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Investment Planning

Avoiding unnecessary tax in the new year.

By Steven D. Lamb, February 4, 2019

New IRA, Roth IRA, HSA, and 401(k) limits for 2019.

New year, new rates

Financial professionals often confuse investors with the phrase “qualified funds”. Qualified funds refer to the ability for funds to grow either tax deferred or tax free if they meet certain IRS qualifications. Conversely, “non-qualified funds” are often called “taxable accounts” because you pay tax every year that the account accrues dividends, capital gains, and interest. Making the most of qualified funds, ensure that you allow your funds to grow as efficiently as possible without paying unnecessary taxes. These annual limits are reviewed by the IRS annually, and the limits have increased for 2019 to keep pace with inflation.

Use it or lose it

In the United States, these are “use it or lose it” contributions. If you miss a year, you cannot make up contributions in future years. Additionally, you are only able to contribute to qualified accounts while you or your spouse are working. Making the most of qualified funds is the best example we can give in which the “order in which you save” can make just as large a difference as “how much” you save.

Make your plan now

Benjamin Franklin once said, “Don’t put off until tomorrow what you can do today.” This year, that deadline is Monday April 15, 2019 for all calendar year 2018 contributions. Even if you file an extension on your taxes, it does not extend your deadline for making these contributions. Make a plan now to maximize your qualified accounts. Then if it’s possible, set a resolution to maximize your 2019 qualified plans as close to January 1st, 2019 as possible.

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