Year End Financial Planning

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.

Roth Conversions

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.

Tax Harvesting

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

  • Social security benefits will increase by 2.8% due to a cost of living adjustment.
  • Review your withdrawal percentage for either opportunities to either increase or decrease based on your income needs, portfolio performance, and sustainability.
  • IRA contribution limits will increase from $5,500 to $6,000 and the age 50 catch up remains at an additional $1,000.
  • 401(k), 403(b), and Deferred Comp contributions limits increase from $18,500 to $19,000 and the age 50 catch up remains at an additional $6,000.
  • Financial Advisor fees in are no longer tax deductible (this is actually a change for 2018, but a good reminder).

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.



Leave a Reply

%d bloggers like this: