Pay attention because this may have an impact on your tax obligation for 2017.

Mitlin Financial, Inc. believes that working with a team is an important part of getting the best outcomes for our clients. It is important that the strategies above are reviewed and evaluated for your own personal facts and circumstances. Being that we do not provide tax advice, we welcome the opportunity to work with your CPA to review your situation and make sure that you are doing everything you should be in order to be prepared for your 2017 tax filing and mitigating the tax impact from your investments as well. Be sure to contact us regarding your own situation as we enter the end of the year. Feel free to give us a call at (844) 4-MITLIN x12 and allow Mitlin Financial, Inc. to facilitate your financial future!

Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Happy Birthday! Be Sure To Review These 5 Things

Happy Birthday Be Sure To Review These Five Things

 

Using your birthday as a reminder to review and address things in your life is something we have been told to do from a very young age. As an example, I try and schedule my dermatologist and physical appointments around my birthday each year. I simply use this event as a reminder that I must take care of these things to maintain my health.

In the same vein, there are five things you should be reviewing each year financially in order to maintain your financial health. Using your birthday as a reminder for this is also a great way to make sure they get addressed.

  • Review your retirement plan contributions and see if you are in a position to increase them. Many people elect their retirement plan contribution amounts when they first start working for a company, and then hardly ever look at it again. Saving for retirement is now the responsibility of the employee, and it is important to make sure that we are doing our best to reach our goals. It would be a shame if you began contributing three percent when you started working for the company and still are today, but could afford to do more. Simply looking at and addressing this each year will allow you to make sure you are maximizing your retirement savings. 
  • Debt is something that is used when purchasing major assets, such as a home. It is vital to evaluate your debt to see if it is still working in the way you intended or if there are opportunities to put you in a better position financially. When used appropriately in a financial plan, debt can be a very useful tool. I would recommend that you look at the outstanding loans you have, and their rates and terms to see if they are still ideal for you. Would it make more sense for you to pay it off or continue the loan? Perhaps refinancing the debt would be a good move? This should be reviewed annually. 
  • Estate planning documents are key to making sure that your assets and wishes are carried out upon your death. These planning documents could include your will, trust, healthcare proxy, living will, and power of attorney. It is important to review the documents and make sure they are still relevant based upon your current circumstances. In many cases, you will find that these documents will only require updating every five to seven years, but by reviewing them each year, you will assure that they are properly addressing your current situation. 
  • Check the beneficiaries on all of your accounts. It is crucial that you make sure that your beneficiary designations are appropriately maintained. Many times, we establish our beneficiaries and never look at them again. We have encountered clients that are married with families who still have their parents named as beneficiaries. Checking them each year is a great way to make sure your financial assets will pass along to the people you want to receive them. 
  • Your financial plan should be reviewed annually to make sure it is accounting for any changes to your life circumstances or goals. In addition, it is important to review the plan in regards to the assumptions that are being utilized, such as inflation, returns, life expectancy, and savings. Once you have updated the plan, it is key to review the new outcomes and create an action plan for any items that should be addressed in the coming year. A plan is not static, but a living breathing document that needs to be updated and reviewed at least each year. 

Mitlin Financial assists our clients in addressing these five areas over the course of the year, but it is important to make sure you do address them yourself. A birthday is a great time to take a look, reflect, and make sure your financial health and wellbeing are being looked after.

Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone in your family needs assistance in getting started on reviewing these areas today.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Mitlin Minute: Hidden money....maximizing all your benefits

In this edition of Mitlin Minute we discuss "Hidden money....maximizing all your benefits". 

Have you look at area that you may be able to obtain hidden money?  I recently checked the NYS Unclaimed Funds and found they were holding monies for me.  In addition, my health insurance company will reimburse me up to $400 per year for riding my Peloton.
 
Are you maximizing the employer match for your companies 401(k)?  Make sure you are taking advantage of the full match provided by your employer.

Be sure to share this Mitlin Minute with your network so they can think about maximizing all of their benefits.

 

 

 

Disclaimer: This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

To Rollover or Not Rollover, That is The Question

To Rollover or Not Rollover That Is The Question

 

There are many decisions that need to be made when changing employers or retiring. One of the key decisions that you may need to make is whether or not to rollover your retirement plan, 401(k), from the previous employer. As mentioned in Top Five Things to Review Before Changing Jobs, you have several options when separating from service and it is important to do a careful review upon your departure.

Depending on your account balance you may not have any choice and may be required to take a distribution. It is important that you read your company’s summary plan description to see if there is a minimum level, such as $5000, where they force you to take a distribution. It is common for companies to impose this minimum so they are not burdened with maintaining what is needed for many smaller accounts for employees that are no longer with the company. When faced with this distribution, you will have the option to roll over the assets to your own IRA, your new employer’s 401(k) or simply have a check cut to you. Be aware of the tax consequences of simply taking the check. The options and consequences are very similar to those that are not forced to rollover, so keep reading.

