Your investment plan: Be in ‘design’ mode, not ‘default’ mode

Just like spring cleaning, the annual April ritual of organizing your tax papers is a great reason to review and revise your investments. Many, out of habit with their payroll deduction, invest in plans that have evolved by “default,” not by “design.” To help you along, here are few tips to consider during this season:


  • Inventory: Review your portfolio to ensure your investment “design” is optimized. Seek good advice, consult with a professional.
    Review beneficiary designations. Remember, the beneficiary of your IRA, 401(k) plan, insurance policy, etc., generally gets the money – no matter what your will or trust specifies.
  • IRAs: Consider opening a traditional IRA (contributions made by the April 15th tax deadline are deductible from 2014 taxes).  
    If you already have one, take the required distributions. If you inherited an IRA from someone other than a spouse (traditional or Roth), take distributions even if you are younger than 70 ½.
  • 401(k): A new raise this year? Beef up contributions instead of spending it – tax-free! For 2015, that means $18,000 for those under age 50 and $24,000 for older workers.  
    Multiple 401(k) plans? Consider rolling them over into your current plan or consolidating into an IRA (often, IRAs provide a better investment than a 401(k) plan).
  • Health care: Check your flexible spending account rules. Some may have a grace period to allow for a $500 rollover, rather than forfeit unspent funds.
    Maximize contributions to your Health Savings Account – take advantage of pre-tax deductions including withdrawals for approved medical expenses. In 2015, contribution limits are $3,350 (individual) and $6,650 (family). Those 55 and older may save an extra $1,000.
  • Gifting: Consider using appreciated securities rather than cash for year-end charitable donations. You may qualify to deduct the current market value without paying tax on the appreciation while you owned it.
    Maximize a gift tax exclusion: give unlimited gifts, up to $14,000 to individuals or $28,000 for spouses combined, without eating into your lifetime federal gift and estate tax exemption. Unused exclusions do not carry over.

-Lori Craig is a market executive and senior vice president of PNC Wealth Management in Milwaukee.

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