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Do You Know Why 2020 Is A Critical Year For Tax Planning?

Center for Financial Planning, Inc. Retirement Planning
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It’s been quite the year, hasn’t it? 2020 has certainly kicked off the decade in an interesting fashion. In addition to the coronavirus quarantine, it’s also a year that required a significant amount of tax planning and forward-thinking. Why is this year so unique as it relates to taxes? Great question, let's dive in!

SECURE Act

The SECURE ACT was passed in late December 2019 and became effective in 2020. The most meaningful part of the SECURE Act was the elimination of the stretch IRA provision for most non-spouse IRA beneficiaries. Non-spouse beneficiaries now only have a 10-year window to deplete the account which will likely result in the beneficiary being thrust into a higher tax bracket. This update has made many retirees re-think their distribution planning strategy as well as reconsider who they are naming as beneficiaries on certain accounts, given the beneficiary’s current and future tax bracket. Click HERE to read more about this change. 

CARES Act 

Fast forward to March, the CARES Act was passed. This critical stimulus bill provided direct payments to most Americans, extended and increased unemployment benefits, and outlined the parameters for the Paycheck Protection Program for small business relief. Also, another important aspect of the CARES Act was the suspension of Required Minimum Distributions (RMDs) for 2020. This isn’t the first time this has occurred. Back in 2009, RMDs were suspended to provide relief for retirees given the “Great Recession” and financial crisis. However, the reality is that for most Americans who are over 70 1/2 and subject to RMDs (RMDs now begin at age 72 starting in 2020 due to the SECURE Act), actually need the distributions for cash flow purposes. That said, for those retirees who have other income sources (ex. Social Security, large pensions, etc.) and investment accounts to cover cash flow and don’t necessarily “need” their RMD for the year for cash flow, 2020 presents a unique planning opportunity. Not having the RMD from your IRA or 401k flow through to your tax return as income could reduce your overall income tax bracket and also lower your future Medicare premiums (Part B & D premiums are based on your Modified Adjusted Gross Income). We have seen plenty of cases, however, that still make the case for the client to take their RMD or at least a portion of it given their current and projected future tax bracket. There is certainly no “one size fits all” approach with this one and coordination with your financial planner and tax professional is ideal to ensure the best strategy is employed for you. 

Lower Income In 2020

Income for many Americans is lower this year for a myriad of reasons. For those clients still working, it could be due to a pay cut, furlough, or layoff. Unfortunately, we have received several dozen calls and e-mails from clients informing us that they have been affected by one of the aforementioned events. In anomaly years where income is much less than the norm, it presents an opportunity to accelerate income (typically though IRA distributions, Roth IRA conversions, or capital gain harvesting). Every situation is unique so you should chat with your planner about these strategies if you have unfortunately seen a meaningful reduction in pay. 

Thankfully, the market has seen an incredible recovery since mid-March and most diversified portfolios are very close to their January 1st starting balances. However, income generated in after-tax investment accounts through dividends and interest are down a bit given dividend cuts by large corporations and because of our historically low interest rate environment. We were also were very proactive in March and April with a strategy known as tax-loss harvesting, so your capital gain exposure may be muted this year. Many folks will even have losses to carry over into 2021 and beyond which can help offset other forms of income. For these reasons, accelerating income could also be something to consider. 

Higher Tax Rates In 2021, A Very Possible Scenario 

Given current polling numbers, a Democratic sweep seems like a plausible outcome. If this occurs, many analysts are predicting that current, historically low rates could expire effective January 1, 2021. We obviously won’t know how this plays out until November, but if tax rates are expected to see a meaningful increase from where there are now, accelerating income should be explored. Converting money from a Traditional IRA to a Roth IRA or moving funds from a pre-tax, Traditional IRA to an after-tax investment account (assuming you are over the age of 59 1/2 to avoid a 10% early withdrawal penalty) eliminates the future uncertainty of the taxes on those dollars converted or distributed. Ever since the Tax Cuts and Jobs Act was passed in late 2017 and went into law in 2018, we have been taking a close look at these strategies for clients as the low tax rates are set to expire on January 1, 2026. However, if taxes have a very real chance of going back to higher levels as soon as 2021, a more aggressive income acceleration plan could be prudent. 

As you can see, there have been many moving parts and items to consider related to tax planning for 2020. While we spend a great deal of our time managing the investments within your portfolio, our team is also looking at how all of these new laws and ever-changing tax landscape can impact your wealth as well. In our opinion, good tax planning doesn’t mean getting your current year’s tax liability as low as humanly possible. It’s about looking at many different aspects of your plan, including your current income, philanthropy goals, future income, and tax considerations as well as considering the individuals or organizations that will one day inherit your wealth and helping you pay the least amount of tax over your entire lifetime.

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.


All investments are subject to risk. There is no assurance that any investment strategy will be successful. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

What’s the Difference Between a Roth and a Traditional IRA?

What's the difference between a roth and a traditional ira Center for Financial Planning, Inc.®

Many are focused on filing their taxes by April 15th, but that day is also the deadline to make a 2019 IRA contribution! With only a week left, how will you decide between making a Roth or a traditional IRA contribution? There are pros and cons to each type of retirement account, but your individual situation will determine the better option. Keep in mind, the IRS has rules to dictate who can make contributions, and when.

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.

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

  • Please keep in mind that for making contributions to this type of account, it makes no difference if you are covered by a qualified retirement plan at work (401k, 403b, etc.), you simply have to be under the income thresholds.

  • The maximum contribution is $6,000 for those under the age of 50. For those who are 50 & older (and have earned income for the year), you can contribute an additional $1,000 each year.

2019 Traditional IRA Contributions

  • For single filers covered by a company retirement plan, the deduction is phased out between $64,000 and $74,000 of 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 have a spouse who is, the deduction for your IRA contribution is phased out between $193,000 and $203,000 of MAGI.

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

Now, you may be wondering what type makes more sense for you (if you are eligible). Well, like many financial questions…it depends! 

Roth IRA Advantage

The benefit of a Roth IRA is that money grows tax deferred. So, when you are over age 59 1/2 and have held the money for 5 years, the money you take out is tax free. However, in exchange for tax free money, you don’t get an upfront tax deduction when investing the money 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 the year you contribute money to the IRA. For example, a married couple filing jointly has a MAGI of $190,000 putting them 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 to pay 24% in taxes in order to then make the $6,000 contribution. The drawback of the traditional IRA is that you will be taxed on it later in life when you begin making withdrawals in retirement. Withdrawals taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.

Pay Now or Pay Later?

Future tax rates make it challenging to choose what account type is right for you. If you go the Roth IRA route, you will pay your tax bill now. The downside is that you could find yourself in a lower tax bracket in retirement. In that case, it would have been more lucrative to take the other route. And vice versa.

How Do I Decide?

We typically recommend Roth contributions to young professionals because their income will most likely increase over the years. However, if you need tax savings now, a traditional contribution may make more sense. A traditional IRA may be the best choice if your income is stable and you’re in a higher tax bracket.  However, you could be disqualified from making contributions based on access to other retirement plans. 

As always, before making any final decisions, it’s always a good idea to work with a qualified financial professional to help you understand what makes the most sense 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.

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SECURE Act: Potential Trust Planning Pitfall

Josh Bitel Contributed by: Josh Bitel, CFP®

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SECURE Act: Potential Trust Planning Pitfall

Does the SECURE Act affect your retirement accounts?  If you’re not sure, let’s figure it out together.

Just about 2 months ago, the Senate passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act.  The legislation has many layers to it, some of which may impact your financial plan.

One major change is the elimination of ‘stretch’ distributions for non-spouse beneficiaries of retirement accounts such as IRAs. This means that retirement accounts inherited by children or any other non-spousal individuals at least 10 years younger than the deceased account owner must deplete the entire account no later than 10 years after the date of death. Prior to the SECURE Act, beneficiaries were able to ‘stretch’ out distributions over their lifetime, as long as they withdraw the minimum required amount from the account each year based on their age. This allowed for greater flexibility and control over the tax implications of these distributions.

What if your beneficiary is a trust?

Prior to this new law, a see-through trust was a sensible planning tool for retirement account holders, as it gives owners post-mortem control over how their assets are distributed to beneficiaries.  These trusts often contained language that allowed heirs to only distribute the minimum required amount each year as the IRS dictated.  However, now that stretch IRAs are no longer permitted, ‘required distributions’ are no longer in place until the 10th year after death, in which case the IRS requires the entire account to be emptied.  This could potentially create a major tax implication for inherited account holders.  All trusts are not created equally, so 2020 is a great year to get back in touch with your estate planning attorney to make sure your plan is bullet proof.

It is important to note that if you already have an IRA from which you have been taking stretch distributions from, you are grandfathered into using this provision, so no changes are needed.  Other exemptions from this 10-year distribution rule are spouses, individual beneficiaries less than 10 years younger than the account holder, and disabled or chronically ill beneficiaries.  Also exempt are 501(c)(3) charitable organizations and minor children who inherit accounts prior to age 18 or 21 (depending on the state) – once they reach that specified age, the 10-year rule will apply from that point, however.

Still uncertain if the SECURE Act impacts you?  Reach out to your financial advisor or contact us. We are happy to help.

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.


