Baird’s Tim Steffen Recommends Annual Best Practices to Keep Retirement Planning On Track

MILWAUKEE, Feb. 23, 2015 – Successful retirement plans are a work in progress. Success or failure can be the result of any number of factors including market forces, savings levels and even changes in one’s personal life. To increase the likelihood of successfully achieving a retirement goal, Baird’s Tim Steffen, CPA/PFS, CFP®, Director of Financial Planning for Baird’s Private Wealth Management group, recommends annual best practices to help retirement savers keep their plans on track.

  • Check your contribution limits – 401(k), IRA and other retirement plan annual contribution limits are adjusted each year for inflation. Also, in the year you turn age 50, you become eligible to make catch-up contributions to your retirement accounts, and the maximum catch-up contribution is also adjusted annually. You can find the most current contributions here on the Internal Revenue Service’s website.

    For 2015, the following maximum deferrals or contributions apply. Be aware that if you are contributing a flat dollar amount via payroll deduction, you might miss out on contributing the maximum amount. For IRAs, you can contribute up until April 15th for the previous calendar year.

    Type of Retirement Plan or Account          Deferral/Contribution Limit
    • 401(k), 403(b), 457 plan
    • Catch-up contributions starting in the year you turn 50
    • $18,000 (up from $17,500 in 2014)
    • $6,000 (up from $5,500 in 2014)
    • IRA and Roth IRA
    • Catch-up contribution starting in the year you turn 50
    • $5,500 (unchanged from 2014)
    • $1,000 (not adjusted for inflation)
  • Check your deduction limits – Like contribution limits, the eligibility for a deduction changes from year to year as well. It’s recommended that you check to see if you are still eligible or have become eligible for an IRA deduction. If you no longer can deduct your IRA contribution, then perhaps a Roth IRA contribution becomes more attractive, although those eligibility rules are modified annually as well.
    Account Type   AGI Phaseout
    • IRA for someone covered by a retirement plan
    • Married filing jointly: $98,000 to $118,000 (up from $96,000 to $116,000)
    • Singles and Head of Household: $61,000 and $71,000 (up from $60,000 to $70,000)
    • IRA for someone not covered by a retirement plan though spouse is covered
    • Married filing jointly: $183,000 to $193,000 (up from $181,000 to $191,000)
    • Roth IRA
    • Married filing jointly: $183,000 to $193,000 (up from $181,000 to $191,000)
    • Singles/Head of Household: $116,000 to $131,000 (up from $114,000 to $129,000)
  • Determine if a Roth IRA option is your best choice – The hierarchy of retirement savings options for many is to first make a deductible Traditional IRA contribution; if that’s not available then a Roth IRA contribution; finally a non-deductible Traditional IRA is the last option for those above the income thresholds noted above. Whether the immediate tax benefit of the deductible Traditional IRA outweighs the longer-term benefit of the tax-free growth in a Roth IRA is hard to discern. As a rule of thumb, it depends on how soon you will need the money – the longer you can wait to access the funds, the better the Roth IRA becomes. This becomes especially true after age 70½, when investors in a Roth IRA are not subject to the Required Minimum Distribution rules. If you can draw on other sources of income and not tap a Roth, the Roth may become the better choice. According to Steffen, “The Roth IRA is the most powerful over the long-term if you aren’t going to use it.”

    In addition, the Roth IRA is a better option for those whose tax bracket will remain high after retirement. For those whose income and tax bracket will drop significantly after retirement, the deductible Traditional IRA may make more sense. In that case, you take a deduction from income when your tax rate is higher and begin drawing on the money and paying the taxes when your rate is lower.

    If you decide to convert a Traditional IRA to a Roth IRA and later decide keeping the Traditional IRA makes more sense, you have until October 15th of the year after the conversion to undo the transaction. The primary reason for recharacterizing a Roth conversion is if the account value has fallen significantly from the time of the conversion. Presumably, the recharacterization may be driven by a desire to not pay taxes on a now much lower amount. Some also may find that their income/tax bracket went up and the cost of the conversion will end up being more than they expected.

  • Check your beneficiary designations – “It’s surprising how many people name a beneficiary when they open a retirement account and never change it,” Steffen said. Significant life events including death, divorce, birth or marriage may require changes to beneficiaries. Others may want to change their beneficiary to name a trust instead of an individual for estate planning purposes.

  • Update your financial plan if needed – Take a look at your original financial plan to see if anything has changed. Significant changes to your income and material life changes (death, divorce, birth, marriage) should trigger a re-evaluation. Major moves in the market also might impact your plan. For example, a major downturn as occurred in 2008-‘09 might require that you adjust your savings level to ‘catch up.’

  • Rebalance your investments – During the initial retirement planning process, you and your financial advisor selected an asset allocation to best meet your investment goals at that time. It’s recommended that you check annually to see that your allocations to stocks, bonds, international investments and other asset classes still are in line with the asset allocation you selected. Said Steffen, “Keep in mind that if you are rebalancing investments outside of a retirement account, your changes may trigger tax consequences.”

  • Look into new investment options offered by an employer-sponsored retirement plan – Each year, your plan sponsor will provide an update on your plan, and may add or remove investment options. Take a close look at any new options to determine whether you should reallocate all or a portion of your contributions. If a fund you were using has been replaced, take a close look at the new fund to see if it still makes sense for you.

  • Double check Social Security benefits – Create a personal login in at to ensure the Social Security Administration has properly credited your earnings and to receive an estimate of your future benefit. Also, if you are approaching age 65 and still working, begin looking at your health insurance options under Medicare.

  • Schedule a meeting with your advisor if you are five years or less away from retirement – As you get closer to retirement, it is important to fine tune your plan to make sure everything is in order. This may be the time to make adjustments to your savings plans or retirement date to ensure you do not outlive your retirement savings. To learn more, read Steffen’s advice on pre-retirement planning.

Tax season is a good time to perform an annual retirement plan check-up. And while you are at it, take a few minutes to make sure the other parts of your financial house are in order. For example, executives who have stock options should check option expiration dates and vesting schedules to ensure that they don’t miss a deadline. If your situation has changed, look into parking or childcare reimbursement benefits at work, as you may need to add or remove the benefit. Consider life insurance premiums and eliminate any income replacement policies that you may have purchased to support a family if your children now are grown. Take a look at all of your estate planning documents to make sure they are up-to-date. Lastly, look at health savings accounts to determine whether your current contribution matches any change in the annual contribution limit.

To schedule an interview with Tim Steffen on this or other wealth management topics, contact Amy Nutter, Baird Public Relations, at (414) 765-3988 or For more tax and financial planning tips and insights, follow Tim Steffen on Twitter @TimSteffenCPA.

About Baird
Baird is an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe and Asia. Established in 1919, Baird has more than 3,100 associates serving the needs of individual, corporate, institutional and municipal clients. Baird has $145 billion in client assets. Committed to being a great place to work, Baird ranked No. 9 on FORTUNE’s 100 Best Companies to Work For in 2014 – its 11th consecutive year on the list. Baird’s principal operating subsidiaries are Robert W. Baird & Co. in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird’s investment banking and private equity operations. For more information, please visit Baird’s Web site at

For additional information, contact:
Amy Nutter
Baird Public Relations
(414) 765-3988