We want to share an article we’ve adapted from, “A Baker’s Dozen: 13 Smart Planning Moves” written by Charles Sherry, M.Sc. for Horsesmouth ®. Enjoy!
Rebalance your portfolio.
Fluctuations in the market can alter your target asset allocation. Determine if adjustments are needed at least annually. At CCMI, we constantly monitor and rebalance our clients’ portfolios as needed during the year.
Review your portfolio strategy.
Schedule a meeting with a CERTIFIED FINANCIAL PLANNERTM to evaluate your portfolio approach, if you’ve had a major life change such as retirement.
Know the tax loss deadline.
The deadline to harvest any tax losses in a taxable portfolio and/or offset capital gains is December 31, 2015. You cannot deduct sales or trades of stock or securities in a wash sale. This means within 30 days before or after the sale you cannot buy, acquire a fully taxable trade, or acquire a contract or option to buy the identical stock or securities.
Avoid taxable distributions in mutual funds, if possible.
If a mutual fund is purchased on December 12 and it pays a dividend and capital gain on December 19, this will be included in your 1099 for 2015. Following that distribution the net asset value of the fund declines by the amount of the distribution, but your investment in the fund remains the same.
Review your insurance and beneficiaries.
Have you experienced any major life change this year (e.g. marriage, a new baby, the loss of a loved one)? Make sure the life insurance coverage you have is still appropriate for your current situation and the update your beneficiaries as needed.
(Please note: CCMI takes care of the above five planning areas for our investment management and financial planning clients.)
Spend FSA funds.
Funds set aside in a flexible spending account (FSA) for medical expenses must be spent or they are typically forfeited and become taxable to you. Few FSAs offer a grace period or allow up to $500 of unused money to be carried over to the next year; any used amount in excess of the carryover is lost.
Note increase in tax benefits due to inflation adjustment.
Estate of decedents who passed away have a basic estate tax exclusion of $5,430,000 for 2015.
Contribute to a Roth IRA.
Depending on your Adjusted Gross Income (AGI) you may be able to contribute $5,500 (or $6,500 if you are 50 or older) to a Roth IRA for 2015. If your 2015 AGI is between $116,000 and $131,000 for a single taxpayer or $183,000 to $193,000 for married couples filing jointly, then the amount on contribution will be reduced. You can continue to contribute to your Roth IRA after age 70 ½. The deadline for funding your account for 2015 is April 18, 2016.
Take required minimum distributions.
A required minimum distribution (RMD) must be taken beginning at age 70 ½ or the year a person retires, whichever occurs later. Your first payment can be postponed until April 1 of the year following the year in which your turn 70 ½. Each year, including the year you paid your first RMD by April 1, you must take an RMD by December 31. Profit-sharing, 401(k), 403(b), 457(b) or other defined contributions plans (SEP IRAs and Simple IRAs) are also subject to RMD rules, but dependent upon the plan documents.
Should you consider converting a traditional IRA to a Roth IRA?
Find out if converting to a Roth IRA would be tax- advantageous for you. CCMI discusses this with our clients who may be eligible based on their income for the year.
Start a college saving plan.
Consider opening a 529 plan for your child, grandchild or other special young person in your life. For California residents, this does not provide tax savings but does remove the money you transfer to the 529 from your estate and also allows those funds to grow tax-free.
Make charitable gifts.
A qualified charitable distribution (QCD) is a taxable distribution from an IRA (excluding an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70 ½ or older that is paid directly from the IRA to a qualified charity. It’s important to note that QCDs technically expired on December 31, 2014, but they are expected to be renewed by Congress for 2015. An IRA owner can exclude up to $100,000 of a QCD made for one year, and a QCD can be used to meet any IRA required minimum distribution for one year, assuming QCDs are renewed without changes.
Donations from a Roth IRA are eligible, as well as donations from an inherited IRA if the beneficiary is at least 70 ½.
You may also explore the option of a donor-advised fund. This allows the donor to take the tax benefit immediately, while giving the donor time to decide when and to which qualified charity the distribution will be made.
If you need help vetting a charity, visit our recent post, This is a Time of Sharing – Research before Donating.
CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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