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Retiring? Here’s How to Maximize Your Last Year of Work

Nick Defenthaler Contributed by: Nick Defenthaler, CFP®

Retiring? Here's How to Maximize Your Last Year of Work

So you’ve decided to hang ‘em up – congratulations! Retirement is an extremely personal decision made for a multitude of reasons.

Some of our clients have been able to afford to retire for several years and have reached a point where the weekly grind isn’t as enjoyable as it once was. Probably dozens of thoughts are running through your head. What will life look like without work? How will I spend my days? Where do I/we want to travel? Do I want to work part-time or volunteer?

With so many emotions and thoughts churning, you might easily miss potentially good opportunities to really maximize your final year of full-time work. In this blog, I’ll touch on planning concepts you should consider to get the most “bang for your buck” as you close out your full-time career:

Maximizing Employer Retirement Plans (401k, 403b, etc.)

If you aren’t already doing so, consider maximizing your company retirement plan. If you are retiring mid-year, if appropriate, adjust your payroll deduction to make sure you are contributing the maximum ($25,000 for those over the age of 50 in 2019) by the time you retire. If monthly cash flow won’t allow for it, consider using money in a checking/savings or taxable account to supplement your cash flow so you can max out the plan. Making pre-tax contributions to your company retirement plan is something you should consider.  

“Front-Load” Charitable Contributions

If you are charitably inclined and plan to make charitable gifts even into retirement, you might consider “front-loading” your donations. Think of it this way: If you are currently in the 24% tax bracket, and you will drop into the 12% bracket once retired, when will making a donation give you the most tax savings? The year you are in the higher bracket, of course! So if you donate $5,000/year to charity, consider making a $25,000 contribution (ideally with appreciated securities and possibly utilizing a Donor Advised Fund) while you are in the 24% bracket.

This strategy has become even more impactful given recent tax law reform and the increase in the standard deduction. (Click here to read more.) This would satisfy five years’ worth of donations and save you more on your taxes. As I always tell clients, the more money you can save on your tax bill by being efficient with your gifts, the less money in the IRS’s pocket and more for the organizations you care about!

Health Care

This is typically a retiree's largest expense. How will you and your family go about obtaining medical coverage upon retirement? Will you continue to receive benefits on your employer plan? Will you use COBRA insurance? Will you be age 65 soon and enroll in Medicare? Are you retiring young and need to obtain an individual plan until Medicare kicks in?

No matter what your game plan, make sure you talk to the experts and have a firm grip on the cost and steps you need to take so that you don’t lose coverage and your insurance is as affordable as possible. We have trusted resources to help guide clients with their health care options.  

Those are just a few of many things you should be thinking about prior to retirement. With so many moving parts, it really makes sense to have someone in your corner to help you navigate through these difficult, and often confusing, topics and decisions. Ideally, seek out the help of a Certified Financial PlannerTM (CFP®) to give you the comprehensive guidance you need and deserve!

Nick Defenthaler, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He contributed to a PBS documentary on the importance of saving for retirement and has been a trusted source for national media outlets, including CNBC, MSN Money, Financial Planning Magazine, and OnWallStreet.com.


Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Generally, if you take a distribution from a 401k prior to age 59 ½, you may be subject to ordinary income tax and a 10% penalty on the amount that you withdraw, in addition to any relevant state income tax. Contributions to a Donor Advised Fund are irrevocable. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Roth vs. Traditional IRA: Which is best for you?

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Roth vs Traditional IRA: Which is best for you?

If you’re planning to use an IRA to save for retirement, but aren’t sure whether Roth or Traditional is best for you, we can help sort it out. Before we break down the pros and cons of each, however, we need to make sure that you are eligible to make contributions.

For 2019 Roth IRA contribution rules/limits:

  • For single filers, the modified adjusted gross income (MAGI) limit is phased out between $122,000 and $137,000. (Unsure what MAGI is? Click here.)

  • For married filing jointly, the MAGI limit is phased out between $193,000 and $203,000

  • Please keep in mind that it makes no difference whether you are covered by a qualified plan at work (such as a 401k or 403b). You simply have to be under the income thresholds.

  • The maximum contribution amount is $6,000 if you’re under age 50. Those who are 50 and older (and have earned income for the year) can contribute an additional $1,000 each year.

For 2019 Traditional IRA contributions:

  • For single filers who are covered by a company retirement plan (401k, 403b, etc.), in 2019 the deduction for your IRA contribution is phased out between $64,000 and $74,000 of modified adjusted gross income (MAGI).

  • For married filers covered by a company retirement plan, the deduction is phased out between $103,000 and $123,000 of MAGI.

  • For married filers not covered by a company plan, but who have a spouse who is covered, the deduction is phased out between $193,000 and $203,000 of MAGI.

  • Maximum contribution amount is $6,000 if you’re under age 50. Those who are 50 and older (and have earned income for the year) can contribute an additional $1,000 each year.

