Raleigh NC Financial Advisor: End of Year Financial Planning
The end of the year is quickly closing in, and there is no better time than now to take inventory of your financial situation. Evaluating, budgeting, and planning your finances is not a static activity, but rather endeavors that need attention on a regular basis in order to be successful. As financial advisors, we understand the importance of financial planning, especially when we are nearing the end of the year.
With a new year about to begin, consider the following year-end financial planning techniques in order to end strong and start your new year with your best foot forward:
1. Evaluate Financial Plan
If you created a financial plan for this year, now is a great time to assess the goals you set to achieve. What did you accomplish for the year so far, and what goals can you complete in the time remaining? If there are long-term financial goals that you didn’t meet, if they are still relevant, consider moving them to next year’s financial plan. A financial advisor or financial planner can help with your financial plan.
2. 401(k)
Does your employer match your 401(k) plan contributions? If so, you don’t won’t want to miss out on those helpful tax deductions. Also, you don’t want to miss contributing the maximum amount to your 401(k) and taking advantage of the ‘free money’ match from your employer. Because each company has different matching limits, be sure to check with HR as soon as possible.
3. Flexible Savings Account (FSA)
If you have an FSA, now is the time to check your unspent balance, as some plans have a policy that will cause you to lose your money at the end of the year if it isn’t spent. If you have a balance, consider getting that checkup you have been putting off, treat yourself to a new pair of eyeglasses, visit a chiropractor or acupuncturist, or stock up on meds and travel/health items for an upcoming holiday vacation.
4. Year End Gifting
Gifting allows you to give up to $15,000 per person, per year to an individual (usually a child or grandchild) without any tax consequences. For larger estates, gifting can minimize the amount of the estate subject to estate taxes. Though the estate tax now applies only to assets above $11.4 million, the limit is set to revert to $5 million in 2026 unless Congress extends it. The gifting limit also applies to contributions made to 529 plans.
5. Charitable Contributions
The 2017 Tax Cuts and Jobs Act has changed how many people approach their charitable gifting. The increased standard deduction means fewer people benefit from itemizing deductions. With these changes have come new strategies for handling charitable gifting.
According to a recent study by Psychological Science, the happiness of giving a gift actually outlasts the happiness of receiving gifts. If you’re looking to donate to charity this year, you’ll need to make it by December 31st in order to receive a donation receipt for this year.
6. Estate Planning Documents
Your wishes can change over time, and your will or other estate planning documents should reflect your current desires. Take time at the end of each year to review your trusts and wills; if you don’t have them yet, don’t delay. Unexpected deaths can put a family’s finances in jeopardy if a will wasn’t left behind.
7. Required Minimum Distribution
If you’re over 70 ½ and have a traditional IRA, the IRS requires that you take a distribution of a certain amount each year, also known as the Required Minimum Distribution (RMD). The amount of the RMD will vary and is based on multiple factors, including your age and the value of your IRA at the end of the previous year.
If you don’t take your RMD by year end, it can result in a penalty. If you don’t need the funds, consider making a Qualified Charitable Distribution (QCD). A QCD, also known as a charitable IRA rollover, turns your RMD into a charitable gift. You won’t pay taxes on a QCD, but you also can’t get a tax deduction.
8. Tax Withholding
In order to avoid a large tax bill or a potential penalty for underpaying, you may need to review your tax withholding for the year. Though withholding issues can affect anyone, they are most likely to affect those with less predictable incomes, such as business owners or salespeople who work on commission.
If this applies to you, the income estimates you made earlier in the year may not be accurate. In the last months of the year, you can use the IRS’s withholding estimator to help avoid major tax issues in April.
Bottom Line
To achieve your financial goals, staying on top of financial planning is necessary and never-ending. The end of year is an ideal time to assess your current situation and determine what changes can help you better reach your goals next year.
Want to find other ways to fine-tune your financial plan? Contact us to see how we can help create a financial plan that will help to provide financial stability and security you desire for your family.
Sources:
1. End of Year Planning
https://www.moneytips.com/end-of-year-financial-planning
2. 10 Quick Year-end Financial Planning Tips
Mark Avallone – https://www.forbes.com/sites/markavallone/2017/10/01/10-quick-year-end-financial-planning-tips/#3cf4a2203a59
https://www.georgewealthgroup.com/article/2471-year-end-financial-planning-checklist
https://www.psychologicalscience.org/news/releases/the-joy-of-giving.html
Disclosures:
This site may contain links to articles or other information that may be on a third-party website. Advisory Services Network, LLC is not responsible for and does not control, adopt, or endorse any content contained on any third-party website.
This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
