One would wonder why am I writing about taxes right now when there are more than 3 months left for year-end and another 7 months before tax-filing deadline. But that's the whole point. There is still some time left in 2017 to take advantage of some interesting tools available. In my previous blog After-tax 401K to Roth IRA I had written about how one could maximize savings in 401K by making after-tax contributions and how these after-tax contributions could be converted into ROTH IRA. Many folks call this as "back-door" mechanism to contribute to ROTH IRA (even though it is completely legal unless tax-reforms in discussions closes this backdoor).
Good news is that overall limit has been increasing over last couple of years as evident from following table. This means one could contribute upto $54K (or $60K if you are over 50) to 401K. After full contributions of $18K and your employer's match, it would still give you an opportunity to contribute 25K or so for after-tax contributions (which could be converted to ROTH IRA).
Table courtesy of Motley Fool Article
Good news is that overall limit has been increasing over last couple of years as evident from following table. This means one could contribute upto $54K (or $60K if you are over 50) to 401K. After full contributions of $18K and your employer's match, it would still give you an opportunity to contribute 25K or so for after-tax contributions (which could be converted to ROTH IRA).
Tax Year 2017
|
Tax Year 2016
|
Tax Year 2015
|
Tax Year 2014
| |
|---|---|---|---|---|
Elective Deferral Limit
|
$18,000
|
$18,000
|
18,000
|
$17,500
|
Overall Contribution Limit
|
$54,000
|
$53,000
|
$53,000
|
$52,000
|
Catch-Up Contribution
|
$6,000
|
$6,000
|
$6,000
|
$5,500
|
In addition to this, there is another "hidden" but equally beneficial savings tool called HSA. Most big companies now offer these Health Savings Accounts. For all practical purposes, these work like 401k for medical expenses. You can read extensive details on how these accounts work in well-written Barron's article. Hope these articles would give you insights into various tools available to maximize your savings and make "taxing" times less "taxing"!
President Trump and team have finally realized that sometimes its better to work with your opponents than your own party leaders. In two weeks, he seems to have negotiated two deals with democrats. Trump, Shumer and Pelosi seems to be best buddies in these days and that may be good for America. Ryan and McConnell must be fuming in their chambers but they had it coming their way. Trump being Trump, no one can predict what he would do next but for now, he seems to have realized that to get anything done, he better work with democrats. If this continues, we may see long awaited tax-reforms before year-end. Would be good for companies (due to repatriation holiday and lower corporate taxes) and individuals with lower taxes. Let's hope 2017 ends with new less complex tax regime!
/Shyam
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