Patinelli & Chang, LLP

What has the Average American Saved for Retirement?

What is the size of the average retirement nest egg? It depends on what you mean by ‘average.’"

It’s the question we all wonder about, but not very many of us will come out and ask. A 2019 analysis of more than 30 million retirement accounts by Fidelity Investments found that the average balance in corporate sponsored 401(k) plans at the end of 2018 was $95,600. When it came to traditional, Roth and rollover IRAs, the number was $98,400, reports Investopedia in a recent article titled “What Is the Size of the Average Retirement Nest Egg?” A look at 403(b) and other defined contribution retirement plans in the non-profit sector found that it was $78,7000. These numbers were down between 7.8%-8% from the same quarter of the prior year. Blame the stock market for that.

Averages like this only indicate a few things. Younger workers, for example, tend to have less in their retirement accounts than older workers. Their salaries are smaller, and they haven’t had decades to accumulate tax deferred income in their accounts. However, that gap is wide.

A June 2018 report from the Transamerica Center for Retirement Studies looked at a nationally representative sample of more than 6,000 workers and broke out retirement savings by generation. The boomer members had estimated median retirement savings of $164,000 in 2017, while Gen Xers had $72,000 and millennials had $37,000.

Aside from age, the big factors in retirement savings success seem to be education and income. People with higher income put more money into their retirement accounts. The Transamerica study shows that households with incomes of under $50,000 had estimated median retirement savings of $11,000. Households with incomes between $50,000 and $99,999 had median savings of $61,000 and those with incomes of $100,000 or more had $215,000.

The higher the level of education, the more money people have set aside for retirement.

Therefore, if you’re wondering how your nest egg compares to the average nest egg, the first thing you’ll want to do is decide to whom you want to compare yourself and your nest egg. You can compare yourself to the U.S. population in general, or to people who are more like you in education, age and income.

Here’s an unnerving thought: no matter if your nest egg is way above your peer group, that doesn’t mean it will be enough when retirement rolls around. Everyone’s situation is different, and life hands us unexpected surprises.

One way to prepare is to have an estate plan. If you don’t already have an estate plan, which includes a will, power of attorney, health care power of attorney, possibly trusts and other strategic tools for tax planning and wealth transfer, make an appointment with an estate planning attorney.

Reference: Investopedia (Sep. 24, 2019) “What Is the Size of the Average Retirement Nest Egg?”

Should I Roll a 401(k) Into an IRA?

“What should you do with the money in your 401(k), when you leave your job?”

Your first instinct when leaving a job, for retirement or a new opportunity, may be to take your money with you, by rolling it into an Individual Retirement Account (IRA). That may not be such a bad idea. However, keep in mind that the financial advisor telling you to do so may be getting a commission or fee when you take that action. However, just as there may be reasons to take your 401(k), says AARP in the article “What to Do With Old 401(k) Accounts,” there are also some good reason to leave it exactly where it is. Consider these questions before making a decision:

What does it cost to stay or to leave? Small plans, by which we mean those with fewer than $10 million in assets, charge an average of 1.1. percent annually for administrative fees and investment management, according to a 2018 study that focuses on the costs of 401(k)s from BrightScope. If you are in this type of plan, you may do better by rolling money into a low- or zero-fee IRA at a no-load mutual fund and buying inexpensive funds.

Big plans, with $250 million and more in assets, can be competitive with IRAs. They offer low-cost index funds or target date funds that allocate assets between stocks and bonds and shift those mixes as you age. Your plan in one of these might cost less than 0.5 of your assets per year.

For a complete picture, note that funds suggested by a broker may cost more than that. A financial advisor will also have a higher fee, since most are paid by a percentage of your total assets. There once was a law that required advisors to compare the cost of your current 401(k) with any new investments they recommend, but that law was squashed. Therefore, investors have to do the homework to get clear on their costs.

Do you have enough choices? The average 401(k) fund today offers about twenty-four mutual funds to create a balanced portfolio. It might also offer a stable value fund, like a money market account, that pays higher interest rates than you might get in other products. With IRAs, you have many more choices, but that may not be much of a factor.

How easily can you access your money? A prior employer’s plan may give you the option of a withdrawal at any time, or at least a monthly withdrawal. If that’s not available, an IRA may be better.

Do you need the money? Are you 50 or older? For most people, rolling a 401(k) into an IRA and then making a withdrawal before turning 59½, means a 10% tax on the withdrawal plus regular income taxes. If you leave work the same year you turn 55 or later, you can withdraw money out of the employer’s 401(k) without paying that extra tax.

