Year-end financial planning

Year-End Financial Planning Tips

December is upon us, which means I basically have your attention for about two more weeks max.

After that, let’s face it, we’re all checking out for the rest of 2018.

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So while I have you, and as the year comes to an end, it's a perfect time to review some year-end financial planning tips.

For such an occasion there's no better duo than Michael Goodman and Brenna McLoughlin from Wealthstream Advisors. And in the interest of full disclosure, not only is Michael a dear friend of mine, he's also my advisor.

We discussed a variety of financial planning topics to ponder before you shut down for the holidays, including:

  • Selling assets in your portfolio now versus waiting until next year: Losses offset gains that you have taken previously in the year; if you have more losses than gains, you can deduct up to $3,000 of losses against ordinary income.

  • Take Required Minimum Distributions: Generally, once you turn 70 1/2, you must begin withdrawing a specific amount of money from your retirement assets (there are some exceptions). The penalty for not taking your RMD is steep at 50 percent on the shortfall!

  • Consider a Qualified Charitable Distribution (QCD): One way to sidestep the taxation on your RMD is to make a Qualified Charitable Distribution, which allows you to gift directly from your IRA to a charity without having to include the distribution in your taxable income.

  • Making last minute 529 plan contributions: Money saved in these programs grows tax-free and withdrawals used to pay for college sidestep taxes, too. You can invest up to $15,000 in 2018 without incurring a federal gift tax and many states offer state tax deductions for the contributions.

  • Considering how tax changes could affect you: With all the changes to the tax code, there’s plenty of items to keep in mind before filing your 2018 returns. 

So before you completely shut it down and wrap up your 2018 finances, you’ll want to listen to this episode to make sure there’s nothing you’re forgetting.

Have a money question? Email us here.

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16 Year-End Money Tips for 2016

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The 2016 year-end money tips post is a complicated one, because of major tax changes that are expected to occur next year under the Trump Administration. While there is no single plan to analyze yet, both candidate Trump’s plan and Speaker of the House Paul Ryan’s plan, would cut ordinary income tax brackets, increase standard deduction amounts and repeal and/or limit personal exemptions and itemized deductions. The coming changes mean that you may need to rethink what you have done in the past to prepare for the year-end and adjust your actions to reflect what is likely to be a new tax environment.

  1. Accelerate Itemized Deductions: The main theme for 2016 year-end planning for the nearly one-third of taxpayers who itemize their deductions is clear: you should determine whether it makes sense to pre-fund deductions, like state and local taxes, mortgage interest, and charitable donations this year, because they are likely to be less valuable or potentially go away, next year.
  2. Bunch itemized deductions. Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). So try to bunch legal advice and tax planning, travel and vehicle costs into one year, so you exceed these the 2 percent floor.
  3. Give Bigger Charitable Donations: You may want to give next year’s or future years charitable gifts in 2016, in order to take advantage of the changes on the horizon.
  4. Use Highly Appreciated Securities for Charitable Contributions: If you itemize deductions, you'll write off the current market value (not just what you paid for them) and escape taxes on the accumulated gains.
  5. State and local taxes: If you live in a high tax state or municipality and itemize deductions, you can deduct property taxes paid. While many high-income earners lose a chunk of this write-off due to the alternative minimum tax, many others may benefit from paying whatever is due for 2016, before year-end.
  6. Don’t Pre-Pay Mortgages: Before you start making your 2017 mortgage payments now, you should know that the IRS does not allow you to take deductions for prepaid mortgage interest expenses. That said; if you are a high earner and are thinking about a re-fi or new home loan, just know that the value of the mortgage interest deduction is likely to shrink in the future.
  7. Wait to sell winners in taxable accounts: The usual advice is sell winners, but considering that capital gains tax rates are likely to drop in the future, especially for high earners, you may want to hold off. But if you expect your income to be much higher next year, you may want to realize capital gains today at the lower rate. Your taxable income includes the gain, so factor that in when you make your decision.
  8. Sell losers in taxable accounts. If you have investment losses in a taxable account, you can sell them to offset gains that you have taken previously in the year. If you have more losses than gains, you can deduct up to $3,000 against ordinary income; and if you have more than $3,000, you can carry over that amount to future years. If you’re going to sell something and replace it within thirty days, the new asset can’t be “substantially identical,” which is known as the wash sale Avoid it by waiting 31 days and repurchase what you sold, or replace it with something that’s close, but not the same as the one you sold.
  9. Use your gift tax exclusion. You can give up to $14,000 to as many people as you wish in 2016, free of gift or estate tax. If you combine gifts with a spouse, you can give up to $28,000 per beneficiary, per year.
  10. Fully fund your college savings 529 plan. Money saved in these programs grows tax-free and withdrawals used to pay for college sidestep taxes, too. You can invest up to $14,000 in 2016 without incurring a federal gift tax and many states offer state tax deductions for the contributions.
  11. Pay someone's education or medical bills.You can make unlimited payments directly to medical providers or educational institutions on behalf of others without incurring a taxable gift or dipping into your lifetime gift-tax exemption.
  12. Fully fund employer-sponsored retirement plan contributions. The deadline for funding 401 (k), 403 (b) or 457 plans is December 31. If you are not maxed out yet, you may be able to bump up your contribution limit on your last couple of paychecks. The limit is $18,000, plus an additional $6,000, if you are over 50.
  13. Consider converting Traditional IRA into a Roth IRA. A conversion requires that you pay the tax due on your retirement assets now instead of in the future. Whether or not a conversion makes sense for you depends on a number of factors, the most important of which is whether or not you can pay the tax due with non-retirement funds.
  14. Take Required Minimum Distributions (RMD). Uncle Sam requires that you withdraw money from retirement accounts after you turn 70 ½. (IRS rules are complicated, so please consult IRS.gov for more specifics.) RMD withdrawals must occur by December 31st and failure to do so results in a whopping 50 percent penalty on the amount you should have withdrawn. If you have multiple individual retirement accounts, you only need to take one RMD from all, based on your age and the total value of the accounts. BUT, if you also have a 401K or 403B, you need to take the RMD from each account individually.
  15. Consider a Qualified Charitable Distribution (QCD). Last year, Congress finally made Qualified Charitable Distributions a permanent part of the tax code. This technique allows you to sidestep the taxation on your RMD by making a gift up to $100,000 directly from your IRA to a charity without having to include the distribution in your taxable income. If you use it, you swap having to claim the income for making a charitable deduction.
  16. Open a small business retirement account. If you open a qualified retirement account by December 31, you have until the day you file your taxes next year, including extensions, to make this year's contribution. One plan to consider is the solo or one-participant 401(k) plan, which allows total contributions, not counting catch-up contributions for those age 50 and over, of up to $53,000 for 2016.
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#249 Portfolio Clean Up with Dan Forbes

