It’s that time of year again for our annual article on end of year financial tasks to complete. It’s hard to believe that 2018 is already drawing to a close as it just seems like yesterday we were celebrating New Years! In between festivities, take a few minutes to knock off a couple financial “to-do’s.”
• Portfolio Review — As we wrote our end of year checklist article last year, the stock market was firing on all cylinders and was experiencing very little volatility. It was easy to get complacent about your overall allocation. However, 2018 has been a different story. Instead of the stock market acting like a rocket ship like it did in 2017, this year it’s been more of a roller coaster. If you haven’t reviewed your overall allocation in a while, now would be good time. Reassess your tolerance for risk. How did you feel in the month of October? Were you nervous about the volatility? Does your current portfolio holdings align with time horizon, tolerance for risk, and overall goals? Also, consider working with a tax advisor or qualified financial professional to see if tax loss harvesting (taking a tax loss to offset gains) might be a strategy you could benefit from this year, especially given the recent volatility in the markets.
• Review Contributions — Make sure you are maximizing contributions to your employer sponsored retirement accounts. “Maximizing contributions” may mean different things to different people. For some it may mean putting the annual maximum contribution allowed under current IRS guidelines. For others, it may mean contributing enough to take full advantage of an employer match. Everyone’s situation is different, and you should target saving what your budget will allow for.
• Take Your Required Minimum Distributions — We cannot stress this enough! If you are 70 1/2 or older, be sure you are taking out your Required Minimum Distributions from various retirement accounts as needed. The potential tax penalty is steep for forgetting to do this. Keep in mind too, waiting until the last minute can put you at risk of the custodian that holds your account not processing your distribution request by the required deadline. Also, consider a Qualified Charitable Distribution (QCD) if you don’t need the money from your Required Minimum Distributions for living expenses and you’re charitably inclined. A financial professional can explain how a QCD works and how to qualify.
• Review Debt Repayment Goals — Utilize December to review your annual budget and actual spending. Was your actual spending more or less than what you were budgeting for? Are there areas you could cut back or cut out completely? Also, do you have a payoff plan in place for consumer debts like credit cards? After reviewing your budget, decide if there is room to potentially start paying down consumer debt more aggressively.
• Use Up FSA Money — Do you need a new pair of glasses or box of contacts? If you have money that you’ve been putting into an FSA (Flexible Spending Account), consider using up the account before year end with qualifying expenses. Be sure to check with your benefits department first, however, FSA dollars typically don’t carry forward into the New Year (some companies have an exception and allow up to $500 to be carried forward). It’s important to pay attention to deadlines with FSA accounts because they are typically “use it or lose it” accounts.
• Check Estate Planning Documents — Double check beneficiary designations on accounts to make sure they are up to date. Also, if it has been a while since you’ve had your estate planning documents reviewed or you haven’t gotten around to creating an estate plan, consider setting up an appointment with a qualified attorney. Given the tax law changes that occurred at the beginning of the year, it could be that your estate plan may be due for some fine tuning.
We wish everyone a happy holiday season and a prosperous new year.
Gary E. Croxall, CFP®
Registered Principal of LPL
Soren E. Croxall, CFP®
Registered Representative of LPL
Securities and Advisory Services offered through LPL Financial, member FINRA/SIPC, a Registered Investment Advisor. LPL Financial and Croxall Capital Planning do not provide tax or legal advice. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
