Your Year-End Financial Checklist

The end of a year makes us think about last-minute things we need to address and good habits we want to start keeping. To that end, here are seven aspects of your financial life to think about as this year leads into the next…

Your investments. Review your approach to investing and make sure it suits your objectives. Look over your portfolio positions and revisit your asset allocation.

Your retirement planning strategy. Does it seem as practical as it did a few years ago? Are you able to max out contributions to IRAs and workplace retirement plans like 401(k)s? Is it time to make catch-up contributions? Finally, consider Roth IRA conversion scenarios, and whether the potential tax-free retirement distributions tomorrow seem worth the taxes you may incur today. If you are at the age when a Required Minimum Distribution (RMD) is required from your traditional IRA(s), be sure to take your RMD by December 31. If you don’t, the IRS will assess a penalty of 50% of the RMD amount on top of the taxes you will already pay on that income. (While you can postpone your very first IRA RMD until April 1, 2019, that forces you into taking two RMDs next year, which positions you to face greater income tax.)1

Your tax situation. How many potential credits and/or deductions can you and your tax professional find before the year ends? Examine accelerated depreciation, R&D credits, the Work Opportunity Tax Credit, incentive stock options and certain types of tax-advantaged investments. Your odds of owing Alternative Minimum Tax (AMT) may be reduced in 2018 thanks to the Tax Cuts & Jobs Act. If you do owe AMT during 2018-25, you probably will have to pay less of it (possibly much less) than you would if the TCJA had not been passed.2

Review any sales of appreciated property and both realized and unrealized losses and gains. Look back at last year’s loss carry-forwards. If you’ve sold securities, gather up cost-basis information. Look for any transactions that could potentially enhance your circumstances.

Your charitable gifting goals. Plan charitable contributions or contributions to education accounts; make any desired cash gifts to family members. The annual federal gift tax exclusion is $15,000 per individual for 2018, meaning you can gift as much as $15,000 to as many individuals as you like this year tax-free. (The limit will stay at $15,000 in 2019.) Married spouses can each make $15,000 gifts. So long as these gifts are within the annual exclusion amount (that is, $15,000 or less), they do not count against the lifetime estate tax exemption amount, which is $11.4 million per individual (and $22.8 million per married couple) in 2019.3

You could also gift appreciated securities to a charity. If you have owned them for more than a year, you can deduct 100% of their fair market value and legally avoid capital gains tax you would normally incur from selling them.

Besides outright gifts, you can explore creating and funding trusts on behalf of your family. The end of the year is also a good time to review any trusts you have in place.

Your life insurance coverage. Are your policies and beneficiaries up-to-date? Review premium costs and beneficiaries and think about whether your insurance needs have changed.

Life events. Did you happen to get married or divorced in 2018? Did you move or change jobs? Buy a home or business? Did you lose a family member, or see a severe illness or ailment affect a loved one? Did you reach the point at which Mom or Dad needed assisted living? Was there a new addition to your family this year? Did you receive an inheritance or a gift? All these circumstances can have a financial impact on your life, and even the way you invest and plan for retirement and wind down your career or business. They are worth discussing with the financial or tax professional you know and trust.

Lastly, did you reach any of these financially important ages in 2018? If so, act accordingly.

Did you turn 70½ this year? If so, you must now take Required Minimum Distributions (RMDs) from your IRA(s).

Did you turn 65 this year? If so, you are likely now eligible to apply for Medicare.

Did you turn 62 this year? If so, you can choose to apply for Social Security benefits.

Did you turn 59½ this year? If so, you may take IRA distributions without a 10% early withdrawal tax penalty.

Did you turn 55 this year? If so, you may be allowed to take distributions from your 401(k) without penalty, provided you “separate from service” from your employer (i.e., no longer work at that job).

Did you turn 50 this year? If so, you can make “catch-up” contributions to IRAs (and certain other qualified retirement plans).1,5,6

The end of the year is a key time to review your financial “health” and well-being. If you feel you need to address any of the items above, please feel free to email me or give me a call.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 – kiplinger.com/tool/retirement/T045-S001-when-do-i-have-to-take-my-first-rmd/index.php [7/18]
2 – marketwatch.com/story/meet-the-new-friendlier-alternative-minimum-tax-2018-02-26 [2/26/18]
3 – forbes.com/sites/ashleaebeling/2018/11/15/irs-announces-higher-2019-estate-and-gift-tax-limits/ [11/15/18]
4 – kiplinger.com/article/retirement/T055-C000-S004-smart-strategies-for-giving-to-charity.html [9/26/18]
5 – fool.com/retirement/2018/02/12/5-financial-facts-every-early-retiree-should-know.aspx [2/12/18]
6 – irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions [11/5/18]
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