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6 Financial Thoughts for Year-End

For some reason the end of a year makes us think about things we need to take care of and good habits we want to develop. In preparation for the end of 2015 here are 6 key financial considerations to think about…

Your investments. How much risk are you taking in your investments? Review your portfolio holdings and make sure your investments suit your objectives. Now would be a good time to revisit your asset allocation for all of your accounts, yes even the 401(k) at work.

Your retirement planning strategy. Does reaching retirement seem as practical as it did a few years ago? Are you able to max out contributions to IRAs and employer sponsored retirement plans like 401(k)’s? If you are over the age of 50 are you taking advantage of catch-up contributions? If you are over the age of 70 1/2 or have a Beneficiary IRA account be sure to take your Required Minimum Distribution by December 31. If you don’t, the IRS will slap you with a 50% penalty of the RMD amount in addition to the taxes you owe. Don’t do that!

Your tax situation. The recent increase in the top marginal tax bracket to 39.6% made less tax payers subject to the Alternative Minimum Tax or AMT. Whether or not you are a high earner you should take a closer look at certain types of tax-advantaged investments, accelerated depreciation, retirement account contributions, R&D credits, the Work Opportunity Tax Credit, incentive stock options and deferred income opportunities.

Know your realized and unrealized gains and losses and be sure to review the sale of any appreciated property. If you’ve sold securities, gather up cost-basis information and review last year’s loss carry-forwards so you don’t forget about them. Also identify any transactions that that could be deductible, such as advisory fees for managing investments if you work with a fee-only Registered Investment Adviser like us.

Your charitable gifting. Plan your contributions to education accounts or charities and make any gifts to friends and family members. For 2015 the annual federal gift tax exclusion is $14,000 per individual, which means you can gift up to $14,000 to as many people as you like without tax consequences. If married you can gift up to $28,000 tax-free ($14,000 from each spouse). Keep in mind these gifts count against your lifetime estate tax exemption which currently in 2015 is $5.43 million per individual ($10.86 million per married couple).

To really maximize your tax planning and charitable giving consider gifting appreciated securities to a charity. If you have owned them for more than one year you can deduct 100% of the fair market value and legally avoid capital gains tax.

Your beneficiary designations. When’s the last time you updated your beneficiary information. Check all of your investment accounts, retirement plans, insurance policies and bank accounts to ensure the beneficiary designations are current. All too often we hear stories from clients dealing with a parents estate and some of the accounts have no beneficiary or the name of a loved one that predeceased them.

Your major life events. Did you happen to get married or divorced in 2015? Did you move or change jobs? Buy a home or business? Did you lose a family member, or see a severe illness or ailment affect a loved one? Did you reach the point at which Mom or Dad needed assisted living? Was there a new addition to your family? Did you receive an inheritance or a gift?

All of these circumstances can impact on your life financially and even the way you invest and plan for retirement. They are worth discussing with a financial or tax professional you know and trust.

The end of the year is also the start of a new one. Now is a key time to review your financial health & well-being. If you have questions or need to address any of the items above, please feel free to send us a message or give us a call.

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About Stephen Rischall

Stephen is an award winning fiduciary financial advisor. He began learning to invest at the age of 13 and helped manage the University Corporation Student Investment Fund while studying finance in college. Stephen has been featured as the financial expert for millennials on live radio and in the news. He is an avid adventurer and is passionate about helping people make smarter financial decisions.
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