Should you revisit your 2018 financial plan because of tax reform?

The simple answer is yes.

 
 
Retirement Savings

The average IRA deduction is increasing

It's important to find out if your IRA contributions can be deducted from your taxes.
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1. Maximize your deductions

If you couldn’t get the deduction in previous years, it’s still important to check every year, as your changing tax situation may impact your eligibility.

Whether or not your contribution qualifies for a tax deduction, IRAs still can be a useful savings tool. Roth IRAs may be another avenue for long-term savings with different tax benefits. You can use our online tool as a starting point; then check with your advisor to help determine which strategy is best for you.
Asset location

2. Review how different types of accounts impact your tax exposure

“As you near or enter retirement, your needs may change as you begin to take required minimum distributions and think about income in retirement,” notes Filler.

For example, an asset location review can help you make a purposeful decision about where to put your money after you’ve maxed out your tax-deferred contributions. Some options may include life insurance, a bank account. Your financial advisor can help you make these choices.
Itemized deductions

Will you still itemize your deductions?

An increased standard deduction may be a reason to revisit your financial strategy.
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3. Reconsider your itemized deductions

Two major changes from tax reform will significantly alter whether people use the standard deduction or itemize their deductions. The first change is the nearly doubling of the standard deduction across all filing statuses. The second is that there are new, lower limits on certain types of deductions, with the most prevalent being for state and local income taxes and home mortgages. Taken in combination, these changes are expected to dramatically decrease the number of filers who will itemize their deductions, as the standard deduction will work out as a better deal for many.
 
This combination of factors means that in order for you to reach a threshold where itemizing deductions makes sense, other itemized deductions, such as charitable gifts, may need to be larger. For example, if you have assets that have appreciated over time, donating them to a nonprofit may provide multiple benefits. As a result of making donations:
  • You pay no capital gains on the long-term appreciation by donating the asset.
  • The full fair market value of the asset goes to the charity.
  • You still may be able to claim a charitable deduction for the gift.
     
Some giving vehicles, such as donor-advised funds, make it possible to donate a sizeable asset and draw from the contributed value to support multiple charities over time. Your advisor can help you find the best strategy to fulfill your charitable wishes while also keeping an eye on being tax efficient.
 
Think ahead

Are you thinking about your whole financial plan?

Tax season is a great time to reconsider how to structure your investments to meet all your goals.
Needs
The expenses of your day-to-day life.
Wants
Current goals, such as saving for a vacation.
Family in a line
Wishes
Your long-term plans and dreams, including your legacy, for you and your family.

It’s a good time to think about the big picture

As you’re reviewing your strategy, don’t stop at your tax exposure. The recent tax code changes make this a prime opportunity to revisit your entire financial plan. Additionally, you may find that the market activity has changed your asset holdings or your preparedness for retirement.
 
If you’re having trouble getting a complete picture of your finances, it may be worth consolidation accounts. You may find efficiencies in having all of your retirement accounts in one place, for example. It may also help your advisor better understand your big picture—assess if your full portfolio is aligned to your risk tolerance and whether you have the right asset mix to allow you to achieve your goals.
 
A TIAA advisor can help make sure your financial plan takes all of your goals into account—whether it’s understanding what your future expenses will be, saving for a child’s or grandchild’s college tuition, or finding out how to leave the most amount of money to your loved ones.

“Even though it’s quite possible you have tax fatigue from completing your 2017 returns, it really is the best time to think ahead about changes you can make to help you achieve your goals, both in the short term and for the future,” Filler says.
 
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Before consolidating assets, be sure to carefully consider the benefits of both the existing and new product. There will likely be differences in features, costs, surrender charges, services, company strength and other important aspects. There may also be tax consequences or other penalties associated with the transfer of assets. Indirect transfers may be subject to taxation and penalties. Speak with a TIAA consultant and your tax advisor regarding your situation.
The TIAA group of companies does not provide tax or legal advice. Tax and other laws are subject to change, either prospectively or retroactively. Individuals should consult with a  qualified independent tax advisor, CPA and/or attorney for specific advice based on the individual’s personal circumstances. Examples included in this article, if any, are hypothetical and for illustrative purposes only.
This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor’s personal advisor based on the investor’s own objectives and circumstances.

Advisory services provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser.
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