Year-End Notes

2015 contribution limit increases

A new year is about to begin, and this is a great time to check on your 401(k) retirement plan to take full advantage of the tax benefits. For 2015, the contribution limit has increased from $17,500 to $18,000, with an additional $6,000 permitted if you are 50 or older. These contributions can be in the form of after-tax Roth contributions if your plan has that added benefit.

If you have the ability to take full advantage of profit sharing contributions, you will be able to contribute up to $53,000 to your 401(k) in 2015, up from the current $52,000. This could shave $20,000 or more off your 2015 taxes depending on your income level.

If needed, simply update your contribution elections to make sure your salary deferrals into the 401(k) plan take advantage of these new limits. This is also a good time to check your investment allocation within the plan — which can be done by simply sending me your most recent 401(k) statement and a listing of the investment options.

IRA and Roth IRA contribution limits are not changing for 2015 — $5,500 plus an additional $1,000 if age 50 and over. Be sure to check the income limits for IRA contributions if my office is not handling these for you.

Required minimum distributions for 2014

Last week I finished up calculating and handling all remaining 2014 required minimum distributions (RMDs) for IRA accounts managed at Precedent AM. If you turned age 70 1/2 or over in 2014, or if you have an inherited IRA, don’t miss these required distributions — they carry a tax penalty of 50% if not taken.

For example, if your required distribution is $40,000 this year, and you forget to take it, you can plan on paying a penalty tax of $20,000!

Again, if your IRA is here we already took care of this for you. If you hold an IRA elsewhere, you only have a day or two left to call the custodian and have the required minimum distribution completed. There are some exceptions, so feel free to contact me if you have questions or need help.

Amazing generosity

Our other significant year-end work around the office is assisting with charitable gifts. In 2014, clients of Precedent Asset Management gave away an estimated $650,000 in cash and appreciated securities to causes that matter to them. Amazing! I am blessed to work with such a generous group of people.

Since 2007 I have worked with Central Indiana Community Foundation and the Legacy Fund for Hamilton County, first as a member of the Professional Advisors Leadership Council and now on the Cornerstone Council, to provide clients with donor services and giving solutions that enhance our local community and provide resources to the ministries that are meeting needs right in our back yard. If your 2015 plans include donations of more than $25,000, be sure to schedule a planning meeting early in the year so we can address the most tax efficient ways to complete the gifts and get you access to these donor resources.

New Year’s Day goal setting coming up

My annual New Year’s Day goal setting project is coming up soon! It’s easily my favorite day of the year. I’ll be in touch next week with tips on how to join in on this project.

Christmas financial planning humor

On Christmas Eve, I sat on the floor with a bunch of kids (and more adults than we want to admit) and watched the movie “Earnest Saves Christmas“. When Santa is unable to pay his cab fare, Earnest momentarily takes on the role of financial planner and assesses that “what we have here is a failure to accumulate.” I love the humor, even if only a CFP would laugh; and I love the generosity the scene ends with. You can check out the 30 second clip here.