retirement

Year-End Financial Planning Ideas

Six money management, tax planning and estate planning steps to consider getting started on as 2019 winds down.

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.

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.

About the Author

T. Eric Reich, CIMA®, CFP®, CLU®, ChFC®

President and Founder, Reich Asset Management, LLC

T. Eric Reich, President of Reich Asset Management, LLC, is a Certified Financial Planner™ professional, holds his Certified Investment Management Analyst certification, and holds Chartered Life Underwriter® and Chartered Financial Consultant® designations.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
10 States With the Highest Sales Taxes
Tax Breaks

10 States With the Highest Sales Taxes

Before you embark on a shopping spree in any of the 10 worst states for sales taxes, make extra room in your budget.
June 16, 2021
12 Housing Stocks to Ride the Red-Hot Market
investing

12 Housing Stocks to Ride the Red-Hot Market

The U.S. has a housing shortage and a love affair with home improvement, both of which could create tailwinds for this group of housing stocks.
June 8, 2021

Recommended

2021 Child Tax Credit Calculator
Tax Breaks

2021 Child Tax Credit Calculator

Find out how much money you'll get each month under the child tax credit rules for 2021. Payments will start July 15.
June 18, 2021
18 States With Scary Death Taxes
inheritance

18 States With Scary Death Taxes

Federal estate taxes are no longer a problem for all but the extremely wealthy, but several states have their own estate taxes and inheritance taxes t…
June 17, 2021
Taxes on Unemployment Benefits: A State-by-State Guide
state tax

Taxes on Unemployment Benefits: A State-by-State Guide

Don't be surprised by an unexpected state tax bill on your unemployment benefits. Know where unemployment compensation is taxable and where it isn't.
June 17, 2021
The 10 Least Tax-Friendly States for Middle-Class Families
state tax

The 10 Least Tax-Friendly States for Middle-Class Families

Failing to consider state and local taxes before moving your family to another state could cost you thousands of dollars each year.
June 17, 2021