The year is almost over, and Americans all over the country are taking care of last-minute tax planning. To help us all stay on top of retirement plan issues, MSN Money has put together this list of the important retirement planning moves to make before December 31. Time’s almost up, so make sure you’re doing what you need to avoid penalties, and plan for your future!
Establishing a qualified plan
Qualified plans that operate on a calendar-year basis must be established by Dec. 31 of the year for which contributions are to be deducted.
This includes completing the necessary documentation and notifying employees about the plan. Contributions may be made by the employer's tax-filing deadline, including extensions.
Convert Roth IRAs
Roth IRA conversions for a year must be completed by Dec. 31 of that year.
A conversion may be accomplished in one of three ways:
1. Conversion within the same financial institution
This kind of conversion takes place if the non-Roth retirement account and Roth IRAs are maintained at the same financial institution.
If the delivering account is a non-Roth IRA, the custodian may either require the IRA owner to move the assets from the non-Roth IRA to the Roth IRA, or may change the non-Roth IRA to a Roth IRA to accomplish the conversion. For qualified 403b and governmental 457b plans, the assets must be moved to a Roth IRA, as changing the account to a Roth IRA is not permitted.
2. Trustee-to-trustee transfer
Here the conversion occurs between two financial institutions. Generally, the Roth IRA owner will instruct the Roth IRA custodian to submit a request to the non-Roth IRA custodian or plan (qualified 403b or governmental 457b plan) trustee to deliver the assets to the Roth IRA.