With the end of 2018 fast approaching, there are several financial planning items that you may consider reviewing. Getting a jump on these items in early November may be a good idea, as both your household and your planning firm could be quite busy during the holiday season.
Required Minimum Distributions (RMDs)
Distributions are required from pre-tax retirement accounts beginning in the year you turn 70.5. If you have more than 1 Pre-Tax account, they must be aggregated for the calculation, though the distribution can be taken from any of the accounts. A missed RMD could result in a 50% penalty from the IRS.
Capital Gains Distributions
If you are purchasing shares of mutual funds outside of a retirement account, it may make sense to hold off on those purchases until 2019. Mutual funds pay year end capital gains distributions, meaning you could receive a tax bill for gains from an investment where you did not participate in those gains.
Contact your tax professional to see if it makes sense to convert a portion of your Pre-Tax retirement to Roth. If it makes sense tax wise, this is a great strategy to move funds into a tax advantaged vehicle a little at a time.
Review non-retirement accounts for positions where losses could either offset gains, or be used to reduce income. The loss amount the IRS allows is $3,000 per year, but amounts over and above that can be carried over to subsequent years.
Maximize your 401(k) Plan
Individuals can contribute up to $18,500 to their 401(k) plan for 2018, and $24,500 if they are over the age of 50. Calculate your year-to-date contributions and see if it makes sense to maximize your 401(k) contributions for the remainder of the year. This could be especially beneficial if your plan offers a match and true up, see my article from earlier this year on this benefit. The 401(k) True Up
Prepare for 2019
Finally, it’s a good practice to simply review your estate planning documents and beneficiaries on all accounts at the end of each year. A new child/grandchild, changing homes, starting a business, or losing a loved one can require updates to your existing plan.
I hope this information is helpful, and you all have a wonderful holiday season. If you have any questions at all, please do not hesitate to contact me at the office.