The end of the year is a perfect time to get your financial house in order. You can find ways to save on taxes, discuss money issues with your family and make plans for 2018.
How to begin? We generally recommend these simple tips:
1. Look for ways to reduce your 2018 income taxes.
Take action before the end of the year to save on taxes. You could consider:
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Contributing the maximum amount to all of your retirement plan programs. Why? The government gives you a tax deduction for making contributions to certain qualified retirement plan programs — meaning those funded with pretax dollars, such as your 401(k), 401(b) and traditional IRAs (excluding contributions to a Roth IRA). No matter what tax bracket you’re in, your money can grow there without being taxed until you pull it out.
- Tax bracket management. Is there a gap between the bracket you’re in right now (your amount of taxable income) and the next tax bracket? You may be able to use that gap to your advantage, perhaps by selling and realizing a capital gain, or by converting money in a traditional IRA to a Roth IRA. We suggest talking to a financial professional about this valuable opportunity.
- Timing and/or bunching deductions. If you think your income may change in 2018, go over your deductions and see if you can move them into whichever year will do you the most good. You may also be able to bunch certain expenses into one year, which could push you over a threshold that gives you a tax deduction you wouldn't have gotten otherwise.
- Dumping losing stocks. Taking losses can help with your taxes.
2. Take required minimum distributions.
If you are age 70½ or older and don’t take the required minimum distributions on IRAs, you’ll be penalized. It’s no small matter — the penalty is 50% of what you should have withdrawn, and then that amount is taxed. For all people except those of whom are due for their first RMD (who can wait until the following April), you need to take care of it by the Dec. 31 deadline.
3. Give.
Donating to charities can reduce your tax bill. Besides giving to charities, you can also currently give $14,000 to as many individuals as you'd like without incurring a gift tax or affecting the unified credit. A husband and wife can each currently make $14,000 gifts. In 2018, the gift tax exclusion amount goes up to $15,000.
4. Talk with your family.
If you have the good fortune to have your family gathered in one place during the holidays, take a little time to talk about the finances that concern them (wills, trusts, planned giving, etc.). A little discussion now can make a big difference later.
5. Prioritize planning.
We believe there's no better time for setting goals than the end of the year. Try looking just three years ahead: What would have to happen in order for you to view it as a successful period?
6. Retire your debt.
I believe that if you are retired, so should your debt be retired. Instead of adding to your debt during the holidays, see if you can pay it off entirely. Wouldn’t it feel great to begin 2018 debt-free?
-
Where to Retire: Living in Portugal as a US RetireeLiving in Portugal as a retirement landing spot has abundant advantages, but do your homework and due diligence first.
-
A Social Security Storm Is Gathering: Here's Your Safety PlanIf Social Security reserves are depleted by 2033, as predicted, future benefits could be cut by as much as 21%. Here’s how to weather the impending storm.
-
A Social Security Storm Is Gathering: Here's Your Safety Plan
If Social Security reserves are depleted by 2033, as predicted, future benefits could be cut by as much as 21%. Here’s how to weather the impending storm.
-
What a Second Trump Term Means for Investing in Water SafetyA new administration focused on deregulation could change the scope of today's water protections. So, what does that mean for the investors who support them?
-
How to Avoid These 10 Retirement Planning MistakesMany retirement planning mistakes are easily avoidable. Here are 10 to have on your radar so you don't end up running out of money in your golden years.
-
Before the Next Time Markets Sink, Do Your Lifeboat DrillsAn eventual market crash is inevitable. We can't predict when, but preparing for the ups and downs of investing is imperative. Here's what to do.
-
This Late-in-Life Roth Conversion Opportunity Spares Your HeirsExpensive medical care in the later stages of life is an unpleasant reality for many, but it can open a window for a Roth conversion that benefits your heirs.
-
Women, What Is Your Net Worth?Many women have no idea what their net worth is, or even how to calculate it. Many also turn to social media finfluencers for advice. Here's what to do instead.
-
Converting Retirement Savings to a Roth IRA? Don't Do ThisYou might want to convert all of your savings to a Roth in one go, but you could end up paying hundreds of thousands more in taxes than you have to.
-
What Is Your 'Enough Is Enough' Number for Retirement?Chasing a 'magic number' for retirement can be anxiety-inducing. Instead, build your plans around a personal number that reflects your individual circumstances.