Are you in debt? Most creditors cannot access a 401(k) account. However, if you live in a state that permits it, they might be able to get to an IRA account.

How is your plan working for you so far? If your account has low-cost funds and you like the way things are going, there may be no point in making any changes. Stay the course.

Reference: AARP (June 10, 2019) “What to Do With Old 401(k) Accounts”

Surprise! Retirement Is Not Tax-Free

“Since its debut nearly 40 years ago, the 401(k) has emerged as one of the premier tools to save for retirement in America. In fact, when we poll 401(k) participants across the country, the majority consistently say it’s their largest—or only—source of retirement savings.”

What many people don’t realize that that when they start drawing funds from those 401(k)s, they’re taxed. One of the reasons the accounts are so popular, is that a traditional 401(k) is funded from pre-tax paychecks, so the money deposited into the plan and any gains on the investment are not taxed until the money is taking out. These withdrawals are called “distributions” and there are strict rules about Required Minimum Distributions, known as RMDs.

In the article “How 401(k) savers can avoid a nasty surprise come retirement,” Market Watch advises readers that these contributions are worthwhile, since they lower taxable income. Contributing enough can even move a taxpayer into a lower tax bracket for a given year, if they are able to do so.

However, there’s always payback where Uncle Sam is concerned. In this case, when distributions are taken, they are subject to ordinary income taxes. That’s why it’s called a “tax-deferred” account—taxes are deferred or put off. They aren’t tax free.

People who work in estate planning or personal finance tend to assume that everyone knows this, but that’s not the case. Just as they are about to retire, a great saver may look at their 401(k) balances and be so happy to consider how all their hard work and diligent savings have paid off. However, even if they have a million dollars in an account, the reality is, that $1 million is actually worth more like $700,000, if they are paying federal, state and local taxes. The same is true with balances of any size.

It is still important to continue saving in a 401(k) or any other kind of retirement account. However, you must keep that tax obligation in mind, when you’re setting any kind of financial retirement goals. Tax rates in the future are unknowns, but plan on roughly 20% in federal tax, and maybe another 3–10% in state and local taxes, depending upon where you live.

If you use an online retirement calculator to help you plan and estimate your goals and costs in retirement, make sure that the calculator takes taxes into account.

Everyone’s strategy for building a retirement nest egg is different. However, there are certain rules to consider, based on age. Once you turn 59½, you are allowed to take money from your 401(k) without penalties, but you will probably pay at least 20% in federal income tax, plus state and local income.

If you are taking withdrawals at this age and still drawing a paycheck, you might be moving yourself into a higher tax bracket. If you turn 65, withdrawing enough to move into a higher tax bracket may also mean that you are paying higher Medicare premiums.

For those who continue working into their 60s and 70s, a good goal is to preserve your 401(k) accounts for as long as possible. You are not obligated to take any money out of a traditional 401(k), until you turn 70.5. At this point, the Required Minimum Distributions must begin. Legislation pending as of this writing (the SECURE act) may change the age requirement for RMDs, but until the legislation becomes laws, the age remains at 70.5.

Reference: Market Watch (June 3, 2019) “How 401(k) savers can avoid a nasty surprise come retirement”

How a Single 401(k) Works for Self-Employed

“There are many perks to being self-employed—flexible hours, the possibility of working from home and, of course, being your own boss. However, one major downfall that has historically burdened solopreneurs is the lack of access to traditional employer-sponsored retirement plans, such as a 401(k).”

Freelancers, gig-workers or solo entrepreneurs have always had a hard time saving for retirement. It takes a tremendous amount of self-discipline to take money that would otherwise go to run a household or pay quarterly taxes and set it aside in a retirement account. Without an automatic withdrawal from a regular payment, it’s tough. However, there is an option, says Next Avenue in the article “A Retirement Plan for the Self-Employed: The Single 401(k).”

Known as the Single 401(k), the Self-Employed 401(k), Individual 401(k), or the Solo 401(k), this is a retirement plan designed for self-employed people or sole proprietors, and if applicable, also for their spouses. With a Single 401(k), 100% employee salary deferral of up to $19,000 is permitted in 2019, if you are under 50. If you’re over 50, that number can go up to $25,000. It also allows an employer profit-sharing contribution of up to $56,000 per year, which lets you save even more by being both the employer and an employee of your business.

