When is the right time to assess your individual financial picture? The simple answer: there is never a wrong time. So as you consider New Year’s resolutions related to your health, your career or your social life, consider adding your finances to the start-of-a-new-year equation.
Here are five tips from the Summit Financial team to help you begin 2017 on the right financial and investment foot.
- Maximize your match: Company-sponsored retirement plans often include employer matching contributions designed to help employees boost their savings. The threshold for an employer match can vary by company, so be sure you know exactly what that threshold is at your place of employment and determine if you have the financial means to reach it. A salary increase is a smart time to increase your contribution, but the end of any year is also a natural time to make an assessment. And don’t forget about the “catch-up contribution”; during the year you turn 50 (is that you in 2017?), you can increase your contribution into most 401k plans from a maximum of $18,000 to $24,000. Bottom line: Take full advantage of what your employer – and federal law – allows.
- Ease your tax burden with 529 college savings plans: If you are currently saving money for your children’s college education, there are numerous avenues that can work to your advantage from a tax perspective. If you live in Massachusetts, a new law – which takes effect on January 1, 2017 – may help you even more. It allows Mass. residents to deduct up to $2,000 from their state income tax when contributing to the state’s 529 college savings plan. Connecticut, Rhode Island and Vermont are among the many other states that offer similar deductions. Bottom line: This beneficial law can be used as an inflection point to ensure that you have the correct investment strategy and time horizon for the prospective college students in your family.
- Be sure that your 401k provider is acting in your best interests: On April 10, 2017, the Department of Labor’s new fiduciary rule will take effect. The new legislation means that retirement plan advisors must act in their clients’ best interests rather than their own business interests. Advisors must address and manage any conflicts of interest that could affect their advice. Bottom line: Is your 401k advisor a fiduciary? Now is the time to make sure he or she is offering retirement advice that suits your goals and circumstances.
- Take a long-term view of your investments following the election: Regardless of your stance on President-elect Donald Trump and policy proposals that could affect the economy and the markets, don’t make changes to your portfolio based solely on Trump’s victory. Your personal investment strategy should be based on your time horizon; if you’re 40 years old, for instance, you’ll be investing for at least 25 years – likely even longer. Fluctuations over the next four to eight years may not have as much impact on your retirement savings as you might think. Bottom line: Think twice before changing your investment strategy because of the events of November 8, 2016.
- Avoid the last-minute IRA rush: Many investors wait until tax time to make full contributions to their traditional and Roth IRAs, not realizing that they can make monthly contributions to avoid scrambling at the deadline. For the 2016 tax year, the contribution deadline is April 17, 2017 (the current maximum contribution is $5,500 for those under 50 years of age and $6,500 for those 50 or older). Bottom line: Why not spread out your contributions over a 12-month period? It may ease at least one financial worry come April.
Summit Financial wishes you a happy, healthy and financially-sound New Year.
The Financial Professionals of Summit Financial Corp (7 New England Executive Park, Suite 900, Burlington, MA 01803) offer access to Securities and Advisory Services through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser.
Third Party Administrator (TPA) services offered by Summit Financial Corporation are separate and unrelated to Commonwealth Financial.