If you are eligible, you may be wondering which makes more sense for you. Well, as with many financial questions…it depends! 

Roth IRA Advantage

The benefit of a Roth IRA is that the money grows tax-deferred. When you are over age 59 ½, you can take the money out tax free. However, in exchange, you don’t get an upfront tax deduction when investing in the Roth. You are paying your tax bill today, rather than in the future. 

Traditional IRA Advantage

With a Traditional IRA, you get a tax deduction for the year you contribute money to the IRA. For example, a married couple filing jointly with a MAGI of $190,000 (just below the phase-out threshold when one spouse has access to a qualified plan) would likely be in a 24% marginal tax bracket. If they made a full $6,000 Traditional IRA contribution, they would save $1,440 in taxes. To make that same $6,000 contribution to a ROTH, they would need to earn $7,895, pay 24% in taxes, and then make the $6,000 contribution. The drawback of the traditional IRA is that you will be taxed on it when you begin making withdrawals in retirement.

Pay Now or Pay Later?

It’s challenging to decide which account is right for you, because nobody has any idea what tax rates will be in the future. If you choose to pay your tax bill now (Roth IRA), and in retirement you find yourself in a lower tax bracket, you may have been better off going the Traditional IRA route. However, if you decide to make a Traditional IRA contribution for the tax break now, and in retirement find yourself in a higher tax bracket, then you may have been better off going with a Roth. 

How Do You Decide?

A lot depends on your situation, such as the career path you’ve chosen and your desired income in retirement. However, we typically recommend that those just starting their careers (who will most likely see their incomes increase over the years) make Roth contributions. If your income is stable, and you’re in a higher tax bracket, a Traditional IRA and immediate tax break may make more sense now.

Before making any final decisions, it’s always a good idea to work with a qualified financial professional to help you understand what works best for you.

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.


UPDATED from original post on June 19, 2014 by Matt Trujillo, CFP®

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Kali Hassinger, CFP®, CDFA®, and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. You should discuss any tax matters with the appropriate professional.

Qualified Charitable Distributions: Giving Money While Saving Money

Josh Bitel Contributed by: Josh Bitel, CFP®

Qualified Charitable Distributions

The Qualified Charitable Distribution (QCD) can be a powerful and tax-efficient way to achieve one’s philanthropic goals. This strategy has become much more popular under the new tax laws.

QCD Refresher

The QCD, which applies only if you’re at least 70 ½ years old, essentially allows you to directly donate your entire Required Minimum Distribution (RMD) to a charity. Normally, any distribution from an IRA is considered ordinary income from a tax perspective; however, when the dollars go directly to a charity or 501(c)3 organization, the distribution from the IRA is considered not taxable.

Let’s Look at an Example

Sandy turned 70 ½ in June 2019, and this is the first year she has to take a Required Minimum Distribution (RMD) from her IRA, which happens to be $25,000. A charitably inclined person, Sandy gifts, on average, nearly $30,000 each year to her church. Because she does not really need the proceeds from her RMD, she can have the $25,000 directly transferred to her church, either by check or electronic deposit. She would then avoid paying tax on the distribution. Since Sandy is in the 24% tax bracket, she saves approximately $6,000 in federal taxes!

Rules to Consider

The QCD and similar strategies have rules and nuances you should keep in mind to ensure proper execution:

  • Only distributions from IRAs are permitted for the QCD. Simple and SEP IRAs must be “inactive.”

    • Employer plans such as a 401k, 403b, 457 do not allow for the QCD.

    • The QCD is permitted within a Roth IRA but would not make sense from a tax perspective, because Roth IRA withdrawals are tax-free by age 70 ½.*

  • You must be 70 ½ at the time the QCD is processed.

  • Funds from the QCD must go directly to the charity and cannot go to you first and then out to the charity.

  • You can give, at most, $100,000 to charity through the QCD in any year, even if this figure exceeds the actual amount of your RMD.

The amount of money saved from being intentional with how you gift funds to charity can potentially keep more money in your pocket, which ultimately means there’s more to give to the organizations you passionately support.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

Can you roll your 401k to an IRA without leaving your job?

Nick Defenthaler Contributed by: Nick Defenthaler, CFP®

Can you roll your 401k to an IRA without leaving your job?

Typically, when you hear “rollover,” you think retirement or changing jobs. For the vast majority of clients, these two situations will be the only time they complete a 401k rollover. However, another option for moving funds from your company retirement plan to your IRA — the “in-service” rollover — is an often overlooked planning opportunity. 

Rollover Refresher

A rollover is simply the process of moving your employer retirement account (401k, 403b, 457, etc.) to an IRA over which you have complete control, separate from your ex-employer. If completed properly, rolling over funds from your company retirement plan to your IRA is a tax- and penalty-free transaction, because the tax characteristics of a 401k and an IRA generally are the same.  