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The end of the year is the perfect time to clean up your portfolio, says our guest, Dan Forbes, CFP®. Many moons ago, Dan was my intern and he is now the owner of the thriving Forbes Financial Planning in RI, where he specializes in working with individuals and small businesses. He was named a Certified Financial Planner Board of Standards Ambassador and appeared in the Board’s media campaign in 2014. He is the financial planning expert and weekly contributor to www.GoLocalProv.com and also appears on NBC 10 and ABC6, and contributes to Providence Business News, US World & News Report and Time Magazine.

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Dan noted that end of the year is a perfect time to dump tax losers and to also clean up your portfolio. He warned that you should compare your positions to the appropriate benchmarks. Dan mentioned an interesting Morningstar article about 529 plans and also mentioned that immediate annuities are once again back on his front burner.

Finally, Dan was nice enough to mention the fact that I was named one of the top 10 Influencers on LinkedIn...and I am keeping some pretty fancy company on this list!

Here are a few of the resources that we mentioned during the show:

Thanks to everyone who participated this week, especially Mark, the Best Producer in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 
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15 Year End Money Tips for 2015

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The ball dropping in Times Square, the bungled singing of Auld Lang Syne and yes, year-end money tips…let’s get going! 1.  Sell winners in taxable accounts. If you expect your income to be higher next year, realize capital gains today at the lower rate. Your taxable income includes the gain, so factor that in when you make your decision.

2. Sell losers in taxable accounts. Losses offset gains that you have taken previously in the year; if you have more losses than gains, you can deduct up to $3,000 of losses against ordinary income. Be sure to avoid the "Wash Sale" rule, which precludes you from deducting a loss if you buy a "substantially identical" investment within 30 days.

3. Bunch itemized deductions. Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). So try to bunch legal advice and tax planning, travel and vehicle costs into one year, so you exceed these the 2 percent floor.

4. Give appreciated stock or fund shares to charity. If you itemize deductions, you'll write off the current market value (not just what you paid for them) and escape taxes on the accumulated gains.

5.Use your gift tax exclusion. You can give up to $14,000 to as many people as you wish in 2015, free of gift or estate tax. If you combine gifts with a spouse, you can give up to $28,000 per beneficiary, per year.

6. Pay someone's education or medical bills.You can make unlimited payments directly to medical providers or educational institutions on behalf of others without incurring a taxable gift or dipping into your lifetime gift-tax exemption.