Using the Single 401(k) can save you more than $14,000 in taxes per year (that is, assuming a $56,000 contribution and a 25.7% corporate tax rate), while simultaneously offering a loan provision, just in case you need to tap your savings.

Who qualifies for a Single 401(k)? You have to be truly self-employed, either in your own full-time small business or a part time gig. Your business can be a sole proprietorship, partnership, or corporation, but it can only have no other employees or employees who aren’t eligible to participate in a traditional 401(k). Examples of people who aren’t eligible would be people who are under age 21 or who work fewer than 1,000 hours per year.

The Single 401(k) works well for a husband/wife partnership or a small business with only part-time employees.

It provides flexibility so that when times are good, you can put away a lot. When times are lean, you can save less. Additional benefits:

• Reduced taxable income for pre-salary contributions.
• Built-in profit sharing for maximum savings deductble against business income.
• The cost of the plan is a deductible expense.
• Investments grow tax deferred.
• Higher contribution limits than SEPs and SIMPLE IRAs.

Small business owners don’t have an HR department to rely on, so it’s a good idea to talk with your estate planning attorney about how a Single 401(k) will work for your long-term retirement and estate plan.

Reference: Next Avenue (May 3, 2019) “A Retirement Plan for the Self-Employed: The Single 401(k).”

Is Your IRA Safe from Bankruptcy Claims?

“If you think that personal bankruptcy is a real possibility in your future, understanding IRA bankruptcy protection can potentially save a significant portion of your net worth, as well as unnecessary taxation from premature distributions.”

There are some protections in place for IRAs in the face of bankruptcy, says The Balance in the article “What is IRA Bankruptcy Protection?” The protection from the federal government extends to personal IRAs and Roth IRAs, but there are some limitations.

President George W. Bush signed bankruptcy protection into law in 2005 with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCA). This new law insulated retirement accounts from creditors, by providing that contributions to various retirement plans were excluded from the property of the estate. This was the first time that protection for individual retirement accounts existed.  

Today, IRA bankruptcy protection includes all the retirement accounts: traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs and rollover IRAs. Protection is limited by the amount, which increases on a regular basis.

Here’s a look at the IRA bankruptcy protection from BAPCA:

Traditional IRAs and Roth IRAs: The most recent adjustment was in 2016, when the protection limit was increased to $1,283,025.

SEP IRAs and SIMPLE IRAs: These IRAs receive the same protection limits as traditional and Roth IRAs. They are used by self-employed people and small businesses.

Rollover IRAs: These are traditional and Roth IRAs that were funded by rollover transfers from an employer-sponsored retirement plan, like a traditional 401(k) or a Roth 401(k).

These protections are considered to be high enough to cover most American’s IRA accounts. There are some assets that are not protected. Some examples include general creditors, IRS levies and divorce.

General Creditors: There’s no federal protection for IRA owners, and the protection from general creditors varies by state law.

IRA Assets and IRS Levy: If you owe past taxes to the IRS, they can levy your pay and your IRA. They’ll generally go after other assets first, but if necessary, your IRA is fair game.

IRA Assets and Divorce: What happens to your IRA in a divorce, depends upon a court order and other assets that are held. If IRA assets are divided, taxes can be avoided. According to the “incident to divorce” rules in the tax code, IRA assets can be transferred and split between spouses without taxation within one year of the formal divorce date. This is one where you want a skilled CPA and matrimonial attorney on your side, so the tax liability is minimized.

Every situation is different, so speak with your estate planning attorney to make sure that your IRA assets are protected.

Reference: The Balance (Dec. 12, 2018) “What is IRA Bankruptcy Protection?”

How Does a Pension Compare to a 401(k)?

“Understand the differences between each plan to decide which retirement income stream is best for you.”

No matter your type of work, when it’s time to retire, you’ll want to have as many income streams as possible, says U.S. News & World Report in the article that compares two sources “Pension vs. 401(k).” Start with the understanding that Social Security was designed to provide only about 40% of the average worker’s income. Where does that other 60% come from?

A traditional pension plan, or a defined contribution plan, like a 401(k) account, are two of many retirement savings options. Both plans are designed to provide retirement income, but they are very different in how they are set up and administered.

Most people think a pension is better, but fewer people today have that option. There are also several reasons why a 401(k) is a better way to go, as long as the owner is financially educated and has the discipline to set aside short-term spending for long-term retirement goals.

Let ‘s look at the differences.

