Financial Planning Tip of the Month

It is not too late to make a few quick moves to save some taxes and add to your retirement savings.

Self Employed?  You can still open and fund a SEP IRA for tax year 2016.  A SEP is a simple retirement account for self-employed individuals.  A SEP allows one to contribute up to 25% of compensation (maximum $53,000 for 2016 and $54,000 for 2017).  However, each eligible employee must receive the same percentage.  We find that a SEP is best for sole proprietors without employees.

Maxed out your 401(k) and looking for another way to save additional money for retirement?

We can still set up a Roth IRA for 2016.  A Roth IRA allows one to contribute up to $5,500 ($6,500 if age 50 or older) of after tax dollars.

For single filers: Those with Modified Adjusted Gross Incomes (MAGI) up to $117,000 are eligible to make full contributions.  Those with MAGI between $117,000 and $132,000 are eligible to make partial contributions.

For joint filers: Those with MAGI up to $184,000 are eligible to make full contributions.  Those with MAGI between $184,000 and $194,000 are eligible to make partial contributions.

Still working and typically get a tax refund?

Retired and interested in estate planning?

Consider a Roth conversion.  Roth IRA assets grow tax free.  Withdrawals are also free from tax.  There are no Required Minimum Distributions (RMD) and Roth IRA assets left to your heirs are tax free.  There are three important factors—taxes, time, and costs—that you should consider before you decide if conversion is right for you.  Therefore, careful consideration should be used.  Let us know if you would like to see if a Roth conversion makes sense for you.

Here is some playful and pertinent commentary from Blackrock

Play ball !

Spring training is underway, bringing baseball players back for another season. It is a time of unbridled confidence, when every team imagines it will win the World Series, and every player will have a record-breaking year. Of course, few of these predictions come true. Investors appear to have a similar optimism these days, but just as even the greatest players can stumble, political realities and stretched valuations could well disrupt the market rally.

Knuckleball

For years, investors often took their cues by analyzing the nuances of Federal Reserve statements. Now, the focus has increasingly moved to parsing the ups and downs of the Trump administration. For example, equities rallied strongly after President Trump’s acclaimed address before both houses of Congress in late February, but stumbled after questions surrounding Attorney General Jeff Sessions broke the next day.

Hit and run

Certainly, the potential Trump administration policies represent an important shift in market sentiment and expectations. But it is important to note that signs of rising economic growth coupled with accelerating inflation—so-called reflation—actually predate President Trump’s election. Economic data already show an improving economic picture, before the new administration’s policies have even been enacted. Moreover, it is a global phenomenon. In short, we still see reflation as the driving force for the market whether it gets a “steroid boost” from new policies or not.

Small ball strategies

U.S. stocks are not cheap, but there are pockets worth considering, such as financials and value. We still prefer stocks over bonds, and within stocks looking overseas in Europe, Japan and emerging markets, particularly in Asia. Still, investors may need to play a game of “small ball”—by focusing on grinding out runs through singles and moving the runner forward, rather than hoping for the home run.

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