7. Fully fund your college savings 529 plan. Money saved in these programs grows tax-free and withdrawals used to pay for college sidestep taxes, too. You can invest up to $14,000 in 2015 without incurring a federal gift tax and many states offer state tax deductions for the contributions.

8.Fully fund employer-sponsored retirement plan contributions. The deadline for funding 401 (k), 403 (b) or 457 plans is December 31. This year, the limit is $18,000, plus an additional $6,000, if you are over 50.

9. Consider converting Traditional IRA into a Roth IRA. A conversion requires that you pay the tax due on your retirement assets now instead of in the future. Whether or not a conversion makes sense for you depends on a number of factors, the most important of which is whether or not you can pay the tax due with non-retirement funds.

10. Take Required Minimum Distributions. Generally, once you turn 70 ½, you must begin withdrawing a specific amount of money from your retirement assets (there are some exceptions). The penalty for not taking your RMD is steep -- 50 percent on the shortfall!

11. Consider a Qualified Charitable Distribution (QCD). One way to sidestep the taxation on your RMD is to make a Qualified Charitable Distribution, which allows you to gift up to $100,000 directly from your IRA to a charity without having to include the distribution in your taxable income. However, you swap having to claim the income for making a charitable deduction. As of this writing, lawmakers have not yet extended the QCD.

12. Estimate your 2016 Income. If you’re self-employed, and your tax bracket could rise next year, delay making tax-deductible business purchases until January, when the write-offs will become more valuable

13. Open a small business retirement account. If you open a qualified retirement account by December 31, you have until the day you file your taxes next year, including extensions, to make this year's contribution.

14. Adjust 2016 withholding. Stop the insanity of the interest free loans to Uncle Sam!

15 Start a filing system. Make this the year that you keep all your deductions/receipts organized and easy to find when April 15th rolls around!

 

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#248 Year End Money Moves with Ed Slott

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Ed Slott, CPA is a nationally recognized IRA expert, television personality and best-selling author who has dedicated his life to educating Americans on saving for retirement and the intricacies of IRAs.  He was named “The Best Source for IRA Advice” by The Wall Street Journal and is the author of numerous best-selling books, which is why we are so happy he joined the show to help you make smart, year-end money moves.

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 Ed covered a lot of ground, including a great rule of thumb about filing for Social Security: "The longer you wait, the more you get!" Here's a quick list of things to remember to maximize the remaining days of 2015:

  • Make your 2015 Roth IRA conversion and consider a back door conversion, if you earn too much money to qualify for a contribution
  • Check the taxes on stock or mutual fund sales; use losses to offset gains
  • Max out your retirement accounts (yes, there's still time to get to $18,000 or $24,000 if you are over age 50)
  • Take Required Minimum Distributions: RMDs must start in the year you turn 70 1/2 or the year. Fail to do so and the amount you should have withdrawn will be taxed at 50 percent!
  • Donate your IRA distributions to charity: Although this is still in limbo, Ed recommends that you take advantage of it and assume that Congress will once again make it part of an extender package
  • Check / Update Beneficiary Forms
  • Bunch your deductions and if you are self-employed, project your 2016 income. If it will be higher than 2015, consider deferring income and expenses until next year, when you are in a higher tax bracket
  • Be aware of stealth taxes

Check out Ed's web site www.IRAHelp.com for more information!

Thanks to everyone who participated this week, especially Mark, the Best Producer in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 
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#198 The Hanukkah, Pre-Christmas Show

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As you scramble to complete your holiday shopping, listen to the great questions that we field this week. We start with Karen from Iowa, who holds a large nest egg in illiquid investments. We then shift to Karen, who is getting into the holiday spirit by gifting to her children. (Anyone can give up to $14,000 to an individual without worrying about taxation.

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Steve is trying to decide how to manage his rental income and Dennis wanted to know about Required Minimum Distributions (RMDs).

With just days to go before 2015, check out these year-end money moves!

Our guest Gary Zimmerman of MaxMyInterest.com explains his cool new service is like “Uber for cash” and how it can help you boost your returns with NO RISK!

Thanks to everyone who participated and to Mark, the BEST producer in the world. Check out Mark's first-producing credit for this CBS Evening News segment that aired recently. If you have a financial question, there are lots of ways to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 
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#194 Year-End Retirement Planning with Ed Slott

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What a treat to have retirement plan expert Ed Slott CPA join the show to help make smart year-end financial decisions! Ed is a nationally recognized IRA expert, television personality and best-selling author who has dedicated his life to educating Americans on saving for retirement and the intricacies of IRAs.

