Retirement Planning And Tax Facts: Prepare For Your Future

Planning for retirement involves many aspects, including retirement planning tax considerations. When you plan for retirement, you should consider contribution limits, changes in various tax laws, and other considerations.

Step #1 - Know Retirement Planning Tax Contribution Limits

Depending on your individual plan or plans, you may have several retirement plan accounts. Maybe you have an employer-sponsored 401 (k), and your spouse has a Roth IRA or a Spousal IRA. You may also be self-employed and have a Profit-Sharing or Money Purchase type of IRA. If you are a member of certain organizations, you may have a 403 (b) or 457 (b) account.

For 2009, IRS Code stipulates the maximum contribution for Traditional and Roth IRAs is $5,000. There’s a $1,000 catch-up amount for persons aged 50 or older by the end of the year (for a maximum contribution of $6,000).

SEP IRA maximum contribution for retirement planning tax purposes this year is $49,000, or 25 percent of compensation, whichever is less.

For the 401 (k) and 403 (b) and 477 plans, IRS allows a maximum contribution of $16,500. Add $5,500 catch-up if you’re age 50 or older by year end, for a maximum contribution this year of $22,000.

Simple IRA is limited to $11,500 annual salary deferral in 2009. There’s a $2,500 catch-up amount for those 50 and older by year end, for a maximum contribution of $14,000.

Step #2 - Keep Abreast of Changing Retirement Planning Tax Rules

Tax rules are changing. If you read or hear about any estate or retirement planning tax rules that may impact your situation, contact a tax lawyer. 

Step #3 - Make Sure Your Retirement Needs Are Met

Of course, the primary purpose of your retirement planning tax plan is to ensure that your needs will be met in retirement. Decide how much you need and plan accordingly.

Step #4 - Give to Charity 

If you’re 70-1/2 or older, you can transfer up to $100,000 from a Traditional IRA to a charity. You won’t receive a tax deduction for the contribution, but you won’t have to pay any tax on it either.

Under this deduction, you put your assets in and the trust pays you an income for a specified number of years (or the rest of your life). After the trust matures, the assets go to the charity you chose. The retirement planning tax benefit here is that you get an immediate tax deduction. You also receive a steady income stream, and you can shift assets into the trust, immediately sell them in the trust, and not incur any capital gains right away.

Step #5 – Actively Manage Your Investments 

Actively manage both your investments and your asset allocations for maximum returns. Evaluate your before-tax and voluntary after-tax contributions to retirement plans. Re-evaluate your long-term retirement strategies. Evaluate your financial and tax strategy before receiving any mandatory or discretionary retirement plan distributions.

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