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2018 Year-End Retirement Action Plan

Author: Linda Ward

Linda Ward, Executive Director, Head of Retirement and Education Solutions

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The end of the year is a good time to assess your overall financial picture, especially your retirement strategy. As the year comes to a close, use this action plan to help ensure that you make the most of your retirement savings for 2018.

FOR ALL TAXPAYERS

1. Review and Update your Plan

Take the time to set up an appointment with your J.P. Morgan Advisor for an annual review to help evaluate whether you are on track to meet your retirement goals. Our Customized Financial Analysis tool is designed to ensure that we not only hear your concerns and expectations about retirement, but we also encompass them in your financial strategy. If you don’t have one, ask your J.P. Morgan Advisor for a Customized Financial Analysis so you can evaluate your current financial situation and help make sure you are on track to accomplish all your financial goals. The Customized Financial Analysis is a tool that provides an additional resource in the evaluation of the potential risks and returns of investment allocation choices. The projections or other information generated by the Customized Financial Analysis regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.


 

“Consider establishing an IRA. Make your contribution as early as you can to take advantage of the benefits of tax-deferred compounding.”

Linda Ward

Executive Director, Head of Retirement & Education Solutions, J.P. Morgan

2. Maximize Retirement Contributions
When it comes to saving for retirement, it’s important to take advantage of all the opportunities that might be available to you. Consider the following:

3. Consider a Roth

As you save for retirement, remember that upon distribution, not all dollars will be considered equal. We often concentrate on the amount of dollars contributed to our retirement accounts and may lose sight of the “type” of dollars contributed. To the everyday investor earning an income, pre-tax and after-tax saving options will typically be available for their IRA and their employer-sponsored retirement plan (e.g., 401k, 403b, etc.) contributions. More employers are offering the Roth saving option in the retirement plan they make available for employees, giving workers the choice to diversify the tax treatment of their retirement dollars. Year-end planning offers you the opportunity to review the tax buckets to which you have been allocating your retirement dollars and what diversification opportunities may be available to you.


“Consolidation can be helpful when you are reviewing your overall asset allocation and portfolio risk.”

Linda Ward

Executive Director, HEAD OF RETIREMENT & EDUCATION SOLUTIONS, J.P. MORGAN

4. Think About Consolidating

If you have multiple IRAs at various financial institutions, consolidating them into one IRA may help you organize your assets. Consolidation can also be helpful when you are reviewing your overall asset allocation and portfolio risk. Generally, there are two methods available to you when you are thinking about consolidation—a trustee-to- trustee transfer or a rollover. The IRS allows you to make only one IRA-to-IRA rollover per 12-month period. This limit applies no matter how many IRAs you own or where you hold them. You can still complete an unlimited number of trustee-to-trustee transfers. Your J.P. Morgan Advisor and a tax professional should assist you in determining whether consolidation makes sense given your specific circumstances and goals. If consolidation does make sense, they can guide you as to the best way to accomplish this.

Transfer versus Rollover

“Reviewing your asset allocation is an important step to ensure the allocation and risk level are aligned with your financial goals.”

Linda Ward

Executive Director, HEAD OF RETIREMENT & EDUCATION SOLUTIONS, J.P. MORGAN

5. Reevaluate Retirement Asset Allocation

Reviewing your asset allocation strategy for your retirement investments—including those held in your IRA and 401(k)—is an important step to ensure the allocation and risk level are aligned with your financial goals. Talk to your J.P. Morgan Advisor about reviewing your asset allocation to see if you need to rebalance your retirement portfolio.3


6. Review your Beneficiaries

Are the beneficiaries named on your IRA, 401(k), life insurance policies and other accounts up to date? If you’ve experienced a “life event” (such as marriage, divorce, the birth of a child or grandchild or the death of a spouse) take time now to complete this important step to ensure that your beneficiary designations are still consistent with your wishes. Be sure to speak with your tax and legal advisors before making any beneficiary changes. Remember, the assets in these accounts go to the person(s) or entity(ies) you have designated as your beneficiary(ies) in your account forms (or to the “default” beneficiary(ies) specified in your account agreements, if you have no living designated beneficiary(ies) at the time of your death), regardless of how you may dispose of your assets under your will. Your financial institution will need to honor the latest designation on file from you.


