Financial Planning Information from Northeast Planning Associates

REVIEW YOUR RETIREMENT PLAN CONTRIBUTIONS Whether you want to avoid having to correct excess contributions, or you recognize you’re having a good year financially and you want to increase your retirement plan savings, it’s a good idea to review your current contributions to Traditional or Roth retirement savings vehicles and adjust as needed.

Can you just wait until the end of the year and adjust your contributions then? Of course, and there may be valid reasons to do so. However, earlier in the year, it’s much easier to correct over-contributions OR reap potential investment gains if you are increasing contributions.

It’s important to work with a trusted financial advisor to discuss your specific case, and what may be the right strategy for you and your financial goals. A financial advisor can work with your tax advisor to determine if pre-tax or Roth contributions make the most sense for you as well.

As a reminder, the maximum IRA and Roth IRA contributions for 2021 are $6,000 (plus $1,000 if over age 50). The maximum employee elective deferral into a 401(k) or 403(b) is $19,500 (plus $6,500 if over age 50).

EXPANDED CHILD TAX CREDIT As a part of the American Rescue Plan of 2021 (ARPA), the child tax credit was expanded, making it fully refundable for those who are eligible. The credit is increased from a maximum of $2,000 per eligible child to $3,000. Children under age 6 qualify for a higher credit of $3,600.

What’s unique about this expansion is that the IRS will be issuing advanced payments of the tax credit for the next 6 months (checks in the mail or direct deposits), so that those eligible based on their most recently filed tax return will receive 50% of the tax credit this year, and receive and remainder when they file their 2021 tax return.

For some, this is a welcome cash influx from the federal government. If your adjusted gross income (AGI) is likely not to exceed the limits of $75,000 single/$150,000 joint in 2021, then incorporating this money into your budget is worth considering. You may want to use this money to pay down any accumulated consumer debt or perhaps bolster your emergency fund.

If you anticipate your AGI to be close to the limits, you might not want to spend this money just yet. Unlike the direct payments received for COVID-19 relief, ultimate eligibility for these payments will be based on 2021’s tax return. If you end up being ineligible for these payments, you will have to repay these advances. For those who may end up in this situation, we suggest putting this money into a savings account until your 2022 taxes are filed. Check back next month for planning opportunities for 2021! This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Contact Information

Daren Seekins, CFS Northeast Planning Associates

Phone: 207.862.7247 Email:

Located at Maine Savings Federal Credit Union 671 Broadway, Bangor, ME 04401 Business Hours: Monday - Friday: 8:00 a.m. - 5:00 p.m.

Financial planning offered through Northeast Planning Associates, Inc. (NPA), a registered investment adviser (RIA). Securities and advisory services offered through LPL Financial (LPL), an RIA and broker-dealer (BD), member FINRA/SIPC. Credit union is not an RIA or BD. Insurance products offered through LPL or its licensed affiliates. LPL registered representatives offer products and services using NPA. These products and services offered through NPA, LPL, or their affiliates, which are separate entities from, and not affiliates of the credit union, are: