Past Performance

Hard to believe, yet here we are once again entering the final weeks of another year.  But before the fun and madness of the holiday season are upon you, there’s likely no better time than the present to spend a few minutes to confirm that your time sensitive financial matters are in good order.

Here’s an important year-end financial checklist to consider.

1.  Review your 401(k), 403(b), TSA, or other retirement account contributions. For 2016 individual participants in defined contribution plans like 401(k)’s can defer up to $18,000. For those maxing out the contribution, the average tax savings is approximately $4,500.

If eligible, take advantage of the age 50 and older catch-up contributions, the provision allows you to save an additional $6,000. For 2016 that’s $24,000 of your income that could be sheltered from this years tax return.

2.  Review your current and future asset allocation within your employer-sponsored retirement accounts. Don’t make the common mistake of not paying close attention to the investment allocation – if in doubt – talk to a professional retirement advisor.

3.  Spend the balance from those mischievous Flex Spending Accounts (both health and child care) by the deadline, which is often year-end. Check with your employer to confirm your deadline date and / or if some of your account balance can carry over into 2017.

4. Consider how ALL of your investment accounts are allocated and rebalance or make adjustments if needed. Make sure that you, or your financial advisor, are strategically managing capital losses in your taxable investment portfolio to potentially reduce realized capital gains, or maximize the income write off by year-end.

* See this Tax Loss Harvesting article for more information.

5. Consider adding to or opening a tax-advantaged 529 education plan for your children or grand children. One advantage of gifting to a 529 plan is that 5 years’ worth of gifts can be made in one year. With the annual gift exclusion of $14,000 for 2016, you can gift up to $70,000 at one time, and double that if the gift comes from a couple.

6. Make your charitable donations. You can write off donations only if you itemize deductions.  Consider maximizing the itemized deduction by donating property, or appreciated stock. Please note, car and non-cash donations may attract IRS scrutiny so be sure your documentation is in order.

7. Consider your estate gifting strategy. For 2016, you can give up to $14,000 (per person) to as many people as you’d like without incurring any federal gift tax liability. If you’re married, you and your spouse can give up to $28,000 per recipient.

8. For those over 70 ½ be sure you’ve taken your required minimum distribution from your IRA. Make sure to avoid the common mistake of not including all of your IRA accounts in the annual calculation.

9. Review life insurance policies. The low-interest rate environment has caused problems with many cash value policies. Confirm with your agent or advisor that your life policy isn’t at risk of lapsing in the later years of life.

10. Review beneficiary designations within your IRA’s, 401(k)’s, and insurance policies to confirm the information is correct. Make sure you’re not making the common mistake of naming your estate as a beneficiary. Also, please note that your beneficiary designation on these accounts supersedes your Will, so it’s very important to make sure your beneficiaries are listed correctly.

11.  If you had an exceptionally good or bad year, and expect a much different income next year, then deductions should be managed accordingly.  This may be especially relevant for recent or soon to be retirees. Be sure to confirm with your CPA that the alternative minimum tax won’t scuttle your efforts.

12. Review your budget and savings - try to target savings of at least 14% of your gross income.

13.  Lastly, review your employer benefits package. Before tackling this one, it’s a good idea to review your health and child care expenses. Be sure to take full advantage of flex spending accounts. Also of note is the importance of comparing the term life insurance expense to a policy you’d purchase on the open market.

For more information or help with any of these areas, please don’t hesitate to contact us