“If you’ve experienced a life event, take time now to complete this important step to ensure that your beneficiary designations are still consistent with your wishes.”

Linda Ward

Executive Director, HEAD OF RETIREMENT & EDUCATION SOLUTIONS, J.P. MORGAN

FOR TAXPAYERS AGE 70½ OR OLDER

Once you turn 70½, there are retirement planning steps and strategies that you should consider:

1. Take Required Minimum Distributions

If you have a Traditional IRA and/or employer-sponsored retirement plan,4 you must begin to take your Required Minimum Distributions (RMD) on an annual basis once you turn 70½. You can defer receipt of your first RMD until April 1 of the year following the year in which you attain age 70½. If you do this, you have to take two distributions that year—one for the prior year and one for the current year. If you have multiple IRAs, you can satisfy your RMD from any one or more of the IRAs. Because the penalties for not taking RMDs are steep (50% of the distribution not taken in a given year), you may want to talk with your Advisor about automating your RMDs. If you don’t need the RMD for day-to-day living expenses, consider saving and reinvesting the RMD each year for future expenses or other financial goals. Before requesting an additional RMD, please remember to speak with your J.P. Morgan Advisor about any system-generated RMD you may already have set up so that you don’t duplicate your RMD.




“Taxpayers older than 70½ are permitted to take tax-free distributions from their IRAs for charitable purposes.”

Linda Ward

Executive Director, HEAD OF RETIREMENT & EDUCATION SOLUTIONS, J.P. MORGAN

2. Consider Qualified Charitable Distributions

Taxpayers older than 70½ are permitted to take tax-free distributions from their IRAs for charitable purposes. This provision is commonly referred to as a Qualified Charitable Distribution (QCD) and it allows you to direct a specified amount of your RMD to public charities. The distribution will not be included in your adjusted gross income, but it will count toward satisfying your RMD requirement. To qualify as a QCD for 2018, the funds will have to be made payable to the charity(ies) and distributed by December 31 and may not exceed $100,000. These distributions will be reported on Form 1099-R as “normal” distributions. You should work with your tax advisor regarding how to report any distribution paid to a charity on your tax return.



3. Contribute to a Roth

If you are still working, have earned income, and want to continue to accumulate additional assets for your retirement, you may be able to contribute to a Roth IRA if your adjusted gross income is within the IRS limits. Roth IRA contributions are not tax-deductible, but qualified distributions will be tax-free upon meeting the criteria. Unlike a traditional IRA, you do not have to take RMDs from a Roth IRA. Talk to your J.P. Morgan Advisor if you are interested in establishing and contributing to a Roth IRA.


FOR THOSE WHO INHERIT RETIREMENT ASSETS

If you are the named beneficiary of another person’s IRA, there are important rules you need to know about:


1. RMDs



2. Disclaim an IRA Inheritance

If you are an IRA beneficiary and do not want to accept all or part of the IRA assets you may be entitled to, you can “disclaim” the assets and they will pass to other eligible beneficiaries. The beneficiary disclaiming the assets cannot direct who should receive those assets (i.e., you cannot direct the disposition of the assets you disclaim). A decision to make a qualified disclaimer must be made within nine months of the original IRA owner’s death and before you receive any of the assets. This is an irrevocable decision and you should consult with a tax advisor or attorney before disclaiming IRA assets.


What's Next

It’s always a good idea to check in with your J.P. Morgan Advisor regularly concerning your retirement strategy. Whether you are planning to retire in the near future or not for many years, your J.P. Morgan Advisor can answer questions you may have regarding saving and investing or receiving distributions.


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