The first thing to do on your year-end planning is talk to your tax person or investment advisor about 2015 taxes! Here's some year-end items to be thinking about:
1. Can you or your spouse add more to your 401k plan yet this year? Maximum for this year and next year is 18,000 if under age 50 and 24,000 if age 50 or over.
2. Can you or your spouse contribute to an IRA or Roth IRA? Maximum is 5500 under age 50 and 6500 if age 50 or over or 100% of employment compensation, whichever is less. Deadline is April 18th, 2016! A few more days than "usual".
3. What about Roth Conversions? Look to see if your income this year is expected to be lower than future years. You may want to pay the tax today and have those dollars growing for you TAX FREE.
4. If your income limits are too high for a Roth IRA, you can make a non-deductible contribution to an IRA and before it makes any earnings, convert it to a Roth IRA. (I think of this as a "backdoor" Roth IRA)
5. Gifting - Your Mother always said, it's better to give than to receive! You can give cash or appreciated securities to a qualified charity. By gifting appreciated securities/mutual funds, you can avoid any capital gains tax and the charity receives it tax free as well!
6. What if I don't know what charity to gift to? Set up a "Donor Advised Fund" which will allow you to receive the deduction this year and you can postpone the decision of what charity will receive the money until some future date.
7. Can I gift to my family? Yes, you can give $14,000 to any individual (related or unrelated) without having to file a gift tax return. This helps reduce your taxable estate, but it does not save you any income taxes since the money is not deductible!
8. Portfolio Review - Have there been changes in your life like retirement or needing an income from your assets that would necessitate a change in your mix of stocks and bonds? Check in with us to review your allocation....anytime!
9. Tax Loss Harvesting - This tax technique receives a lot of press time. The idea is to sell the investments which have a loss in non-retirement accounts to offset the capital gains. This strategy has a lot of merit depending on your portfolio, but it is secondary to the investment decisions. First and foremost you want to own stocks and bonds you believe will go up in value over time. Often we want to sell the "dog" in our portfolio, but those might be the ones that are likely to do well in the future since they are currently undervalued.
10. Have you met your Required Minimum Distribution? If you have turned 70 1/2 this year, you now must take out the required amount from your IRA/ 401k plan by April 1st of the year following you turn 70 1/2. However, we usually recommend taking the withdrawal in the year you turn 70 1/2 to avoid taking your RMD twice in one year which may increase your tax bracket and therefore tax bill. It can also increase the cost of Medicare Part B premiums which are based on Modified Adjusted Gross Income (MAGI) of your previous year's tax return.
We are a boutique investment management and financial planning company. Our goal is for you to understand your money, your portfolio and help you realize your dreams. We help take the angst out of managing investments, retirement, estate and tax planning. We create a roadmap to retirement that incorporates your timeline and your lifestyle.