A New Year Presents New Planning Opportunities

Happy New Year from the Principal Advanced Retirement Team. The beginning of the year presents a fantastic opportunity to start fresh. It’s also a great time to look at your financial situation and find opportunities.

Here are few things to consider based upon the tax code in your 2018 planning:

  1. Public charitable contributions limits expanded. Charitable contribution limits have been extended to 60% of the taxpayer’s adjusted gross income, up from 50%. With this larger contribution limit, you may want to discuss a charitable plan for 2018. If you are over 70 ½ you will still be able to do a qualified charitable distributions (or QCD) from your IRA to satisfy your required minimum distribution (RMD) in 2018. This distribution is tax free if you send the distribution directly to the charity.
  2. 529 college savings plan changes. 529 college savings plan can now be used to pay for education prior to college. You can use the 529 assets to pay for private elementary and secondary school expenses tax-free. The annual limit for this distribution is $10,000.
  3. Roth IRA recharacterizations of prior conversions were repealed. This provision allowed investors who had converted traditional IRA assets into a Roth IRA to be able to recharacterize the money. This provision was repealed in the final tax legislation. Along with recent changes to the tax code, you may want to make your 2017 IRA contributions by the tax deadline in April.

The beginning of the year is also an appropriate time to consider changes to your investment policy statement. Review your investment portfolio to determine if any changes need to occur.

Last, but certainly not least, if you are looking at retiring in 2018, start your discussions on how you plan to take Social Security. Social Security, on average, will make up around 40% of your retirement income. Understanding how Social Security plays a part in your retirement income plan is critical to retirement plan success.

Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc.

The subject matter in this communication is provided with the understanding that Principal® is not rendering legal, accounting, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

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Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc.