With 2016 right around the corner, use these 5 tips to maximize tax savings for your retirement plans, whether you're retired or still working.
Get Ready for 2016. If you failed to max out your 401(k) or IRA contributions in 2015, and you're expecting a year-end bonus, consider making a one-time contribution to your 401(k) or 403(b) accounts, up to the maximum contribution amount.
Extra time for IRA contributions. You have until April 15th (Tax Day) to make a contribution to your traditional IRA, up to $5,500, and have it applied to your 2015 tax year. If you're anticipating a tax hit on your 2015 return, consider paying yourself instead with a tax-deferred retirement contribution.
Take required minimum distributions. If you were born before July 1, 1945, you're required to take a minimum distribution from your 401(k) by December 31, 2015. Failing to take a required minimum distribution (RMD) carries a tax penalty of 50%.
Make last-minute 401(k) contributions. All 401(k) contributions for tax year 2015 must be maid by December 31, 2015. Employees can make up to $18,000 in contributions each year and those over 50 can make catch-up contributions of up to an additional $6,000 (total of $24,000). With compound interest, every little bit counts.
Claim the saver's credit. If your adjusted gross is below $30,500 for individuals, $45,750 for heads of household and $61,000 for couples in 2015 and you contribute to a 401(k) or IRA, you may be able to qualify for the saver's credit, worth between 10 and 50 percent of the amount you contribute to a retirement account, up to $2,000 for individuals and $4,000 for couples.
Seek the advise of your financial planner and CPA prior to making tax-based investment decisions.