Edit Module
Bookmark and Share Email this page Email Print this page Print Pin It
Feed Feed

Dec 7, 201710:13 AMOpen Mic

Send us your blog for consideration!

Year-end, tax-smart investing tips

(page 2 of 2)

Delay purchasing mutual fund shares. Many mutual funds pay capital gains distributions in December. So, if you were to buy new shares of a fund just before the distribution date, you may get a larger distribution but you’ll owe capital gains taxes on the money you just invested — without really having received much benefit from your investment. To avoid this potential problem, ask the mutual fund company for the date of the distribution, and consider delaying additional investments until afterward.

Be careful with your RMDs. Once you turn 70½, you must start taking withdrawals — known as required minimum distributions, or RMDs — from your traditional IRA and your 401(k) or similar employer-sponsored plan. Please note, however, that if you are still working and participating in your 401(k) plan or any other “qualified” retirement plan (e.g., a traditional profit sharing plan) beyond age 70½, and you are less than a 5% owner or shareholder in the business sponsoring the 401(k) plan, then you may be able to delay or postpone the commencement of RMDs until you actually separate from service. You’ve got until Dec. 31 to take your RMDs for 2017; if you miss this deadline, you may face a hefty penalty from the IRS. However, if you just reached 70½ in 2018, you have until April 1, 2018, to take your first RMDs. As the name suggests, you must take at least a minimum amount from your traditional IRA and 401(k) — the exact figure is primarily based on your account balance and your age — but you could take out more. Be aware, though, that these withdrawals are usually taxed as ordinary income, so the more you take out, the bigger your tax bill. Consequently, you may want to work with a financial professional to find ways of keeping these RMDs as low as possible, without jeopardizing your standard of living.

Lauri Binius Droster, CFP, is branch director, and senior vice president of RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC.

Click here to sign up for the free IB ezine — your twice-weekly resource for local business news, analysis, voices, and the names you need to know. If you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.

Add your comment:
Bookmark and Share Email this page Email Print this page Print Pin It
Feed Feed
Edit Module

About This Blog

Make your voice heard with IB's "Open Mic." Send your blog entry to Online Editor Jason Busch at jason@ibmadison.com for consideration.

Archives

Feed

Atom Feed Subscribe to the Open Mic Feed »

Recent Posts

Edit Module