Pensions give workers a monthly payment in retirement, if they meet certain eligibility standards. Someone usually has to work a certain number of years to receive a pension and must reach a specific age, before they can start getting payments. The formula is usually calculated based on earnings and years of service.

Employers fund pensions and there’s no employee contribution needed. There’s a tradeoff though: workers have little or no control of how they receive their pension. Most have to be taken in monthly payments, while some companies do allow a lump sum payout.

The usual option is to take a monthly payment to permit a surviving spouse to continue to receive the pension payouts. The monthly payout may be less than a lump sum, but the surviving spouse enjoys the benefit of continuing income after the worker dies. This is often a decision that can be made only one time.

Fewer and fewer companies offer pensions today. Twenty years ago, nearly 60% of large companies offered pension plans. In 2017, only 16% of companies offered pensions to new hires. Pensions are expensive. This is underscored by government pensions, also known as public pensions, which are now scrambling for funding. Moody’s Investor Services calculated that public pensions in 2018 were underfunded by $4.4 trillion. For teachers and civil servants, that’s a worry. In the private sector, the Pension Benefit Guaranty Corporation (a government agency) insures the pensions of 37 million private employees.

401(k) plans replaced pensions for most workers. This puts the onus on the worker to have money taken out of their paycheck (pre-tax). In 2019, employees can contribute as much as $19,000 to a 401(k) plan. Workers 50 and over can add $6,000 in catch-up payments, for a total contribution of $25,000.

Some employers make contributions to their worker’s retirement accounts. However, many workers need to be employed for a certain amount of time, before they are entitled to the funds. Some companies will match an employee’s contribution, if they meet certain contribution levels.

There are two types of 401(k) plans. Traditional 401(k) plans offer a tax deduction at the time that contributions are made. Money grows in the account tax-free, but when withdrawals are made, after retirement, they are subject to income taxes. If you take money out before age 59½, there might be a 10% penalty. Once you reach age 70½, you must take a certain amount out every year, called a Required Minimum Distribution or RMD.

The Roth 401(k) plan does not provide a tax deduction for contributions, but money can be withdrawn tax free during retirement. Depending on the account, there may be a 10% penalty for an early withdrawal, but that only applies to investment gains. Since the contributions have already been taxed, there’s no penalty for withdrawing a portion of the principal early. Unlike the traditional 401(k), there are no RMDs.

Which is best? Few of us have that choice today, but there’s a lot to like about pension plans. If investments don’t perform in a 401(k), there’s no guarantee of having enough money to retire on. However, a 401(k) is not subject to a company deciding to cut pension payments, and lets you decide where your money is invested. There are pros and cons for both kinds of retirement savings plans.

Reference: U.S. News & World Report (Dec. 21, 2018) “Pension vs. 401(k)”

Increased 401(k) Contribution Limits in 2019, Thanks to IRS

“Annual contribution limits for your workplace retirement plan are increasing by $500 next year. While that may not sound like much, the additional money can grow substantially over time, financial advisers say.”

Maybe it doesn’t sound like a lot. However, this early holiday present from the IRS should encourage more employees to save for retirement. The announcement from the IRS that the employee contribution limit for 401(k)s and other workplace-based retirement plans will take a jump to $19,000 is welcome news, says The New York Times’ article “I.R.S Is Raising 401(k) Contribution Limits in 2019.”

When employees enroll in a 401(k) plan, money goes in as pre-tax dollars and isn’t taxed until withdrawn. For workers 50 years and older, there is an additional “catch up” contribution opportunity of $6,000. This amount is not changing in 2019. That means if you are 50 and older, you can contribute as much as $25,000 next year.

401(k) plans, which are named after a section of the tax code that created them, have been around for four decades. Workers typically open accounts as part of their employee benefits package. As employees make their decisions during open-enrollment season for 2019, advisors recommend increasing their payroll contributions to their 401(k) plans.

This is a good time to review your overall retirement saving strategies. Let’s say you take advantage of the new contribution limits. If you invested $500 annually over the course of 30 years (assuming you are in the early years of your career), a 7% average annual rate of return will add $47,000 to your retirement savings accounts.

For those who are lucky enough to have an employer who matches contributions, which range from 3% to 5% of pre-tax paychecks, take advantage of this perk and contribute as much as required to maximize your employee-match.

Advisors recommend increasing contributions by 1% every year, which makes a big difference in the long run. Others remind us of the basics: Start saving early and take advantage of the power of compounding and time.