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 render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

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Retirement Plan Contribution Limits and Other Adjustments for 2020

Nick Defenthaler Contributed by: Nick Defenthaler, CFP®

Retirement Plan Contributions Limits and Other Adjustments for 2020

Last month, the IRS released updated retirement account contribution and income limit figures for 2020. Like the recent Social Security cost of living adjustment, these adjustments are minor, but certainly worth noting.

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

  • $19,500 annual contribution limit (up from $19,000 in 2019)

  • $6,500 “catch-up” contribution for those over the age of 50 (up from $6,000 in 2019, and the first increase since 2015 for this contribution type)

  • Total amount that can be contributed to a defined contribution plan, including all contribution types (employee deferrals, employer matching and profit sharing), increases to $57,000 (up from $56,000 in 2019) or $63,500 for those over the age of 50 ($6,500 catch-up)

o   Consider contributing after-tax funds, if available and cash flow allows for it.

It’s also worth noting that contribution limits to Traditional IRAs and Roth IRAs were left unchanged moving into 2020 ($6,000 under age 50, $7,000 over age 50).

In addition to the increased contribution limits for employer-sponsored retirement plans, the IRS adjustments provide other increases that can help savers in 2020. A couple of highlights include:

Traditional IRA deductibility income limits:

Contributions to a Traditional IRA may or may not be tax deductible, depending on your tax filing status, whether you are covered by a retirement plan through your employer, and your modified adjusted gross income (MAGI). The deductible amount of your Traditional IRA contribution is reduced (“phased out”) as your MAGI approaches the upper limits of the phase-out range. For example:

  • Single

    • Covered under an employer-sponsored retirement plan
      2020 phase out: $65,000 - $75,000

  • Married filing jointly

    • Spouse contributing to the IRA is covered under an employer-sponsored retirement plan
      2020 phase out: $104,000 - $124,000

    • Spouse contributing is not covered by an employer-sponsored plan, but the other spouse is covered under an employer-sponsored retirement plan
      2020 phase out: $196,000 - $206,000

Roth IRA contribution income limits:

Whether or not you can make the maximum contribution to a Roth IRA depends on your tax filing status and your MAGI. The contribution you are allowed to make is reduced ("phased out") as your MAGI approaches the upper limits of the phase-out range.

  • Single

    • 2020 phase out: $124,000 - $139,000

  • Married filing jointly

    • 2020 phase out: $196,000 - $206,000

If your income is over this limit, and you cannot make a regular annual contribution, you might consider a popular planning tool known as the “back-door” Roth conversion.

As we enter 2020, these updated figures will be on the forefront when updating your financial game plan. However, as always, if you have any questions surrounding these changes, feel free to reach out to our team!

Nick Defenthaler, CFP®, RICP®, 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.


This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. 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 render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Contributions to a traditional IRA may be tax-deductible depending on the taxpayer's income, tax-filing status, and other factors. 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.

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to itsx own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

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.

Health Care Costs: The Retirement Planning Wildcard

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Health Care Costs: The Retirement Planning Wildcard

When planning ahead for retirement income needs, we typically think about how much it will cost us to live day-to-day (food, clothing, shelter), and to do those things we want to do, like travel and helping grandkids pay for college. The costs we don’t often think about, those that could potentially wreak havoc on retirement income planning, are health care costs.

According to a recent article from the Employee Benefits Research Institute, the average 65-year-old couple will need $400,000 to have a 90% chance of covering health care expenses over their remaining lifetimes (excluding long-term care).

Longevity is a critical factor driving health care costs. According to the Social Security Administration’s 2020 study, a couple, both 66 years of age, has a 1-in-2 chance that one will live to age 90 and a 1-in-4 chance that one will live to age 95. And considering that Medicare premiums are means-tested, the more income you generate in retirement, the higher your Medicare premiums.

So, what can you do to plan for this potential large cost?

  1. If your goal is to retire early, plan on self-insuring costs from retirement to age 65. Some employers may offer retiree healthcare, or you can purchase insurance on the Health Insurance Exchange through the Affordable Care Act (still out-of-pocket dollars in retirement).

  2. Consider taking advantage of Roth 401(k)s, Roth IRAs (if you qualify), or converting IRA dollars to ROTH IRAs in years that make sense from an income tax perspective. You can use these tax-free dollars for potential retirement health care expenses that won’t increase your income for determining Medicare premiums.

  3. Work with your financial planner to determine whether a non-qualified deferred annuity or similar vehicle might make sense for a portion of your investment portfolio. Again, these dollars can be tax-advantaged when determining Medicare premiums.

  4. Most importantly, work with your financial planner to simulate retirement income needs for health care expenses and include this in your retirement plan. Although you will never know your exact need, flexible planning to accommodate these expenses may help provide confidence for your future.

Contact your financial planner to discuss how you can plan to pay for your retirement health care needs.

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 March 11, 2014 by Sandy Adams.

Any opinions are those of Kali Hassinger 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. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

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.®