A Tax-Smart Checklist—No Matter Your Age

With everything going on in our lives, everyone can always use a helpful checklist to make sure they remember to keep things moving, accomplish what they plan to accomplish, and not put important decisions on the back burner.

This is especially true when it comes to being tax-smart about your investments. It’s probably the last thing you’re thinking about, right?

Do not despair! The checklist below will give you a head start.

If you’re in your 20s or 30s:

• Open and contribute to an IRA annually. Better yet, set up a periodic investment plan to help you contribute monthly.
• Already on track with an IRA? Look at what you are contributing now and try to increase your contributions each year to get closer to the maximum allowable annual contribution ($6,500 for 2023).
• If you are not participating in your employer’s 401(k), 403(b), or other retirement plan, get started now. The earlier you start, the more time you have to enjoy the benefits of tax-deferred growth which can add up over time.
• If you are already participating in an employer-sponsored retirement plan, look to increase the percentage of your contribution. Set a goal – work up to contributing at least 10% of your salary annually over time.
• For a special child in your life, contribute to a 529 Plan on a monthly basis. Setting up a periodic investment plan is an easy way to do this.

If you’re in your 40s or 50s:

• It is not unusual for many of us at this point to have had multiple jobs which have left us with multiple 401(k)s or 403(b)s. Consolidation of these retirement accounts may make sense.
• When was the last time you increased your 401(k), 403(b) and/or IRA contributions? If you are not contributing at least 10% of your income now, outline a strategy for getting there. It may be increasing your contribution by 2% for the next 2 years. Anything you can do will help get you closer to that goal of a comfortable retirement.
• For those 50 years and older, you are now able to contribute more to IRAs, 401(k)s and 403(b)s due to special “catch-up” provisions per the IRS. For IRAs, you can contribute an additional $1,000, while for 401(k)s and 403(b)s, you can contribute an additional $7,500 in 2023.
• Continue to contribute to a 529 Plan, as appropriate, for that special child in your life. Increase contributions based on your anticipation of college costs.

If you’re in your 60s and above:

• If you are in your early 60s, have you determined your retirement date? If not, take some time to consider that date and begin to develop a strategy that takes into account sources of income, potential timing of withdrawals and minimizing tax consequences when withdrawals are made.
• If you are approaching your early 70s, determine a minimum IRA distribution strategy so that you will be prepared when the time comes for you to take those mandatory minimum distributions.
• It may be time to contribute to a 529 Plan for your grandchildren.
• In a higher tax bracket? For shorter-term investments, you may want to consider pursuing current tax-free income using state specific municipal bonds or municipal bond funds.

Need help with any of these tax-smart decisions? Keep track of these financial milestones and many more that happen on or around your birthday. Download the Retirement Planning by Birthday Milestones. Regardless of your age and where you are in life, the advisors at Jemma Financial can help you check all the boxes on the way to being a tax-smart investor.