2019 Year End Financial Planning Checklist

December 6, 2019

The following list is meant to help organize your year-end personal finances. Consider what items are important to you along with other goals to help communicate questions and concerns to your financial planning team.

Provide Tax Returns: Heritage uses your tax return to update your financial plan and to analyze a variety of potential strategies. Your return can provide valuable information to your wealth management team. Please provide us with a full copy of your 2018 tax return if you have not done so already.
Optimize a Lower-Income Year: If 2019 will be a lower income year and you find yourself in a lower tax bracket, consider taking advantage of strategies to benefit from your circumstances. There may be an opportunity to realize some long-term capital gains with zero tax liability. Converting an IRA to a Roth IRA or withdrawing earnings from a tax-deferred account may also be effective ways to manage income taxes if you expect to be in a higher bracket in the future. If 2020 is likely to be a lower income year, you may want to defer withdrawals or portfolio turnover until next year.

Maximize Retirement Contributions: There are still several weeks left in the year to adjust payroll deductions (or year-end bonuses) to contribute more to a 401(k), 403(b) or other tax-deferred savings plan. The 2019 limit on employee elective contributions to 401(k), 403(b) and 457 plans is $19,000. If you are age 50 or older this year, you are able to make an additional catch-up contribution to most plans of $6,000 to reach $25,000 total. If you changed jobs during the year, make sure you coordinate the total contributions to not over or under contribute.

Assess Employer Benefits: Many employees have an open-enrollment period for 2020 group benefits at year-end. While the focus tends to be on health insurance options, other benefits such as disability insurance, life insurance, and discount or wellness programs also merit review. Higher-earners should pay particular attention to available pre-tax benefit plans such as Flexible Spending Accounts for healthcare/dependent care or Health Savings Accounts.

Review Existing FSAs (Flexible Spending Accounts): If you use your employer’s Flexible Spending Account, you may need to use up any remaining balance by year-end to avoid forfeiture. Your employer may let participants have a grace period until March 15th of the following year to submit expenses for reimbursement. Alternatively, you may be able to roll up to $500 of the account balance into the next calendar year.

Consider Gifts to Individuals: You may gift up to $15,000 a year to as many people as you choose ($30,000 if you and your spouse both make the gift) without any gift tax consequences. You can also make payments of tuition or medical costs on behalf of another person as long as the payment is made directly to the billing institution. Larger gifts to a person may require you to file a gift tax return, although no tax will be due if the cumulative gifts don’t exceed the lifetime exemption ($11,400,000 per person for 2019).
Help Fund an Education: 529 College Savings Plans offer a tax-favored way to invest for qualified educational expenses. If you are funding 529 college savings plans for children, grandchildren or others, those contributions count as gifts toward your $15,000 or joint $30,000 annual exclusion per recipient. If you would like to make larger gifts on the front-end, a special rule called “superfunding” allows up to 5 times the annual gift exclusion into 529 plans without using any of your lifetime gift or estate tax exclusion. Please speak with your advisor about this strategy in more detail or if you are interested in establishing a 529 plan.

Evaluate Charitable Giving: Recent tax reform limiting itemized deductions and increasing the standard deduction may alter your ability to deduct charitable gifts. Some taxpayers may find it beneficial to bunch charitable deductions together into a single year while claiming the standard deduction the following year. Before you send cash, ask your advisor if there is a more tax-efficient way to give. In many cases, donating appreciated investments may provide greater overall benefits. If you give frequently or want to better manage your record-keeping, a Donor Advised Fund may be a good option to consider. For those over age 70 ½, Qualified Charitable Distributions (QCD) from an IRA may also be an effective form of giving. It is important to discuss any giving plans with your advisor and tax professional.
Prepare for Holiday Expenses: If you travel around the holidays, have a gift wish-list to fulfill, or have large year-end bills to pay, review your budget needs and cash balances well before the shopping season begins. Planning ahead can avoid extra costs, taxes, or stress in your overall financial plan and well-being.

Kristin Castner, CFA

Kristin Castner, CFA

At Heritage Kristin is responsible for overall marketing strategy, with a focus on communicating the firm's message to clients and prospects and creating outreach programs to engage clients, partners and prospective clients.

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