If it's not too early for stores to put out Christmas decorations, then it's not too early to think about year-end financial planning.
Here are some items to review over the next few months.
1. Retirement Plan Contributions
Now is the time to see if you are on pace to max out your retirement contributions for the year. If not, consider changing how much you contribute or if your plan allows — whether it’s a 401(k), 403(b) or SEP IRA. In addition, consider putting most or all of any bonus you receive into the plan. Do the same for IRA and Roth IRA contributions as well. The IRA contribution limit for 2019 is $6,000 unless you're 50 or older, then it's $7,000. You may also want to consider converting some of your traditional IRA funds to a Roth IRA. You’ll pay taxes on the amount you convert, but all future gains and qualified withdrawals would be tax-free.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
2. Tax Planning
There are tons of tax planning strategies that you can consider for year’s end. Among them are tax harvesting, which is selling investments at a gain or loss to balance out your tax liability. Losses can be deducted against ordinary income up to $3,000, but they can be used to offset gains up to any number. If you don't have gains, the loss can be carried forward to next year. The losses are applied against gains before they are applied to $3,000 of ordinary income. If you want to repurchase that same investment, you need to wait 30 days to avoid Wash Sale Rules.
Reallocate your portfolio to ensure tax-generating investments, like taxable bonds, are in your retirement accounts and investments that generate less tax, such as stocks, are in non-retirement accounts.
Rebalance your portfolio. Invariably some investments have done better than others during the year so you may want to consider rebalancing to ensure you still have the asset allocation you originally intended.
3. Review Insurance Policies
Life insurance policies may have been purchased years ago when your needs were different, so it's a good time to review what you have. The same goes for property & casualty, health and long-term care insurance as well.
4. Review Beneficiaries
I can't stress this enough. Review your life insurance beneficiaries, too, not just beneficiaries for your retirement accounts.
5. Charitable Contributions
Now is a great time to consider making charitable contributions. Of course, the tax deduction is nothing in comparison to the feeling you get from helping an organization fund its mission. In addition, unless you bundle your donations or give through a donor advised fund, you may not get a deduction at all, considering the standard deduction is $24,400 for married couples. If you don't currently support an organization, find one with a mission that is something you're passionate about. For me, that's kids and health, so I support Big Brothers Big Sisters of Atlantic & Cape May Counties, The Love of Linda Cancer Fund, Inc. and the AtlantiCare Foundation.
6. Estate Planning
Following the idea of charitable giving, consider making gifts to family members to help reduce the size of your estate. Per IRS rules, every taxpayer can gift up to $15,000 to an individual recipient in one year. There is no limit to the number of recipients you can give a gift to, but there is a lifetime exemption of $11.4 million.
Keep an eye out for a column on financial New Year's resolutions.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney or tax adviser with regard to your individual situation.
-
Ask the Editor, October 17: QCDs and Tax-PlanningAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers more questions about the use of qualified charitable distributions (QCDs) in end-of-year tax planning.
-
You May Want To Think Twice Before Selling These Four Assets in RetirementSitting on little gold mines? It's natural to want to cash out when you retire. Here’s why you may not want to.
-
Treat Home Equity Like Other Investments in Your Retirement Plan: Look at Its Track RecordHomeowners who are considering using home equity in their retirement plan can analyze it like they do their other investments. Here's how.
-
Why Does It Take Insurers So Darn Long to Pay Claims? An Insurance Expert ExplainsThe process of verification, investigation and cost assessment after a loss is complex and goes beyond simply cutting a check.
-
Two Reasons to Consider Deferred Compensation in the Wake of the OBBB, From a Financial PlannerDeferred compensation plans let you potentially lower your current taxes and help to keep you out of a higher tax bracket. It's important to consider the risks.
-
Financial Fact vs Fiction: The Truth About Social Security Entitlement (and Reverse Mortgages' Bad Rap)Despite the 'entitlement' moniker, Social Security and Medicare are both benefits that workers earn. And reverse mortgages can be a strategic tool for certain people. Plus, we're setting the record straight on three other myths.
-
The End of 2%? An Investment Adviser's Case for Why the Fed Should Raise Its Inflation TargetYes, inflation can be tough on those living on fixed incomes, but protecting us from it too strictly could do our overall economy more harm than good.
-
Medicare Open Enrollment: Why You Need to Pay Extra Attention to Part D, From a Financial AdviserThe lowest premium for prescription drug coverage might not actually save you the most money. Make sure you take copays into consideration and do the math.
-
How the One Big Beautiful Bill Will Change Charitable GivingTaxpayers who don't itemize will be able to take a bigger deduction for donations, which could boost giving. However, high-income donors could see their tax benefits reduced.
-
A 'Fast, Fair and Friendly' Fail: Farmers Irks Customers With Its Handling of a Data BreachFarmers Insurance is facing negative attention and lawsuits because of a three-month delay in notifying 1.1 million policyholders about a data breach. Here's what you can do if you're affected.
