Let’s Do the Numbers: The 2021 Financial Planning Updates You Need

Updates

Let’s Do the Numbers: The 2021 Financial Planning Updates You Need

I hope your New Year is off to a fantastic start and that 2021 will bring many positive changes your way. 

In the financial planning world, you might even consider an increased contribution limit a “positive change.” Why? More capacity for tax-advantaged savings! 

If you’re planning your contributions for this year, read on to learn about a contribution limit increase. Plus, check out some other tax and financial planning opportunities you may want to consider this year.

Increased — and Unchanged — Contribution Limits

▶︎ Health Savings Account Updates

2021 brings with it one positive contribution-specific change from the IRS: Increased health savings account (HSA) limits! The catch-up contribution for those age 55 or better — including those who are turning age 55 this year — is still $1,000. But the limit for individuals is up by $50 and the limit for families increases by $100 over 2020 limits. You can see the details in this table:

2021 HSA Limits

To break up your contributions into your monthly cash flows, if you’re under age 55 and want to contribute the maximum to your HSA this year, you can:

  • Contribute $300 per month to your individual HSA; or
  • Contribute $600 per month to your family HSA.

Not sure if you can contribute to your HSA in 2021? While the minimum deductible amount remains the same for 2021, the maximum out-of-pocket limit for qualifying high-deductible health plans (HDHPs) also changed this year, so be sure to check your eligibility.

2021 HDHPs

And if you’re not able to contribute this year, don’t forget that you have until April 15 to add to your HSA for the 2020 tax year. You can find information on contribution maximums and qualifying HDHPs for 2020 in Jason’s Financial Favorites: Health Savings Accounts (HSAs).

▶︎ Retirement Savings

What about your 401(k), 403(b), or 457(b)? Those contribution limits and catch-up contribution limits for those 50-plus remain the same — as does your individual retirement arrangement (IRA) contribution limit. Here’s how those numbers break down by month for those under age 50 who are looking to max out both plans:

  • With the maximum contribution staying at $19,500, those with 401(k), 403(b), or 457(b) accounts can contribute $1,625 per month or $750 per bi-weekly paycheck.
  • For those with traditional or Roth IRA accounts, a $600 per month contribution will get you to the max for 2021.

As you plan your contributions for 2021, if you’re wondering what order you might want to make your contributions in, head to Jason’s blog, Choose Your Own Contribution with Higher Retirement Plan Limits. We haven’t updated the HSA numbers in this blog yet, but the general order of contributions remains the same. And while the window of opportunity for contributing to an employer-sponsored retirement plan for the 2020 tax year has closed, you have until April 15 to contribute to your HSA and your traditional or Roth IRA for 2020.

Speaking of retirement accounts, RMDs are back for 2021 tax year. The penalty for not taking your required minimum distribution this year remains the same: You pay an excise tax equal to what half of what your RMD should have been if you don’t take it. If you’re subject to RMDs in 2021, you can learn more on the IRS website.

Tax Law Changes

Of course, one contribution limit increase isn’t the only change for 2021. After Tax Day being postponed to July 15 last year, it’s once again set for the familiar April 15. And you might not be thinking about your 2021 taxes when you haven’t filed your 2020 tax return yet, so I’ll stick to some high points that you may want to have on your radar for this year.

Tax Preparation Available!

Don’t forget that, as a client of Financial Planning Fort Collins, you also have access to professional tax preparation. Individual income tax prep is included in our flat-dollar Comprehensive Services fee — at no additional cost. Learn more on our Services page.

These changes in the tax realm include tax bracket adjustments as well as a higher standard deduction. Tax rates for each bracket haven’t changed, but the taxable income limit for each bracket increased slightly for 2021. With tax season just around the corner, you can gain a better understanding of how the bracket changes could affect you when you file your 2020 taxes and receive your 2021 tax projection. As for the standard deduction, it’s up by $150 for single filers and increased by double that amount for married taxpayers filing jointly:

  • The standard deduction for single filers for the 2021 tax year will be $12,550.
  • The standard deduction for married taxpayers filing jointly is $25,100.

Feeling charitably inclined this year? Single filers who take that higher standard deduction can write off up to $300 of cash donations to a qualifying charity above the line when they file taxes next year. Like the standard deduction increase, the above-the-line charitable contribution deduction amount doubles to $600 for married taxpayers filing jointly for the 2021 tax year. 

Other tax changes for 2021 include those to taxable income limits for long-term capital gains rates, alternative minimum tax (AMT) exemption levels, deductible IRA and Roth IRA phaseout limits, and more. These changes aren’t as widely applicable, but that doesn’t mean they couldn’t apply to you. If you have questions on how these changes could affect your tax situation, just let us know.

Social Security COLA

One more positive change for 2021? A 1.3% cost of living adjustment (COLA) increase in Social Security payments. If you’re not yet receiving Social Security benefits, this one doesn’t apply to you. But those currently receiving benefits as well as those beginning to take Social Security in 2021 will see this increase. 

If you’re new to Social Security, you can expect this increase every year. It’s tied to annual increases in the Consumer Price Index (CPI), and you can learn more about the COLA on the Social Security website.

How can we help you make the most of these important changes — and changes in your own life — for 2021? Let us know! Reach out via email, chat (at the lower-left corner of this page), text, phone, or by scheduling a miscellaneous appointment, and see how we can help you make positive changes this year!

Ready to schedule your next meeting?

Simply head to the Meeting page where you can find and schedule a convenient time to discuss whatever is on your mind.

Regina Neenan
regina@fpfoco.com

Regina Neenan is a Financial Paraplanner Qualified Professional™ and the Cash-Flow and Insurance Planning Specialist at Financial Planning Fort Collins. With a lifelong passion for personal finance, they have been serving FPFoCo clients since 2018. You can learn more about Regina on our About page.



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Assets Under ManagementFee as a % of AUM
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MINIMUM ACCOUNT SIZE
There is a minimum initial investment of $100,000 per Strategy:FOCO client household. This minimum can be met via transfer of existing accounts or with new funds. A client household may generally include accounts for a head of household, a significant other, dependents, and any controlled organizations or entities.

Minimums do not apply to inStream proactive financial planning as a stand-alone service.
ANNUAL FEE
Assets Under ManagementFee as a % of AUM
$100,000 - $249,9991.00%
$250,000 - $499,9990.90%
$500,000 - $999,9990.80%
$1,000,000 - $1,999,9990.65%
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Financial planning services are ongoing, and include unlimited phone, email, web and in-person meeting and consultation time. Pricing is based on the unique circumstances of each client situation. Generally, there is a one-time plan development fee ranging from $500 - $2,000 and a monthly fee of $150 - $500; cancel anytime. Clients utilizing investment management services with portfolios of $500,000 or more will typically receive financial planning services for no additional fee.
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$0 - $249,9991.00%
$250,000 - $499,9990.90%
$500,000 - $999,9990.80%
$1,000,000 - $1,999,9990.65%
$2,000,000 - $2,999,9990.50%
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Your fee is determined by the complexity of your needs and situation. The primary proxy we use for complexity is your investable net worth, which is generally your total net worth, excluding your primary residence. Your investable net worth includes the value of cash, bonds, stocks, mutual funds, rental real estate, and other business or financial interests. Our transparent pricing aligns with the holistic nature and value of our comprehensive services. You can use the chart below to estimate your fee based on your investable net worth. In some circumstances, your fee may be more than the minimums in the chart below.
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