8 planning steps to take before the year ends


Another year is coming to a close. So much has happened of late — England voted to “Brexit” the European Union, the Chicago Cubs ended their 108-year World Series draught and Donald Trump was elected President of the United States.

8 year-end planning steps for 2016

With all that’s going on it might be easy to forget about your year-end financial and tax planning.* Here are some reminders.

Plan as soon as possible

1. Meet with a qualified advisor. Take time to visit with a wealth manager to review your financial goals and discuss any life changes that may have occurred this calendar year.

2. Give to your family and friends. You can gift up to $14,000 a year tax-free to as many individuals as you wish.

3. Review your beneficiary designations. This is important if you had any significant life events this year, such as a marriage, divorce, new grandchildren or the death an immediate family member. It’s crucial to review the beneficiary designations on your retirement plans.

4. Check with Social Security. If you’re turning 66 or plan to retire in 2017, consult the Social Security Administration’s website, ssa.gov, to determine your Social Security benefits and how to apply. If you’re approaching 65, consult ssa.gov/medicare to determine how and when to apply for Medicare.

5. Harvest capital losses. Sell stocks or listed options to realize any gains or losses. To help offset gains, you’ll want to try to prune your portfolio of underperforming securities. This is called tax-loss harvesting. The opportunities here will depend on your portfolio’s performance. A conversation with a qualified investment advisor, your tax preparer or both can help you make smart decisions to offset capital gains.

Actions to take before the year ends

6. Fund your retirement accounts. Contribute to your retirement plans. Fully fund your 401(k) and 403(b) retirement savings plans. You have more time to contribute to an IRA, but you’ll want to complete any Roth IRA conversions by December 30. For most people, retirement plan contributions help lower income taxes. For some, such contributions may be matched by employers. This can be a big deal. Contributing to retirement plans has historically been one of the best wealth-building things you can do.

7. Make charitable gifts. You’ll want to follow through with your charitable plans before the year ends. Please read my article if you need some charitable giving ideas.

8. Take your required minimum distributions (RMDs). This applies if you reached age 70½ before 2016. RMDs from your IRA cannot be combined with RMDs from your employer plan. Each must be calculated and distributed separately. Contact a qualified advisor for help.

Key date: December 30

Here are a few more year-end issues to note:

  • Year-end planning related to owning a business or businesses.
  • The alternative minimum tax (AMT).
  • Taking all income this year or postponing some until next year.

In all cases, review your financial and tax situation in light of your goals, the current tax environment and the economic landscape. Your advisor can help you make adjustments so as to best position yourself going forward.

December 31 falls on a Saturday this year. That bumps up the deadline for implementing many of these financial action-steps to December 30.

We’re here to help. Please call or stop by the office.

* Securities America and its representatives do not provide tax or legal advice. Readers should consult their tax advisor, or legal counsel, for advice concerning their particular situation.