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Dispatches

10 Year-End Financial Actions

Fidelity lists 10 tasks investors should complete before the end of the calendar year to reduce taxes, protect their portfolios and ensure their financial goals are met.

Fidelity lists 10 tasks investors should complete before the end of the calendar year to reduce taxes, protect their portfolios and ensure their financial goals are met.

The steps are:

  1. Check your withholding: If you received a large refund or had a big tax bill for last year and your withholdings aren’t significantly different this year, consider revising the amounts listed on your W-4.
  2. Make a charitable donation: If you itemize, donating to charity can reduce your tax bill. Receipts are required for cash donations and donations worth $250 or more.
  3. Tax harvest losses: Selling investments for a loss can offset gains realized on other investments. Wait at least 30 days before repurchasing those investments to avoid triggering the wash-sale rule.
  4. Bunch tax deductions: Accelerate planned tax-deductible expenses to this year. Doing so will increase the total amount of itemized deductions you can claim.
  5. Make an extra 401(k) contribution: If you have not maxed out your contributions, consider adding more to your retirement savings. Doing so reduces this year’s tax bill and increases your nest egg.
  6. Spend your flexible savings account balance: Any balances above the amount your employer allows you to carryover to next year (the legal maximum is $500) should be spent before the end of this year.
  7. Review your portfolio allocations: If your allocations have strayed off target, rebalance your portfolio to bring it back in line with your targeted allocation.
  8. Check the beneficiary information on your accounts: Ensure your beneficiaries are correctly listed on all accounts, and update any information as necessary.
  9. Compare your retirement savings against your goal: Look at your account balances to see if you’re still on track to reach your retirement goals. If not, consider boosting your savings rates.
  10. Over 70½? Take your required minimum distribution: If you are age 70½ or older, you are required to take distributions from your retirement savings annually. Failure to do so can result in a steep penalty.

Source: “Ten Things to Do Before Year-End,” Fidelity Viewpoints, November 12, 2014.

Discussion

Charles Enz from CT posted over 11 years ago:

Regarding item 10. I understand that if you continue working past age 70 1/2 that you do not need to take a Required Minimum Distribution (RMD). I worked full time until I was 74 and did not take one until I retired. Have the rules recently changed on this?


Charles Rotblut from IL posted over 11 years ago:

Charles, It depends on the account and the ownership stake in a business. You must take your first RMD by April 1 of the year following the year in which you turn 70½, regardless of whether you are still employed from IRAs including SEP, SIMPLE and SARSEP IRAs. You can delay RMDs from a defined contribution plan if you are still work, you own less than 5% of the business and the plan allows you to. This table from the IRS explains the rules.


Dan from Arizona posted over 11 years ago:

Item 2 may reduce your taxes, but does it really make sense to spend $100 for a $28 tax deduction? Make a charitable deduction because you feel it will do some good in the world, not because it will improve your bottom line.


Rick Hartwell from KS posted over 11 years ago:

Dan from Arizona is spot on, both financially and philosophically. Just an affirmation. Give from the heart, in regards to affordable amount and specifics (to an efficient 501(c)(3) in which one has a particular interest or compassion. Never give over the phone! (time to disconnect it...?) Another simple strategy is to ask the organization to only have one (or chosen number) mailing/email per year, saving paper and time. Thanks, Dan!


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