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Among his many pearls of wisdom, delivered with his awesome Long island accent, Ed reminded us to do the following before the clock strikes midnight on December 31, 2014:

  • Make your 2014 Roth IRA conversion
  • Be aware of new IRA rollover rules
  • Max out your retirement accounts
  • Take Required Minimum Distributions
  • Check / Update Beneficiary Forms
  • Be aware of stealth taxes
  • Consider donating your IRA distributions to charity
  • Use Your Gifting Limits

In the first hour of the show, we had a terrific call from Mike in Texas, Sharon in CT and Mike in Maryland, all of whom needed guidance on financial advisors.

Thanks to everyone who participated and to Mark, the BEST producer in the world. Check out Mark's first-producing credit for this CBS Evening News segment that aired recently. If you have a financial question, there are lots of ways to contact us:
  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 
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Radio Show #150: Retirement Planning, Market Timing

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It is unbelievable that this is our 150th show. When we started this project three years ago, our goal was clear: to create a radio show for smart people, who need help with their financial lives. Mark and I are happy to report that our fan base has been better than we could have ever imagined--thank you all for listening!

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Throughout the program, we highlight the "14 Money Tips for 2014" and of course answer some great questions!

Linda is a retiree with ample income - does she really need a emergency reserve fund? Meanwhile, Jane and her husband wanted a reality check on whether they can afford early retirement, while Kim is wondering if its OK to buy her retirement dream condo a few years early.

Is it reasonable to dump a long-care policy when you are 77? Karen says that it's becoming increasingly difficult to pay the premiums on her fixed income.

Gary and Steven tell the flip sides of market timing: one waiting for stocks to correct last year, while the other was fortunate enough to invest in stocks last year, even through he probably should never have risked the money in the first place.

Thanks to everyone who participated and to Mark, the BEST producer in the world. Let me know if you think we should provide Mark with a little space to vent his various grievances with you...we're considering calling it "Mark's Musings". If you have a financial question, there are lots of ways to contact us:
  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 
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Radio Show #149: When Can I Retire?

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In the post-Polar Vortex show, many of you want to know the answer to a simple question: "When can I retire?" The answer is different for everyone, but the basics are the same: (1) you need to know what your required income will be in retirement, (2) you should tally up what you can expect from pension and Social Security and (3) assume 3 to 3.5 percent annually from your investment accounts.

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I followed those three steps to help listeners Wayne and John figure out whether or not they can retire. In both cases, there was very good news!

Lyle asked about the consolidation and allocation of his retirement accounts, while Gary is trying to start over with a savings plan and Ralph wanted to know about the safety of various mutual fund companies. Neal might take a cue from Roger about rebalancing his various accounts--there are a bunch of companies that can assist investors (MarketRiders, Betterment)  for a reasonable monthly fee. Both Brian and Tracy asked about various types of financial advice. To great resources to find an advisor are: the Financial Planning Association, which has an easy-to-use tool and the National Association of Personal Financial Advisors (NAPFA).

Bobby reminded us about the IRS' Saver's Credit and Richard likely needs to see an elder-care attorney to discuss options for his mother.

Dennis wrote to thank me for my two recent articles on estate planning: Estate Planning Basics and Estate Settlement Basics and Maria asked about Social Security Widow benefits.

Thanks to everyone who participated and to Mark, the BEST producer in the world. Let me know if you think we should provide Mark with a little space to vent his various grievances with you...we're considering calling it "Mark's Musings". If you have a financial question, there are lots of ways to contact us:
  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 
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Radio Show #148: Start 2014 on Sound Financial Footing

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No gloating about those massive stock market gains of 2013...it's time to look ahead and plan for 2014 and beyond!

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Yes, it was the best year for US stocks since the 1990's, but that's cold comfort for diversified investors, who no doubt are feeling a bit of “asset class envy” right about now. Sure, your brain is telling you that the point of being diversified is that you have a mix of different asset classes included in your portfolio, some of which zig when others zag.  But we know how your heart is just pining to own “the right” asset class every year. Sadly, it's just not possible, so why not concentrate on the basics and quit the second-guessing?

This week's show was a perfect example of how core financial issues can be just as important as investment performance. Daryl asked about maintaining an old whole life insurance policy, while Fred is interested in long-term care insurance.

On the investment front, Gary wondered about index vs. managed funds; Peter is concerned about his muni bond fund; Mike is trying to diversify his portfolio in advance of retirement and Roy is attempting to find a financial advisor.

Thanks to everyone who participated and to Mark, the BEST producer in the world. If you have a financial question, there are lots of ways to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE