Financial Planning

Your Pension Plan – Inflation Adjustments for 2012

For 2012, there are a few cost of living adjustments for pension plans and other retirement-related items. Check out what to expect in the new year….

  • The contribution limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government’s Thrift Savings Plan, increases to $17,000 in 2012, from $16,500 in prior years.
  • The catch-up contribution limit in those plans for those aged 50 and over remains unchanged, at $5,500.
  • IRA contributions and catch up limits remain unchanged for 2012 at $5,000 and $1,000 respectively.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000-$66,000 in 2011.
  • For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $173,000 and $183,000 in 2012, up from $169,000 and $179,000 in 2011.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to 183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.

Financial Planning Dos & Don’ts

During times of economic turmoil, planning for your financial future can be a challenge. With that in mind here are some suggestions that offer you peace of mind and also simplify your life.

  • At least once a year, write down your investment goals and what strategies you will use to achieve them. Writing it down will help keep you focused.
  • Instead of giving money to several different charities, pick one or two that are important to you, and give a larger amount of money to each one. This type of directed giving not only makes more sense, but also makes it easier to track your donations at tax time.
  • Inventory your household possessions. the best way to do this is to make a list and then document your possessions using a camera or video camcorder. Keep your inventory in a safe place such as a safe-deposit box. An inventory will help you in the event you need to submit a claim to your insurance company.
  • Use one insurance agent and one financial advisor for your transactions.
  • If you have doubts about entering into a transaction, don’t do it. You will probably save yourself money, time, and aggravation.

Ensure Your Family’s Security with an Estate Plan

No matter what your net worth, you should have an estate plan in place. Such a plan ensures that your family is cared for and your assets maximized upon your death. An estate plan consists of your will, health care documents, powers of attorney, life insurance coverage, and post-mortem letters.

For those of you with an estate plan already, good for you! But we have a piece of additional advice: make it a priority to review the plan every two years to see whether it needs updating.

Here are the life events that necessitate an update to your plan:

  • Divorce
  • Marriage or remarriage
  • Birth/adoption of child
  • Death of spouse or child
  • Sale of a residence or purchase of new residence
  • Retirement
  • Enactment of new tax laws

When updating your estate plan you may need to do the following:

  1. Name a different executor
  2. Revise your will, especially if your assets have increased significantly
  3. Reassess your life insurance needs
  4. Add or change a power of attorney
  5. Change legal documents to comport with state laws if you move to a different state
  6. Change wills or trust instruments to account for changes in beneficiaries
  7. Change your post-mortem letter to reflect new assets, changes in executors, or other changes

Due to recent changes in estate tax laws, many estate plans may need to be revised. Give us a call to review your current situation.

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