Even if your employer does not have a retirement plan, you can open one up on your own with an Individual Retirement Account (IRA). Contributions to IRAs are also increasing in 2019, for the first time in five years. You can increase your contribution up to $6,000, a $500 increase over last year. If you are 50 years or older, you can save an additional $1,000.

Bottom line: it is never too early to start saving for retirement. This because the longer you can save, the better. If you are eligible for an employer-matching program, make the most of it. If your company offers a Health Savings Account (H.S.A.), you should also contribute to that account. The H.S.A. can be used for current health needs. However, if you let it grow, you can also use that money for health care costs during retirement.

Reference: The New York Times (Nov. 9, 2018) “I.R.S Is Raising 401(k) Contribution Limits in 2019”

Make a Big Life Project Easier By Following These Steps

“Planning for retirement obviously is a big job. Therefore, it helps to break it down into a series of goals that you can check off as you go.”

If you think of retirement as a chance to enjoy a second childhood, or for some people, a second adolescence, then planning for retirement sounds like a lot more fun, advises Kiplinger in the article “A Pre-Retirement Checklist: 8 Steps to Take Right Now.”

On a more serious note, any large task or project is more likely to be completed, if it’s broken down into a series of steps. Here are eight steps that can make planning for your second childhood more successful:

Where do you want to live? Think about the lifestyle you want and find a location that will support it. If travel is your focus, a “lock and leave” condo means you don’t have to think about your home while you are out exploring. If you are a homebody and like a peaceful setting, a small town may work well for you. If you have more money, you will have more options but need to know your priorities.

Start practicing being retired now. What happens if you don’t have a job to go to every day? Take a week of vacation time to do nothing. How do you feel by the end of the week? Bored? Anxious? Ready to go back to work? Post-retirement depression occurs to people who have a hard time adjusting to the loss of their role in the workplace. Start thinking about who you want to be when your identity is not tied to your job.

Eliminate as much debt as you can. With no mortgage, car payment or credit card debt, you have more control over your expenses. This takes planning. Start by listing all your current debts, then rank them not by amount, but by interest rates from highest to lowest. Start paying down the highest interest rates and work your way down, until you are debt free.

Shift your risk profile. Once you get within five years of retirement, it’s time to adopt a more defensive investment philosophy. Maybe you were an aggressive investor in your early or middle earning years but now is the time to reduce risk. Rebalance your portfolio quarterly to get there slowly, reduce exposure to equities and create stop-loss strategies to mitigate downside risk.

Deal with it: health care costs. This is the ugly part of retirement that we tend to hope not to have to deal with at all. As we age, your health care costs are likely to go up. Do your research and plan for what Medicare does not cover, like long-term care or health care costs that happen when you are overseas.

Make a budget and live on it. You should actually make two budgets: necessities and discretionary items. What do you need to live now, including housing, transportation, food and health care? What are the things you’d like to enjoy: recreational activities, travel and entertainment? Create a plan that gives you the best possible chance of getting your necessities covered, then play around with the luxuries. If there’s no breathing room, then consider upping your savings or working longer.

Apply for Social Security early. Apply three months in advance of the date you would like to start getting retirement benefits. You are allowed to apply four months in advance of your Full Retirement Age. Get up to speed with all the data on Social Security: when should you start taking benefits, should your spouse start taking benefits before you, how will your income impact your benefits, etc.

Could rolling over your 401(k) work for you? There are several moves that can be made with your 401(k), including rolling into an IRA, which could increase investment options, give you more flexibility and offer more distribution options. Don’t make a move without a full understanding of the process and the benefits and drawbacks—mistakes here can be costly.

Reference: Kiplinger (Oct. 9, 2018) “A Pre-Retirement Checklist: 8 Steps to Take Right Now”

Did You Celebrate 401(k) Day?

“And speaking of 401(k) Day, younger 401(k) participants have a built-in advantage that no one else can claim — that’s a message that grandparents need to deliver to youthful family members.”

If you’re one of those people who is always on the lookout for ways to encourage your kids or grandchildren to save, that’s great—you’re teaching them the value of money. If you missed National 401(k) Day, on Sep. 7, or Grandparent’s Day on Sep. 9, that’s also okay. Every day presents some kind of teachable moment, says the article “Retirement Planning: A 401(k) Day message” that appeared recently on Tuscon.com.

One point you should stress to kids and grandkids: they’ve got a great built-in advantage, when it comes to saving for anything, including retirement. Having an extended time in which to save and for money to grow, is something most of us don’t understand, until that advantage is long gone.