Assuming that you are not going to be forced to take a distribution, you will be presented with several options for your 401(k) assets and we will discuss each of them here:

  • You will be able to maintain your 401(k) account with the current provider at your previous employer. This would not require any changes and your account would continue to be managed as it was previously, by you. The main difference would be that you would no longer have any contributions being deposited into the account.
  • Rolling over your 401(k) to a current (or newly opened) Individual Retirement Account or IRA. This would be a non-taxable event as long as you perform the movement of monies as a direct rollover. This would then allow you to take over management of the assets or hire a wealth management firm or advisor to assist you with investing these funds. You would not be limited to the investment menu presented by your previous company and now would have the ability to invest the funds however you see fit.
  • Another option you may have, depending on the plan provisions for your new employer, would be to roll the assets over into your new employer’s retirement plan. Like rolling it over to your own IRA, this would be a non-taxable event if you handle it as a direct rollover. You would still be in a position to manage these assets on your own and would be limited to whatever investments the new employer offers in their plan.
  • The last option you would have is taking a distribution. This would be a taxable event and depending on the size of the 401(k) could cost you a considerable amount in taxes. A distribution or withdrawal would be taxable as ordinary income in the year you take the distribution. When taking this type of withdrawal there is a 20% mandatory federal tax withholding by the plan. This is used to offset your tax liability for the year. Essentially, if your 401(k) at the time of distribution is worth $100,000 you would only receive a check in the amount of $80,000. The $20,000 would be sent in as a Federal tax withholding to offset your liability for the year. Keep in mind, this does not mean that this is all the tax you owe. Depending on your tax bracket for that given year, you may owe more or you may end up getting a refund because you withheld too much over the course of the year. Before exercising this option it is very important to consult with your tax advisor to make certain there are not any unintended consequences down the road.

The choices here are not easy ones to make and should be considered very carefully. It is important to speak with a fiduciary advisor that can outline and walk you through the pros and cons of each option. As an example, one of the tremendous benefits of rolling the assets into your own IRA would be the freedom and flexibility of the investments you can choose. In addition, it would provide you with the ability to have an advisor assist you with the investments as well. These two benefits may come with a cost and it is important to understand what the cost/benefit is of making this transition. You want to make sure that you are making a change for the right reasons and the decision will ultimately benefit you and your family in the end.

This decision making process is something we have walked many clients through before and we are confident we can help you as well. Please feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know has changed jobs recently, plans to change jobs, retire or simply has a 401(k) plan with a previous employer. We look forward to helping you, and them, make the decision that is best for all.

 

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.

Top Five Things to Review Before Changing Jobs

Top Five Things to Review Before Changing Jobs

 

The days of working for a company for 40 plus years, being handed a gold watch for your tenure, and collecting a pension for the remainder of your life is long gone. It is more likely that today’s workers will hold ten to fifteen jobs, spending less than five years at each employer according to a recent report from theBureau of Labor Statistics. In addition to the stress and anxiety associated with finding a new job, there are important financial aspects that should be reviewed with each change. 

  • Do you have a financial plan in place? It would make sense that you should have a financial plan in place, especially if you are looking to make a job change. Using the plan, you could easily determine how the employment change will ultimately affect your financial situation-whether positive or negative. Although you may not be changing jobs for financial reasons, it would be a good idea to know going in what the effects will be. 
  • How are you protecting yourself, and your family, from death or disability? You need to evaluate how you are covered for life and disability insurance. Often times we see younger employees, even older ones, only having group coverage through their employer. Many times this coverage is not portable and cannot come with you when you separate from service. It is a good idea to research if your new employer has these coverages available for you. Whether they make it available or not, it may make sense for you to explore obtaining your own individual coverage that is yours to have regardless of your employer. This is especially worthwhile if you plan on having the number of employers mentioned in the report above. 
  • What are you going to do with your retirement monies at your previous employer? It would not make too much sense to have ten to fifteen different retirement accounts when you finally look to retire. You may create a job just to keep track of where all your assets are, how they are invested and how they are performing. Upon leaving an employer, you usually have the ability to maintain the account where it is, unless you do not satisfy certain minimums and they force you to move it or roll it over. Typically you would want to roll these assets over and that can be done by rolling them into your new employer’s retirement plan, if the plan provisions allow, or into your own IRA. There are several things to consider when trying to determine which method to use when rolling over your assets. We will review this particular topic in a future post, as this is a topic of its own. 
  • Are you contributing to your 401(k) and changing jobs mid-year? It is important to note that there is a maximum, for 2019 it is $19,000 for those under 50 years of age and $25,000 for those over, that you can contribute to your 401(k) on an annual basis. You will want to make sure that you do not violate these thresholds if you contribute to both the old and new employers’ retirement plan. This amount is not a maximum per employer, but actually a maximum on the amount you can defer annually from your earnings. Putting too much in over the course of the year will give you extra work to unwind what was done and remove the excess amount. 
  • Are you in the process of looking for a new home and would need a mortgage to purchase it? Looking for a new home is a great experience and also a stressful one. Buying a new home ranks up there with looking for a new job, so you may not want to try doing both of these at the same time. In addition to saving yourself stress, you may not want to do both of these at the same time due to your need of a mortgage. It will be important that the mortgage company see stability in your work history and they certainly will want to make sure you are with your employer for a specific period of time. The time period they are looking for will be dependent upon the type of loan you would be looking to secure. It would be wise to consult with a mortgage consultant prior to making any job changes while in the home buying process. You certainly will want to make sure you are with your employer when you are about to close because the mortgage company will call them around the closing to verify you are still employed. You will not want to risk your home purchase over a job change, so it is important that you research this in advance. 

Changing jobs brings a certain level of stress with it and there are certainly ways to mitigate it. Ideally you would want to have a financial plan in place, in advance of any change, and this will put you ahead of your fellow job changers. The advisor who helped you develop the plan will be in the unique position to walk you through these top five things you should review, as well as others not mentioned here. Having the right advisor on your side, that is a good fit, will alleviate much stress and make the transition go much smoother.

We have helped many clients through this process and would welcome the opportunity to help you or someone you know. Please feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know has plans of changing jobs in the foreseeable future or they simply want to put a plan in place. We look forward to helping you, and them, make this a smooth transition.

This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.