End of Year Actions – May Take Time – Act Now!

The only reason to feel pressured or rushed is because some actions take some time to determine and then to get them done. CPA’s, custodians and brokerages get overwhelmed this time of year. A favorite saying of mine is that “financial planning is not an emergency” – but if you have not budgeted your planning and time appropriately and you’re running into a deadline like 12/31/2016 – then it can become problematic. So here are some thoughts on the most common activities. Important: Everyone’s situation is different. Work with experts and then do what they tell you. Best if the advice is collaborative from a 2-3 person team that has reviewed your circumstances and goals. Most of you reading this are not experts. Don’t get fooled into making yourself an expert. You are the ultimate decision-maker. You hire the experts.

Clients: Contact us if any questions!

Here is a list of things to consider:

  • High wage earners should meet (ASAP) with their CPA to determine if there are any actions that need to be taken by 12/31/2016 to mitigate taxes due April 2017. If those activities include actions by a custodian (TD Ameritrade Inst.) or a brokerage, then the real deadline may be 12/15/16 or sooner.
  • Business owners have the most tools at your disposal – and it is complex. If you’ve recently greatly accelerated profits – contact us. We’ll bring a team to help you implement the best possible strategy. We can help you protect your success from predators.
  • Please don’t allow a strong aversion to pay taxes cause you to make less than optimal decisions. You want the best “after tax result” – sometimes that is not the “least taxes paid” result. Don’t let the “tax tail wag the dog”!
  • If you want to gift shares of a security to a charity – start early; that process takes time!
  • Those with high capital gains may be advised by their CPA’s to see if they need some purposeful capital losses to offset the gains already incurred. We call that process tax-loss harvesting. There are rules on how to do this properly.
  • Some may wish to establish a new “qualified account” like an IRA or other retirement plan vehicle. You can make contributions as late as 4/15/17 for tax year 2016.
  • “RMD” – required minimum distribution. If you are 70 1/2 or older and have an IRA (Not Roth IRA), then you must take a minimum distribution each year. (Uncle Sam wants his tax money that you avoided when you contributed pre-tax to the account years before.) There’s a formula and usually your custodian or brokerage will tell you the amount early in the current year. The balance as of 12/31 the year just ended and your age determines the amount. For clients: contact us if you have questions.
  • Beware inherited IRA’s of loved ones that passed. There are rules you must follow. (Not for Roth IRA.)
  • Those with 401(k) accounts may want to make some last minutes adjustments – unlike IRA’s you cannot continue making 2016 contributions to 401(k) in early 2017. There’s not much you can do now, but you can adjust slightly. Talk to your HR person at your employer.
  • This is a good time to look at how your money is invested in your 401(k). There are two steps – get expet help to decide which fund(s) to buy in your account – then re-balance every 6-12 months. The person that sold the 401k plan to your employer is likely to not be competent in investing or willing to offer investment advice. Very few people allocate their 401(k) assets correctly and as a result end up with less money in retirement.  We are willing to help even if you are not a client. Contact us.


If you have any questions

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Or would like to talk further

(760) 804-0910