Fall Financial To-Do List

Cooler weather, kids back in school, football, and every possible food item becoming pumpkin flavored: all signs that fall is upon us and we are closing in on the last quarter of the year.  While you may want to take advantage of the weather while it lasts (at least those of us in the Midwest) and get those outdoor projects completed, we’ve compiled a list of financial items that may also need to be addressed before year-end.  

Review investment accounts.

  • With the run-up in US stocks, is your portfolio allocation still in line with your long-term strategy?  By rebalancing your portfolio back to your original target asset allocation you will be taking some profits from your better-performing investments (selling high) and moving those funds into areas that have not done as well (buying low).  Rebalancing also aligns your portfolio back to the level of risk you originally had planned.
  • Look for tax-loss harvesting opportunities.  If investments in your taxable accounts have lost value since first purchased, tax-loss harvesting provides an opportunity to realize those losses and use them to offset capital gains from other investments.  Just be sure you are not significantly altering your investment strategy by selling out of certain funds or creating a wash sale if those dollars are reinvested.

Year-end tax maneuvers.

  • For those over age 70 ½, make sure you complete your Required Minimum Distribution (RMD) before December 31.  Missed RMDs are subject to a 50% penalty.
  • Utilize a Qualified Charitable Distribution (QCD) to satisfy a portion of your RMD.  By giving directly from your IRA to a qualified charity, your contribution counts towards your RMD while not being included as taxable income.  This may impact your eligibility for certain deductions or credits as well as reduce the amount of Social Security benefits that are subject to tax.
  • Consider converting a portion of your IRA to a Roth IRA.  If your income is lower this year or you will likely be in a higher tax bracket in the years to come, including during retirement, it may make sense to convert a portion of your IRA and pay the income tax now in order to have that money available tax-free at a later date.
  • Better manage your charitable giving.  With the increase in the standard deduction, many taxpayers no longer receive a tax benefit on charitable donations.  If the tax deduction is important, consider utilizing a donor-advised fund or bunching your charitable donations as a way to maximize the deduction on your return.

Review company-sponsored retirement plans.

  • Are you on track to defer the maximum amount ($19,000 in 2019 plus an additional $6,000 if over age 50) to your 401(k) or similar retirement plan?  If not, most employers allow participants to change the amount contributed throughout the year.  If you receive a year-end bonus, consider deferring as much as possible into your retirement plan.
  • Increase the contribution percentage for next year.  Even an increase of 1% or 2% can make a big difference over time.
  • Check for new investment options.  Retirement plans are often reviewed toward year-end and investment options may change.  Look to see if any of the investments you are participating in are being removed or if better options are being added.

Establish a retirement plan.

  • For self-employed individuals and business owners, setting up a retirement plan can save money on taxes, provide for your future income needs, and attract and keep quality employees.  The deadline to establish many plans such as a 401(k) or SIMPLE IRA is October 1.
  • If you have earned income but are not eligible to participate in a company sponsored retirement plan consider funding your own IRA or Roth IRA.  Contributions may also be available for a non-working spouse.

Optimize company benefit plans.

  • Many companies provide multiple health insurance options.  Review your choices to make sure you are getting the right coverage for your family’s needs.  Selecting a plan that qualifies you for a health savings account (HSA) may allow you save money on both taxes and health care costs.
  • If you participate in a Flexible Spending Account (FSA), the money saved into these accounts should be spent by year-end on qualified expenses since in many cases they are use it or lose it.*
  • If life and/or disability insurance is offered through your employer it may be a cost effective way to protect yourself and your family.  Be sure to know the details of coverage such as taxation, portability, etc. as it may make more sense to get protection outside of the company offering.
  • Review other perks.  Benefits such as discounted legal services, gym memberships, education assistance, or transition reimbursement may be available to you.

Review Medicare Part D plans.

  • For retirees that are enrolled in a Medicare Part D prescription drug plan, open enrollment is between October 15 and December 7.  Benefits under Part D plans change from year to year, so it pays to closely examine your costs under each plan available in order to make sure the plan matches your needs.

Revisit your financial goals.

  • Is your planned retirement date still appropriate?  Are there any additional college expenses for children or grandchildren on the horizon?  If retired, is your annual spending in line with your financial plan?   By revisiting your goals now you can confirm your financial plan is still appropriate or if adjustments need to be made.

By spending a little time reviewing and getting your financial affairs in order now, you can ensure that you are taking advantage of opportunities for this year and getting off to a good start for the year ahead.

*Not all FSA plans are 100% use it or lose it. Some offer a grace period where you’re allowed to use the money for a certain period of time after year-end. Others will let you keep up to $500 for next year. Check your specific plan details to see what leeway is allowed.

Reach out today. This could be the start of a great relationship.

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