Circle These Retirement-Planning Deadlines on Your Calendar
By Paula Pant
Who doesnt love the idea of retiring on a tropical beach, near a beautiful mountain vista, or in a wooded forest?
Retirement may be the dream, but in order to turn this dream into reality, you must keep a few deadlines in mind every year.
Here are a few important dates for you to keep on your retirement planning calendar.
January 30. If youre a sole proprietor and youre eligible to make contributions to a SIMPLE IRA account, January 30 is the latest date during which you can make employee deferrals that count towards the previous tax year.
April 1. If you are 70-1/2, you must take your first required minimum distribution, or RMD, from a 401(k) or an IRA by April 1 of the year following the calendar year in which you turn 70-1/2. (Note: This is just the deadline for your first RMD. Your subsequent RMDs are due by December 31.)
Circle this date on your calendar with a big red marker, because the penalty for missing this deadline is severe. If you dont withdraw the correct amount, you will have to pay a 50% excise tax on the amount of money that you should have withdrawn. Chat with your tax advisor to make sure youre taking an adequate RMD from your 401(k) or IRA.
April 15. This is generally the tax-filing deadline, though it is sometimes moved one or two days forward if April 15 happens to fall on a weekend. This is also the deadline for making an Individual Retirement Account (IRA) or Health Savings Account (HSA) contribution that can retroactively apply to the prior tax year. For example: You have until a deadline of April 15, 2014, to make an IRA contribution that can retroactively apply toward your 2013 tax return.
Depending on the 401(k) structure within your company, your 401(k) deadline may be either April 15, or December 31. Corporations and LLCs that are taxed as corporations must make their contributions by December 31, while sole proprietors, partnerships and LLCs taxed as sole proprietors can generally make employer contributions to their 401(k) accounts until the April 15 tax filing deadline. (They must make employee contributions by December 31). Many of these plans will take the shape of Individual 401(k) plans (also known as Solo 401(k) plans or One-Participant 401(k) plans).
Are you setting up a SEP-IRA account? If so, the deadline for creating an account (as well as making contributions to that account) is your tax-filing deadline. That may mean April 15, but if you file an extension, that could be as late as October 15.
October 1. Eligible participants can open a SIMPLE IRA account by as late as October 1 for the year in which they want to make contributions. (This assumes that youve never had a SIMPLE IRA before. If you have had one in the past, and youre opening another one, your deadline is January 1.)
December 31. If your 401(k) is administered by a corporation or an LLC taxed as a corporation, you must make your 401(k) contributions in the same calendar year that its counted towards. In other words, you must make your 401(k) contributions by December 31.
Charitable gifts must also be made by December 31. Individuals are allowed to receive tax-deductions on $14,000 worth of gifts, which means you and your spouse can gift a combined $28,000, though you must give that gift before New Years Day.
December 31 is also the deadline to make tax-deductible contributions to a 529 college savings plan for that calendar year. You can contribute to a 529 plan for yourself, your children or your grandchildren.
If youre 70-1/2 or older, your RMD deadline is December 31, unless its the first RMD that you are withdrawing, in which case you have until a deadline of April 1. (Again, talk to your tax advisor and your financial planner to double check about your specific RMD deadline, as the penalty for missing it is substantial.)
The bottom line: Circle a few dates on your calendar, and double-check all your assumptions with a tax professional and a financial advisor. The policies are both complex and ever-changing, and the penalties for missing some of these deadlines are stiff. Sit down with a professional to plan your year ahead, so that you can enjoy your hard-earned savings 365 days a year.
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