I’m reminded every morning how many “sleeps” are left before Santa comes. My boys (2/3) are very very excited to say the least! But I’m still in work mode and maybe you have some year-end items to take care of too? Be sure to make some time for financial planning before turning the page on 2019. While certain tax decisions can wait until 2020, like Individual Retirement Account and Health Savings Account contributions, the last 2 weeks of the year are your last chance to make some important decisions that can help round out 2019 and help get 2020 started on the right foot.
Review your portfolio. It has been a very positive year for most domestic and international equity markets. Make sure your portfolio is rebalanced to your target allocation, which should be relative to your tolerance for risk and investment time horizon. Depending on the type of account, you might want to claim some gains or losses too – but check with your tax advisor first.
Take your required minimum distribution. If you’re required to take distributions from your retirement plan (based on age 70.5 rules), be sure to do so by December 31 or face a 50% penalty.
Check dependent status. Keep your college student qualified as your dependent by meeting the “support” test. Generally, your child cannot provide more than one-half of his or her own support, so check this. Add up the funds they received during the year. Do you need to increase your level of support before year-end in order to claim the exemption? It could be worth it.
Check all your deductibles. Have you met deductibles on certain insurance plans this year? Are you close to your out-of-pocket maximum for 2019? If so, it might be worth considering that extra doctor’s visit, or having that extra test or exam before January 1 rolls around and you’re stuck having to meet a new deductible or co-insurance.
Check your income. Was your earned income lower than usual? Maybe you should consider converting Traditional IRA assets to Roth IRA assets. Need deductions? Can you beat the new (higher) standard deduction? Do you get insurance from the marketplace? Will credits be owed back? Do you need to consider making charitable contributions, or making additional deferrals in your workplace retirement plan?
Think about your income needs for 2020. Do you have big plans for home projects or a trip? Are you playing catch-up from unexpected expenses this year? If you’re retired and collecting social security, your cost of living increase will be 1.6% next year. Will that be enough or should you consider generating some cash in your investment portfolio now and taking a distribution in 2019, to spread out some taxes and get ready for 2020?
Lastly, talk to your financial planner. The financial planning process is about reviewing options and making sure your financial life is in concert with your goals. Life is never a straight line, so be sure you’re on track by talking with your planner before the year is through. If you aren’t currently engaged with a planner, consider giving us a call. We’re here to align your personal values, vision and wealth, and would be happy to chat.
*Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversation from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss.
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
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
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