Year-End Retirement Planning Deadlines for 2017

Contributing to a 401(k) plan can save you thousands of dollars on your 2017 tax return, but you need to meet the year-end contribution deadline. Retirees must take withdrawals from their 401(k)s and traditional IRAs before the end of the year to avoid a stiff tax penalty. Here's how to maximize the value of your retirement accounts before the end of the year.

[Read: New 401(k) and IRA Rules for 2018.]

Contribute to your 401(k) plan. Deposits to your 401(k) plan are typically due by the end of the calendar year. Dec. 31 falls on a Sunday in 2017, so the last business day to make a contribution is Dec. 29. However, many people contribute to 401(k) plans via payroll withholding, and it might take your company a pay period or two to process the change. "It really is a good idea for savers to aim to initiate their transactions a little earlier than the deadline," says Ted Mitchell, Fidelity's director of public relations for personal, workplace and institutional services. "At the very least, aim for two to three weeks earlier."

The 401(k) contribution limit for 2017 is $18,000. Those age 50 and older are eligible to deposit an additional $6,000 for a maximum possible contribution of $24,000. Boosting your 401(k) contributions could significantly decrease your 2017 tax bill. A 50-year-old worker in the 25 percent tax bracket who maxes out his 401(k) would reduce his tax bill by $6,000. Even a $1,000 contribution would save him $250 in taxes. "Each dollar contributed reduces your overall tax bill, so that can have an immediate impact," says Steven Sivak, a certified financial planner and managing partner for Innovate Wealth in Pittsburgh.

Take required minimum distributions. Distributions from 401(k) plans and traditional IRAs must be taken by Dec. 31 each year after age 70 1/2. The penalty for missing a required minimum distribution is 50 percent of the amount that should have been withdrawn in addition to regular income tax on the distribution.

You get extra time to take your first required minimum distribution. If you turned age 70 1/2 in 2017, you have until April 1, 2018 to take your initial required minimum distribution. However, your second and all subsequent distributions will be due by Dec. 31 each year. Waiting until April to take your first distribution means you will need to take two distributions in the same year, which could result in an abnormally high tax bill.

Roth 401(k)s have an annual distribution requirement, but Roth IRAs do not. "A strategy for individuals with a Roth 401(k) account is to roll over all Roth 401(k) funds to a Roth IRA prior to Dec. 31, before they turn 70 1/2," says Ajay Kaisth, a certified financial planner for KAI Advisors in Princeton Junction, New Jersey. "A Roth 401(k) plan that has a zero balance as of Dec. 31 will not be impacted by required minimum distribution requirements on the Roth 401(k) assets."

[See: How to Pay Less Tax on Retirement Account Withdrawals.]

Donate your IRA distribution to charity. IRA owners who are age 70 1/2 or older can avoid paying income tax on part or all of their required distribution if they directly transfer an IRA withdrawal to a qualifying charity. An IRA charitable contribution of up to $100,000 can also be used to satisfy the minimum distribution requirement. "If you are a retiree over 70 1/2 not needing your distributions, you can avoid paying income tax on your required minimum distributions by donating up to $100,000 of your distribution to charity," Kaisth says. "To qualify for the tax break, charitable distributions for 2017 must be paid directly from your IRA to a qualified charity by the end of the calendar year."

Qualify for the saver's credit. If your adjusted gross income is less than $31,000 as an individual, $46,500 as a head of household or $62,000 as part of a married couple in 2017 and you contribute to a retirement account, you might be able to qualify for the saver's credit. This tax credit is worth 10, 20 or 50 percent of retirement account contributions of up to $2,000 for individuals and $4,000 for couples, with the exact amount of the credit depending on your income. "You can get the deduction, and then lower- and middle-income people can get a saver's credit on top of that," Kaisth says. "This is different from a tax deduction. A tax credit is a dollar-for-dollar reduction of gross tax liability."

[See: Social Security Changes Coming in 2018.]

More time for IRA contributions. While 401(k) contributions are generally due by the end of the calendar year, you have until April 17, 2018 to make an IRA contribution that will qualify you for a tax deduction on your 2017 return. You can contribute to an IRA shortly before filing your taxes to get a nearly immediate reduction in your tax bill. "Deadlines for contributions are the tax filing deadline in mid-April, but if you wait until early 2018 to make the contribution, make sure you specify the contribution is for 2017," says Laurie Dubchansky, a certified financial planner for Havaplan Financial in Newport Beach, California. "Doing so will give you an opportunity to make another deposit for 2018."

Emily Brandon is the author of "Pensionless: The 10-Step Solution for a Stress-Free Retirement."