By Ronn Yaish, MBA |
Residential Energy Efficiency Tax Credit
If you are considering an energy-saving update to your home, you may want to do it before the end of the year to benefit from a $500 tax credit. This credit expires on December 31, 2016. Be aware that a homeowner can only claim a maximum of $500 between 2011 and 2016. This means that if you have already claimed this $500, you’d be ineligible for a tax credit. This is a great way to improve the value of your home, save some money and make the world a better place. To get more info on this credit and how to utilize it, consult YaishFinancial.com/MoneyMoves.
Don’t Leave Money on the Table
I recently met with a family for a financial-planning consult. When I reviewed the wife’s work benefits, I noticed that she had been eligible for a 5 percent company match to her 401K for the past three years. Let’s say she was making 50K; after three years she had just given up $7,500. Meaning that her company was willing to put $2,500 in her 401K for each year she put in $2,500 (5 percent of 50K is $2,500). This financial task seems like a no-brainer. It’s like giving up “free money.” To be fair it may not be an easy task for a family to remove this amount of income from their budget. In that event, it still pays to at least put something away! In this example, if she had put away $100 a month, her savings would amount to $1200 for the year, and then her company would be able to place an additional $1200 into her retirement account; after three years without the impact of the investments, she would have had $7200 in her account. I would recommend to start by putting away whatever you think you can afford. It’s a good idea to seek guidance from a professional like a financial advisor or accountant. In sum, check with HR to see if your company has a 401K match before the year ends!
Although Roth IRA contributions of $5,500 can be made until April of next year, it’s a good idea to take action today. A family filing jointly with an income of up to $194,000 may each contribute $5,500 toward a Roth IRA account. I am a big fan of this type of account. The funds grow tax free. This is the only type of retirement account where funds are not taxed when they are taken out after age 59 ½ and there is no RMD, required minimum distribution.
Also, don’t forget to take advantage of 401K/403b/457 retirement contributions before the deadline, December 31, 2016 (unlike Roth IRA funds contributions cannot be made through April 2017). In 2016 the contribution limit is $18,000 for eligible employees and company-matched funds do not count toward this limit. If you are over 50, there is an additional $6000 called a catch-up to help those getting closer to retirement sock away a little more. Again, put away whatever you can. Between regular contributions and the power of compounding (beyond the scope of this article), the money adds up. Save something and save early.
Change Your Passwords
Hackers are clearly very good at their jobs. Let’s not make their jobs easier. We should all be changing our passwords regularly. At the very least consider changing your credit card, brokerage, banking accounts and other sensitive accounts once a year.
Having a hard copy of the passwords may make sense but remember to keep it in a safe and fireproof environment like a lockbox. (It is a good idea to let someone you trust like a spouse, parent or sibling know where the list of accounts and passwords is kept, in the event they need to help you during an emergency or death.) Another option is to use an online password management tool. Although this sounds counterintuitive for someone trying to protect their password and accounts, these password tools may be something to consider. The tool uses a really difficult and individual password for each of your accounts. In order to login you need only one password to enter the password tool. Then it signs you in. For more info on Password Management Tools see YaishFinancial.com/MoneyMoves.
Health Savings Accounts
If you have a High Deductible Health Plan (HDHP), you are eligible for a Health Savings Account (HSA). The IRS defines a high deductible health plan as any plan with a deductible of at least $1,300 for an individual and $2,600 for a family. If you fit this criterion then you can start a HSA via your employer (if they have one), bank or financial institution.
An HSA allows you to place money in this account before having taxes taken out where the money can grow tax free and can be taken out tax free. The purpose of this account is to help pay for medical expenses—except the actual premium. The reason why you want to make this move before the end of the year is that these contributions reduce your taxable income, so if, for example, you earn 40K and put 3K into a HSA you only pay tax on 37K. Also, unlike Flexible Spending Accounts that need to have funds spent before the end of the year, HSA money can roll over into the next year without penalty. For more info on HSAs, visit YaishFinancial.com/MoneyMoves.
By Ronn Yaish, MBA
Ronn Yaish is Wealth Advisor and CEO of Yaish Financial Services, a New Jersey-based investment and wealth management firm. Ronn earned a Masters in Education and an MBA in Finance. He has been featured in Forbes, AOL Finance, Credit.com, GoBanking and US News and World Report. His goal is to educate and help clients “keep things simple” when managing their money.