Try this example:

Let’s say you have a 22-year-old granddaughter named Chelsea. She’s 22 and works with Becky, 25, and Ben, 30. They both work for a company with a generous 401(k) plan with an amazing dollar-for-dollar match. They each start participating in the program at the same time. They contribute $150 every month through payroll deductions. Add to the fact that contributions increase by 3% every year and assume a nice 8% annual rate of return.

How much of a difference will there be when they reach age 65?

For Ben, who contributes over the course of 35 years, there will be $900,000 by the time he celebrates his 65^th birthday.

For Becky, who contributes the same as Ben, has an additional five years on Ben to add to her account, so she’ll have $1.1 million.

Your smart granddaughter, Chelsea, who started working at 22, with eight more years than Ben to contribute and benefit from the company match, will celebrate her retirement at 65 with $1.7 in her 401(k).

They each contribute the same amount. But the mathematics of compounding, also known as the multiplier effect, results is a difference of hundreds of thousands a year.

Here’s another example. Take a sum of money and invest it at 8%. Leave it invested for nine years, and you will double the original investment. Leave it for another nine years, and you will quadruple the investment. The passage of time drives compounding. The longer time you have, the greater the results.

If your kids or grandchildren are working and are relatively young (or if you are relatively young yourself), recognize the power of time in savings and make sure to get into the habit of saving in your retirement accounts.

Reference: Tuscon.com (Sep. 6, 2018) “Retirement Planning: A 401(k) Day message”

Take These Steps to Get Ready for Year End Finances

“New Year's Eve is far away.  However, it's never too early to organize your finances for the end of the year. Do it while there’s still plenty of time to increase your retirement nest egg, lower your taxable income and avoid tax penalties.”

September still feels a lot like summer in most parts of the country, and it’s tempting to think it will never end. However, as we are reminded by USA Today in the article “Retirement tips: 8 Ways to start your year-end financial planning now,” you can save yourself a lot of time and money by starting to get organized and taking action long before the end of the year.

Among the tips are:

Take care of your RMDs.

Once you reach 70½, you must start taking withdrawals from IRA, SIMPLE IRAs, SEP IRAs or any retirement plan. You must take the smallest possible amount by December 31. The same goes for inherited IRAs and inherited Roths. If you don’t take these distributions, or if they are not large enough, the penalty is painful: a 50% excise tax on the amount not distributed. Spare yourself the last-minute risk and do this in October or November.

Careful it’s not too big.

If you make an excessively big contribution when you roll over disallowed amounts, such as your annual RMD, or you don’t follow the once-per-year, 60-day rules about amounts withdrawn and then returned to a retirement account, you could face a 6% penalty of the excess contribution.

Give with a Qualified Charitable Distribution (QCD).

If you’re over 70½, you can make a donation using a QCD—that’s a donation from a retirement account RMD to a qualified charity. It excludes the amount you donate from your taxable income and it can be used to satisfy all or part of the amount of your RMD from an IRA.

It’s Tax Harvest Season

If you have a taxable account, examine unrealized gains and losses long before the year ends. Are there positions you can take with unrealized losses that can be sold to reduce or eliminate the gain? Year-end distributions can create problems for mutual fund owners. Consider waiting to purchase a mutual fund, until after it distributes capital gains.

Look at Funding a Roth IRA and Purchasing Cash Value Life Insurance

Both these financial vehicles can grow tax free and distributions are also mostly tax free. You can also consider a partial conversion of your traditional IRA to a Roth IRA. You’ll pay taxes on the amount of the income, so be sure you have enough money to pay the taxes due on the Roth IRA conversion. Do it in a year when your income will be lower to keep taxes low.

Beneficiary Designations and Your Estate Plan

While you’re looking over your finances, take the time to review beneficiary designations and your overall estate plan. Have there been changes since the last time you reviewed your estate plan? Marriage, death, birth, divorce, the sale of a property or an inheritance: these are all reasons to review your estate plan. Remember that your beneficiary designations supersede anything in your will, so make sure they are also up to date.

Don’t Forget the Finishing Touches

Estate planning attorneys hear this all too often—a trust is created but never funded. Titles to property don’t get changed. Make sure that you finish what you’ve started. Start early, so you can go into the holiday season with all of your personal legal and financial tasks completed.

Reference: USA Today (Aug. 29, 2018) “Retirement tips: 8 Ways to start your year-end financial planning now”