SECURE Act: You may know that, as part of a larger government package signed into law in December 2019, Congress included provisions that could make saving for retirement more accessible. Key takeaways include:
- Required minimum distributions (RMD) now begin at age 72. If you turned 72 in 2022, speak with your advisor about when and how to begin taking your RMD.
- As long as you are still working, you can now contribute to traditional IRAs past age 70½.
- 529 funds can be used to pay down student loan debt, up to $10,000.
Thinking of donating to charity?
With the 2017 Tax Cuts and Jobs Act, some donors may find that the total of their itemized deductions is just below the level of the standard deduction. You may find it beneficial to bunch or combine two years of charitable donations into one year; that way you could itemize deductions this year and take the standard deduction next year. This strategy could produce a larger two-year deduction, depending on income level, tax filing status, and giving amounts. Donor-advised funds are one way to bunch contributions efficiently.
Click here to access the Schwab Charitable Tax Savings Calculator to help determine if a “bunching strategy” might benefit you.
Creating a donor-advised fund can take 2-6 weeks to set up and transfer stock from a non-Charles Schwab financial institution. If you have been thinking about this, please let us know as soon as possible.
Deadlines – Don’t Wait Until the Last Minute!
Begin Working on Now Before the December 31st Deadline
□ Consider donating appreciated securities held for more than a year rather than cash. This can eliminate capital gains you would incur if you sold the assets and donated the proceeds, potentially increasing the amount available for charity by up to 20%. Please let us know your requests by the following dates to help ensure that your charitable gift donations are processed by year-end:
o Mutual funds: November 14, 2022
o Stock transfers: December 1, 2022
□ Qualified Charitable Distributions (QCD): up to $100,000 may be distributed tax-free from your IRA to operating charities. QCDs have very specific requirements (some of which are listed below) so we recommend consulting your CPA to see if you qualify.
o Taxpayer must be 70 ½ at the time of payment to charity
o Can only come from an IRA, not a SEP or Simple IRA or from an employer plan
o Must be made to public charity – private foundations and donor-advised funds are not eligible
□ Contribute to donor-advised fund
By December 31st
- Annual Gifting: The annual gift tax exclusion for 2022 is $16,000 per recipient per year. In other words, you may gift as many people as you like up to $16,000 each without having to file a gift tax return. You might be surprised how much wealth you can transfer tax-free using this strategy over several years.
- Maximize contributions to employer-sponsored retirement accounts:
- 401(k)s and other qualified plans
- Turn 50 this year? You have until the end of the year to defer an additional $6,500 in “catch-up” to a 401(k). This catch-up employee deferral can be made by anyone who is age 50 or older.
- Spend Flexible Savings Account (“FSA”) dollars – including Health Care Spending Account (HCSA) and Dependent Care Spending Accounts (DCSA)
- Some HCSA plans allow a rollover $500 so check with your employer to confirm your plan’s deadlines
- Contribute to a 529 College Savings Plan
- 401(k)s and other qualified plans
By April 18th, 2023
- Establish and/or contribute to an IRA.
- You have until Tax Day next year to establish and/or contribute to a traditional or Roth IRA for 2022.
- The maximum is $6,000 or 100% of earned income, with an additional $1,000 “catch-up” for anyone 50 or older by December 31 of the contribution
- There are income phase outs and limitations to these types of contributions so please check with us if you are unsure of your eligibility.
- Maximize Contributions to Health Savings Account (HSA) if you are eligible.
Other Things to Consider
- Update or confirm your Beneficiary Designations (video tutorial)
- Add a “Trusted Contact” to your Schwab accounts. This adds another layer to protect your accounts from fraud and elder exploitation. We can send you a description of what a Trusted Contact is. (video tutorial)
- Data security:
- Consider changing online passwords
- Review your credit report
- Review estate documents