Year’s end always makes us think about last-minute things we must address and New Year’s resolutions. At Kendall Capital, we have developed seven areas of your financial life to think about as we head in to 2017.
Your investments. Review your approach to investing and make sure it suits your objectives. Look over your portfolio positions and revisit your asset allocation. Consider scheduling a comprehensive review meeting with us to review your investment strategies together.
Your retirement planning strategy. Does it seem as practical as it did a few years ago? Consider Roth IRA conversion scenarios, and whether the potential tax-free retirement distributions tomorrow seem worth the taxes you may incur today.
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. As a client of Kendall Capital, we make sure this is taken care of by mid-year, so RMDs are not a concern for you at years end.
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). Review any sales of appreciated property and both realized and unrealized losses and gains. Take a 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.
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 limit is $14,000 per individual and $28,000 for couples for 2016. The gifts do count against the lifetime estate tax exemption amount, which is $5.45 million per individual and $10.9 million per married couple for 2016. 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.
Besides outright gifts, you can plan other financial moves on behalf of your family – you can create and fund trusts, for example. The end of the year is a good time to review any trusts you have in place.
Your life insurance coverage and retirement plans. Are your policies and beneficiaries up-to-date? Review premium costs, beneficiaries, and any and all life events that may have altered your coverage needs. We also encourage you to review the beneficiaries on your retirement accounts.
Speaking of life events…did you happen to get married or divorced in 2016? Did you move or change jobs? Buy a home or business? Did you reach the point at which Mom or Dad needed assisted living? Did you receive an inheritance or a gift? All of these circumstances can have a financial impact on your life, the way you invest and plan for retirement, and how you wind down your career or business. They are worth discussing with the financial or tax professional you know and trust.
Lastly, did you reach any of these financially important ages in 2016? If so, act accordingly.
- If you turned 70 ½ this year, you must start taking RMDs from your IRA(s).
- If you turned 65 this year, you are now likely eligible to apply for Medicare.
- If you turned 62 this year, you can choose to apply for Social Security benefits.
- If you turned 59 ½, you may take IRA distributions without a 10% penalty.
- If you turned 55 this year, you may be allowed to take distributions from your 401(k) account without penalty, provided you no longer work for that employer.
- If you turned 50 this year, you can make “catch-up” contributions to IRAs (and certain qualified retirement plans).
The end of the year is a key time to review your financial “health” & well-being. If you feel you need to address any of the items above, please feel free to give me a call.