A Year-End Planning Checklist to Help You Wrap Up 2019

Presents? Check.

Tree? Check.

Decorations? Check.

Food and drink? Check.

A thorough review of your tax-loss harvesting options?

See, I knew you were forgetting something!

Believe me, I understand that your checklist for the month of December is probably spilling onto another page already. And it’s not much fun to sit around the fire and think about filing taxes in April. But there’s less than two weeks left to consider some moves that could have a major impact on how you wrap up 2019 and progress into 2020.

On our last episode of the year, we go through the important year-end planning decisions that you, your spouse, and your fiduciary advisor need to discuss before December 31st.

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Review your tax-loss harvesting options.

For most of our clients, this is item number one on our year-end planning checklist. On an annual basis, we review our clients’ portfolios and look for any investments that have gone down in value that could be sold to offset gains on other investments. Doing so can reduce, and in some cases, even neutralize capital gains taxes. Selling down investments also creates an opportunity to use that capital to buy new investments, including items similar to what you just sold. After 30 days, you can even reinvest in the exact same security, while still enjoying that tax deduction in April.

Think twice before making any new investments.

Tax-loss harvesting makes it possible for your investment account to be up in value and not have any taxable gains. Unfortunately, the opposite is also true: we’ve had folks see losses for the year on certain accounts and have large capital gains taxes to pay anyway.

The most common scenario is folks who buy a mutual fund near the end of the year that pays a dividend and a capital gain shortly after the purchase date. Unfortunately, these folks are then responsible for paying taxes on that entire yearly distribution, even though they only held the fund for a few days or weeks.

If new investment products are on your shopping list this holiday season, please make sure you go over the details with your fiduciary advisor. In most cases, there are better year-end planning options for your investible cash. For example, you could …

Top off your existing accounts.

The annual contribution limits to IRAs and Roth IRAs are $6,000 if you’re under age 50 and $7,000 if you’re over age 50. You have until you file taxes next April to hit those limits, but there’s no reason not to contribute now if you have the cash.

You can contribute up to $19,000 to your 401(k) by December 31st, and an extra $6,000 if you’re over 50. Next year both of those limits will increase by $500, so now is a good time to review how your 401(k) works and make sure your contributions are getting matched throughout the year.

Finally, most states, including Missouri and Kansas, give you a state income tax deduction for contributions to 529 college savings accounts. Those contributions have to be made by December 31st if you want that deduction.

Take your required minimum distributions (RMDs).

When you reach age 70 ½, you are required by law to start taking RMDs from IRA and 401(k) accounts. There are also rules as to how you take RMDs, especially if you have a few retirement accounts in your portfolio.

The first year you fall under this rule, the IRS lets you weigh your options until April of the following year. After that, if you don’t take your RMDs by December 31st, the IRS will hit you with a 50% penalty. Imagine missing the deadline for taking an RMD of $100,000 and then having to write the IRS a check for $50,000!

That’s why RMDs are such a frequent topic of conversation on Keen on Retirement and at the Keen Wealth offices. If you don’t talk through all your options and plan for your RMDs with your fiduciary advisor, you could find yourself staring at one of the biggest tax penalties in the book.

Count your blessings.

Like many folks, I always get a bit reflective this time of year. Despite all the challenges we face as individuals, families, and as a country, history shows that we have a knack for getting over those hurdles in the long run. Looking back at all we’ve overcome makes me hopeful for the future and grateful for the blessings in my life.

If you’re feeling a similar sense of gratitude and want to give back, consider making a charitable contribution before the end of the year. I know some folks feel uncomfortable asking about how giving can affect their year-end planning from a tax perspective. But working through your options with your fiduciary advisor can help you to maximize the impact of your generosity, not just reduce your taxes.

Thanks again to all the clients and friends of Keen Wealth and to all the listeners and readers of Keen on Retirement for a great 2019. We just passed the 100th episode milestone of our podcast and we couldn’t have done that without the loyal support of listeners like you.

I wish all of you a very happy holiday season and a healthy and prosperous 2020. We’ll be back in the new year with more impactful content that I hope will help you make the second half of your life the best half.

Bill Keen: There’s less than two weeks left to consider some year-end planning moves that could have a major impact on how you wrap up 2019 and progress into 2020.

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Got a question or comment? Email it to me and we’ll get back to you or call our office at (913) 624-1841. 

About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

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