By Jeremy T. Rodriguez, JD
IRA Analyst

When it comes to tax law and retirement planning, there are two things I like to talk about at the beginning of a new year: (1) some of most important rulings issued and laws passed in the prior year; and (2) the steps you can take today to improve your savings for retirement in the future. Since the topic du jour has been New Year’s resolutions, I want to tackle the second topic in this installment.
  • Investment Strategy: 2018 was a roller coaster year for investment markets. Many of the gains earned over the course of the year were given back in a chaotic final few months. World markets were faced with trade disputes, rising interest rates, and the uncertainty over the upcoming Brexit decision. Add to that the ongoing government shutdown affecting domestic markets and it all begs the question: How are you investing your retirement savings and does that strategy consider the upcoming challenges? Do you even have an investment strategy

    Retirement planning can be broken down into two simple steps: (1) a savings plans and (2) an investment plan. Those that invest with IRAs generally have both. However, all too often, workers only address one-half of this equation. Most will readily adopt a savings plan by agreeing to defer compensation into their company’s 401(k), 403(b), or 457(b) plans. That is good. However, many blindly select investments based on name, on prior year’s performance, or even allow themselves to be defaulted into a standard fund. Even those that do pay attention to the initial investment selection rarely monitor the options in terms of an ever-changing financial market. In fact, many of us simply don’t have the time or expertise to do so. So, make 2019 the year you act! Either you put together an effective strategy or you take the time to meet with a competent advisor ( One of my favorite basketball players of all-time, Shaquille O’Neal, once said “don’t fake the funk on a nasty dunk.” The point is, admit what you know, and if it’s outside your expertise hire someone to help. Years down the road, you’ll thank yourself.

  • Savings Strategy: First thing is first, if you have a retirement plan at work that matches contributions, you should be contributing up to the matching level. Anything else is leaving money on the table. Thus, that is the first step you, and your spouse if applicable, should be taking to secure your financial future. Once you hit that level, and if you can save a bit more, you have some decisions to make. You can defer that additional amount into the company plan or you can open a traditional or Roth IRA. Before tackling this question (and its attending considerations), you must review the deductibility and eligibility rules for both IRA accounts.

    The maximum amount you can contribute to a traditional or Roth IRA for 2019 is $6,000 per individual (not per account). There’s also the additional $1,000 catch-up that can made to either account if you will be age 50 or over during the year. Company plans, however, have higher limits (See

    Traditional IRAs are attractive because you can deduct your contribution from income. However, the tax code limits deductibility based on income, commonly called the “phase-out limits” (See If your income is within, or above, the phase-out limits, any contributions you make above the deduction limit will be considered non-deductible, or after-tax. That is basis which needs to be tracked on IRS Form 8606.

    On the other hand, Roth IRAs have eligibility rules (See If your income is above these limits, you cannot contribute. Any additional amount is considered an excess contribution which brings its own set of problems. So, with that in mind, you want to mull over these rules while considering the following:


  1. What will be your expected income tax bracket for 2019?
  2. Do you have room in that tax bracket to invest the savings in an after-tax account?
  3. Does your company plan allow a Roth option or is a Roth IRA the only way to accomplish this?
  4. Are you eligible to make a full or partial Roth IRA contribution?
  5. Do you need the immediate tax savings that comes with deferrals to either a company plan or traditional IRA?
  6. If you do, can you deduct the entire traditional IRA contribution or are you totally or partially phased-out?
  7. Do you have legal exposure that would make ERISA creditor protection in a company plan more attractive than an IRA?
  8. Or do you value the increased flexibility and access to funds that comes with an IRA?
  9. How do the expenses and investment options in your company plan compare to the expenses and wider investment array that comes with an IRA?


  • Beneficiary Issues: This an excellent time to review your IRA and company plan beneficiary designations decision to determine whether those still make sense. Has there been a change in the family (e.g., birth, death, marriage, or adoption)? Is there a need to name a trust beneficiary or, does a trust previously put in place still make sense? When it comes to the second consideration, while it may hurt to revoke a trust you paid a few thousand to put in place, it could prevent your beneficiaries from having to apply for an expensive IRS Private Letter Ruling to have the trust ignored. You also want to look at your contingent beneficiaries, especially if you have children at or near adult age, and you and your spouse are financially sound. In such a situation, if your spouse is the primary beneficiary and the kids the contingent beneficiaries, you give your spouse the ability to execute a disclaimer and essentially make a tax-free gift to your children! They could then use that for several common early adulthood expenses (e.g., college, housing, their children, etc.) or add it to their own savings.

    While I’m a bit biased, I believe all 3 of these suggestions are sound resolutions to adopt at the beginning of each new year. Neither the rules I mentioned nor the considerations I raised are new or groundbreaking. Nevertheless, the investment landscape constantly changes, so committing to taking this simple approach every year will ensure that you and your family are on solid footing when it comes to your financial.