Year-End Financial Planning Ideas

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

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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.

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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.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

T. Eric Reich, CIMA®, CFP®, CLU®, ChFC®
President and Founder, Reich Asset Management, LLC

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