7 Things to Put on Your Year-End Financial Checklist

The end of the year is a key time to review your financial “health” and well-being. To that end, here are seven aspects of your financial life to think about as this year leads into the next.

#1 | YOUR INVESTMENTS

Review your approach to investing and make sure it suits your objectives. Look over your portfolio positions and revisit your asset allocation.

#2 | YOUR RETIREMENT PLANNING STRATEGY 

Does it seem as practical as it did a few years ago? Are you able to max out contributions to IRAs and workplace retirement plans, like 401(k)s? Is it time to make catch-up contributions? Finally, consider Roth IRA conversion scenarios. If you are at the age when a Required Minimum Distribution (RMD) is required from your traditional IRA(s), be sure to take your RMD by December 31. If you don’t, the IRS will assess a penalty of 50% of the RMD amount on top of the taxes you will already pay on that income. (While you can postpone your very first IRA RMD until April 1, 2018, that forces you into taking two RMDs next year, both taxable events.)1

   

#3 | YOUR TAX SITUATION

How many potential credits and/or deductions can you and your accountant find before the year ends? Have your CPA craft a year-end projection including Alternative Minimum Tax (AMT). In years past, some business owners and executives didn’t really look into deductions and credits because they just assumed they would be hit by the AMT. The recent rise in the top marginal tax bracket (to 39.6%) made fewer high-earning executives and business owners subject to the AMT – their ordinary income tax liabilities grew. The top bracket looks as though it will remain at 39.6% for 2018 even if tax reforms pass. So, examine accelerated depreciation, R&D credits, the Work Opportunity Tax Credit, incentive stock options, and certain types of tax-advantaged investments.2

Review any sales of appreciated property and both realized and unrealized losses and gains. Look back at last year’s loss carry-forwards. If you’ve sold securities, gather up cost-basis information. Look for any transactions that could potentially enhance your circumstances.

 

#4 | YOUR CHARITABLE GIFTING GOALS

Plan charitable contributions or contributions to education accounts, and make any desired cash gifts to family members. The annual federal gift tax exclusion is $14,000 per individual for 2017, meaning you can gift as much as $14,000 to as many individuals as you like this year, tax-free. A married couple can gift up to $28,000, tax-free, to as many individuals as they like. (The limits rise to $15,000 and $30,000 in 2018.) The gifts do count against the lifetime estate tax exemption amount, which is $5.49 million per individual (and therefore, $10.98 million per married couple) in 2017.3,4

You could also gift appreciated securities to a charity. If you have owned them for more than a year, you can deduct 100% of their fair market value and legally avoid capital gains tax you would normally incur from selling them.5

Besides outright gifts, you can explore creating and funding trusts on behalf of your family. The end of the year is also a good time to review any trusts you have in place.

 #5 | YOUR LIFE INSURANCE COVERAGE

Are your policies and beneficiaries up-to-date? Review premium costs and beneficiaries, and think about whether your insurance needs have changed.

 

#6 | LIFE EVENTS

Did you happen to get married or divorced in 2017? Did you move or change jobs? Buy a home or business? Did you lose a family member or see a severe illness or ailment affect a loved one? Did you reach the point at which Mom or Dad needed assisted living? Was there a new addition to your family this year? Did you receive an inheritance or a gift? All of these circumstances can have a financial impact on your life as well as the way you invest and plan for retirement and wind down your career or business. They are worth discussing with the financial or tax professional you know and trust.

 

#7 | DID YOU REACH ANY OF THESE FINANCIALLY IMPORTANT AGES IN 2017? 

If so, act accordingly.

  • Did you turn 70½ this year? If so, you must now take Required Minimum Distributions (RMDs) from your IRA(s).
  • Did you turn 65 this year? If so, you are likely now eligible to apply for Medicare.
  • Did you turn 62 this year? If so, you can choose to apply for Social Security benefits.
  • Did you turn 59½ this year? If so, you may take IRA distributions without a 10% early withdrawal tax penalty.
  • Did you turn 55 this year? If so, you may be allowed to take distributions from your 401(k) account without penalty, provided you no longer work for that employer.
  • Did you turn 50 this year? If so, you can make “catch-up” contributions to IRAs (and certain qualified retirement plans).1,5

Sources:

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. fool.com/retirement/2017/04/29/whats-my-required-minimum-distribution-for-2017.aspx [4/29/17]
  3. businessinsider.com/trump-gop-tax-reform-plan-bill-text-details-rate-2017-10 [11/2/17]
  4. irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes [10/23/17]
  5. turbotax.intuit.com/tax-tips/estates/the-gift-tax-made-simple/L5tGWVC8N [11/10/17]
  6. kiplinger.com/article/taxes/T055-C032-S014-4-year-end-tax-savings-tips-to-try-by-thanksgiving.html [10/17]
  7. merrilledge.com/article/ready-set-retire-8-deadlines-you-need-to-know [11/10/17]

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