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McHugh & Macri
Certified Elder Law Attorneys Serving New Jersey Residents since 1978.
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Mid-year tax planning a good idea for New Jersey residents

NAELA National Academy of Elder Law Attorneys, Inc. MEMBER

New Jersey residents may find this tax advice helpful. According to a CBS tax planning article, mid-year is a good time to take stock of retirement accounts. The contribution limit for 2013 for a 401(k), a 403(b) and a 457 plan is $17,500.

The article advises that if a person is 50 years-of-age or older, he or she may be able to take advantage of the so-called 'catch up" provision and contribute an extra $5,500; this is an option few people are able to utilize. According to the author, people should consider investing an amount at least matching their employer's contribution. Another suggestion is increasing a person's contribution level every six months and to share every raise with your plan. The author offers the idea: if money is not in your pocket, it won't be spent.

Using an employee retirement plan results in a significant tax advantage. No income tax is withheld at the time of contribution. Although Social Security and Medicare taxes are withheld at the time contributions are made, the other money not withheld will earn interest income free from taxes until withdrawals at retirement begin. While those dollars are in your account, they are tax deferred. This tax-deferred method results in a significant increase to each person's total amount of funds available at retirement.

Thoughtful tax planning may be the key to retiring without worry. Mistakes in tax planning or failure to plan can result in serious consequences. Few people like to contemplate the possible family repercussions involved from the lack of a will, a living will or a power of attorney, A New Jersey attorney experienced in estate planning may help to avoid potential future problems and may be able to save grieving families from further anguish.

Source: CBS Boston, "Mid-Year Tax Planning For Your Retirement Accounts", Dee Lee, July 24, 2013

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