What is an “in-service” rollover?

Unlike the “traditional” rollover, an “in-service” rollover is probably something unfamiliar to you, and for good reason. First, not all company retirement plans allow for it, and second, even when it’s available, the details may confuse employees. The bottom line: An in-service rollover allows an employee (often at a specified age, such as 59 ½) to roll a 401k to an IRA while employed with the company. The employee may still contribute to the plan, even after the completed rollover. Most plans allow this type of rollover once per year, but depending on the plan, you potentially could complete the rollover more often for different contribution types at an earlier age (sometimes as early as 55).

Why complete an “in-service” rollover?

While unusual, this rollover option offers some benefits:

More investment options: Any company retirement plan limits your investment options. You can invest IRA funds in almost any mutual fund, ETF, stock, bond, etc. Having options and investing in a way that aligns with your objectives and risk tolerance may improve investment performance, reduce volatility, and make your overall portfolio allocation more efficient.

Coordination with your other assets: Your financial planner can coordinate an IRA with your overall plan with much greater efficiency. How many times has your planner recommended changes in your 401k that simply don’t get completed? When your planner makes those adjustments, they won’t fall off your personal “to do” list.

Additional flexibility: IRAs allow penalty-free withdrawals for certain medical expenses, higher education expenses, first time homebuyer allowance, etc. that aren’t available with a 401k or other company retirement plan. Although this should be a last resort, it’s nice to have the flexibility.

Exploring “in-service” rollovers

So what now? First, always keep your financial planner in the loop when you retire or switch jobs to see whether a rollover makes sense for your situation. Second, let’s work together to see whether your current company retirement plan allows for an in-service rollover. That typically involves a 5-10 minute phone call with us and your company’s Human Resources department.

With your busy life, an in-service rollover may fall close to the bottom of your priority list. That’s why you have us on your financial team. We bring these opportunities to your attention and work with you to see whether they’ll improve your financial position! 

Nick Defenthaler, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He contributed to a PBS documentary on the importance of saving for retirement and has been a trusted source for national media outlets, including CNBC, MSN Money, Financial Planning Magazine, and OnWallStreet.com.


Rolling over your retirement assets to an IRA can be an excellent solution. It is a non-taxable event when done properly - and gives you access to a wide range of investments and the convenience of having consolidated your savings in a single location. In addition, flexible beneficiary designations may allow for the continued tax-deferred investing of inherited IRA assets. In addition to rolling over your 401(k) to an IRA, there are other options. Here is a brief look at all your options. For additional information and what is suitable for your particular situation, please consult us. 1. Leave money in your former employer's plan, if permitted Pro: May like the investments offered in the plan and may not have a fee for leaving it in the plan. Not a taxable event. 2. Roll over the assets to your new employer's plan, if one is available and it is permitted. Pro: Keeping it all together and larger sum of money working for you, not a taxable event Con: Not all employer plans accept rollovers. 3. Rollover to an IRA Pro: Likely more investment options, not a taxable event, consolidating accounts and locations Con: usually fee involved, potential termination fees 4. Cash out the account Con: A taxable event, loss of investing potential. Costly for young individuals under 59 ½; there is a penalty of 10% in addition to income taxes. Be sure to consider all of your available options and the applicable fees and features of each option before moving your retirement assets. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person's situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to re tax or legal matters with the appropriate professional. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Roth 401(k) plans are long-term retirement savings vehicles. Contributions to a Roth 401(k) are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Unlike Roth IRAs, Roth 401(k) participants are subject to required minimum distributions at age 70.5.

IRS Announces Increases to Retirement Plan Contributions for 2019

Josh Bitel Contributed by: Josh Bitel

Several weeks ago, the IRS released updated figures for 2019 retirement account contribution and income limits. 

IRS Increases Retirement Plan Contributions for 2019

Employer Retirement Plans (401k, 403b, 457, and Thrift Savings Plans)

  • $19,000 annual contribution limit, up from $18,500 in 2018.

  • $6,000 “catch-up” contribution for those over age 50 remains the same for 2019.

  • An increase in the total amount that can be contributed to a defined contribution plan, including all contribution types (employee deferrals, employer matching and profit sharing), from $55,000 to $56,000, or $62,000 for those over age 50 with the $6,000 “catch-up” contribution.

In addition to increased contribution limits for employer-sponsored retirement plans, the IRS adjustments provide some other increases that can help savers in 2019. A couple of highlights include:

Traditional IRA and ROTH IRA Limits

  • $6,000 annual contribution limit, up from $5,500 in 2018 – the first raise since 2013!

  • $1,000 “catch-up” contribution for those over age 50 remains the same for 2019.

Social Security Increase Announced

As we enter 2019, keep these updated figures on the forefront when updating your financial game plan. As always, if you have any questions surrounding these changes, don’t hesitate to reach out to our team!

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®