Start of a New Year

Paul Morrone |

Regardless of what New Years is or isn’t for many, it’s that proverbial line in the sand when diets start (mainly to just get back to even keel after binge eating for a month), gym commitments (loosely) begin and bad habits are (temporarily) dropped in what is usually an empty promise to make the upcoming year ‘better’ than the last. That may sound like a bit of a jaded viewpoint, but my expression comes not only from personal experience, but has more than enough statistical evidence to back it up. This all begs the question; what can you do to make your New Year’s Resolutions more successful going forward? I don’t know about you, but I don’t have the self-control to go to Italian restaurant and order a salad for dinner, and that’s something I’ve been willing to accept. While you can’t delegate dietary and physical fitness goals (If you find a way, please let me know!), many positive steps towards your financial goals can be automated.

Speaking of financial goals, the beginning of a new year is a great time to begin or modify systematic savings plans that have been ignored or ill-maintained due to the chaotic social schedule and financial stress usually associated with the holiday season. While there were no inflationary adjustments to the IRS allowable deferrals to IRAs or qualified plans for 2016, it’s always good to review the limits that apply to you to see if there is any additional opportunity available for the upcoming year.

401(k)/403(b)/457 Plan Employee Deferral– $18,000

SIMPLE IRA Employee Deferral – $12,500

Traditional IRA Contribution Limit – $5,500

ROTH IRA Catch-up Contribution – $5,500

Another often overlooked planning tool is the Health Savings Account (HSA), which has slightly different contribution limits based upon the type of plan and age of the individual making contributions. The HSA catch-up contribution is available to those 55 and older.

HSA Catch-up Contribution – Maximum contribution individual $3,350/family $6,750

For those of you who are reaching the 50 year old milestone during 2016, it is a great time to review your qualified plans and tax advantaged accounts to take advantage of some of the additional savings opportunities available to people 50 and older:

401(k)/403(b)/457 Catch up Contribution – $6,000 (total allowable employee deferral $24,000)

SIMPLE IRA Catch-up Contribution - $3,000 (total allowable employee deferral $15,500)

Traditional IRA Catch-up Contribution - $1,000 (total allowable contribution $6,500)

ROTH IRA Catch-up Contribution - $1,000 (total allowable contribution $6,500)

As mentioned earlier, the HSA also has catch-up contribution provisions, however, this is only available to those 55 years and older.

HSA Catch-up Contribution - $1,000 (max contribution individual $4,350/family $7,750)

Educating yourself and proactively planning for these increased saving opportunities at the beginning of the year gives you a full 12 months to budget and allocate funds before they are spent.