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Published on: 11/15/2018 • 7 min read

Year-end Tax and Financial Planning Ideas

The end of the year presents a unique opportunity to look at your overall personal financial planning situation.   With factors like the 2018 tax law changes, life changes or just working towards your goals, now is an especially important time to review things.  It is always a good time to see if you are  on-track at your stage in life. Taking what we now know about the new tax law and weaving together all of the other areas of your personal finances is one of the key ways we provide value to you as your trusted adviser. Below are some things we’d like to help you think through before the year ends.

Income Tax Planning –Ensure you are implementing tax reduction strategies like maximizing your retirement plan contributions, tax loss harvesting in portfolios and making charitable contributions can all help reduce current and future tax bills.   It is also good to review your current year tax projection based on your income and deductions year to date and how that may be different from before. We talk about many of these in our  year-end tax planning checklist.

Estate Planning – Examine a flowchart of your current estate plan to visualize what would happen to each of your assets and how the current estate tax law will impact you.  Be sure that your estate planning documents are up to date – not just your will, but also your power of attorney, health care documents, and any trust agreements – and that the beneficiary designations are in line with your desires. If you have recently been through a significant life event such as marriage, divorce or the death of a spouse, this is especially important right now.

Investment Strategy– Recently, we’ve seen increased market volatility and it may feel uncomfortable. Market declines are a natural part of investing, and understanding the importance of maintaining discipline during these times is imperative. Since last year, we have suggested that it is a great time to “Stress Test” your portfolio and review your overall  Portfolio Allocation and assure that the investment allocation and discipline is aligned with your financial plan. Regular portfolio rebalancing and reviews will allow you to maintain the appropriate amount of risk in your portfolio.  And, if you are retired and living off your portfolio, you also want to maintain an appropriate cash reserve to cover living expenses for a certain period of time so that you do not have to sell equities in a down market.  We talk about that quite a bit in our Retirement Survival Guide. It is also a good idea to look at expected distributions from mutual funds.  If you recently purchased a mutual fund (or have a fund with a holding-period loss or small gain), you can check with the fund company to see if there will be a large capital gain distribution that will be taxable. If you sell the fund before the distribution, you can avoid the tax hit (these occur annually – typically in December).

Charitable Giving – There are many ways to be tax efficient when making  charitable gifts. For example, donating  appreciated stock could make sense in order to avoid paying capital gains taxes. Further, you may want to consider bunching charitable deductions by deferring donations to next year or making your planned 2019 donations ahead of time. If the numbers are large enough, you might even consider a private foundation or donor advised fund for your charitable giving.  These deductions and contributions need to be  locked-in by year end, so now is a great time to start considering your plan.

Retirement Planning –Think about your future when working becomes optional. Whether you expect a typical full retirement or a career change to something different, determining an appropriate balance between spending and saving, both now and in the future is important. There are many options available for saving for retirement, and we can help you understand which option is best for you. We have a great  Retirement Planning Checklist for you to see if you are on track!

Cash Flow Planning  – Review your 2018 spending and plan ahead for next year. Understanding your cash flow needs is an important aspect of determining if you have sufficient assets to meet your goals.  If you are retired, it is particularly important to maintain a tax efficient safe and sustainable withdrawal strategy to cover your spending needs. At Avidian Wealth we talk about it in our  Retirement Survival Guide and when we help you in Planning for Retirement the R.I.T.E. Way® (R.I.T.E. stands for “retirement income taxed efficiently” – see image in the link from the guide).  If you have not yet reached age 70.5, it is prudent to ensure you are making tax-efficient withdrawal decisions. If you are over age 70.5 make sure you are taking your required minimum distributions because the penalties are significant if you don’t.   This also may include reviewing your strategies to maximize income from either/or  Social Security or your Pensions.

Risk Management – It is always a good idea to periodically review your insurance coverages in various areas. Recent catastrophic events like hurricanes serve as a powerful reminder to make sure your property insurance coverage is right for your needs. If you are in a Federal disaster area, there are additional steps necessary to recover what you can and explore the tax treatment of casualty losses. Other areas of risk management that may need to be revisited include  life, long-term care and/or disability insurance.

Education Funding – Funding education costs for children or grandchildren is important to many people. While the increase in college costs have slowed some lately, this is still a major expense for most families. It is important to know the many different ways you can save for education to determine the optimal strategy. Often, funding a 529 plan comes with tax benefits, so making contributions before the end of the year is key. With the added flexibility of funding k-12 years (set at a $10,000 limit), 529 accounts become even more advantageous.  For those with kids in college, it is also important to understand the rules when it comes to taking  529 Plan withdrawals tax-free.

Elder Planning  – There are many financial planning elements to consider as you age, and it is important to consider these things before it’s too late. We have talked about  planning for incapacity several times on the STA Money Hour. There are many  issues to consider when caring for your aging parents or other loved ones. are Having a plan in place for who will handle your financial affairs should you suffer cognitive decline is critical. Making sure your spouse and/or family understands your plans will help reduce future family conflicts and ensure your wishes are considered. The decisions you make each year with your personal finances will have a lasting impact on your long-term financial plan.  If you don’t have a financial plan, here is a short video that share’s Avidian Wealth’s Financial Planning Process. We hope this letter has begun to generate some insight to areas of your personal finance that need attention. Please contact us when you are ready to talk through year-end planning.





Financial Planning and Investment Advice offered through Avidian Wealth Management (STA), a registered investment advisor. STA does not provide tax or legal advice and the information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters or legal issues, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Use only at your own peril. As always, a copy of our current written disclosure statement discussing our services and fees continues to be available for your review upon request.

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