Year-End Investment Checklist

With the end of the year in sight, lots of plans are being made—what gifts to buy, what the menu will be, and how to shed the extra weight that will inevitably be acquired. But part of your holiday planning needs to include a year-end investment checkup so you don’t pay more taxes than you should and set you up for next year. Here are things to consider.

Tax Loss Harvesting

With the extremes in the market this year you may be concerned about what will happen in 2019. You may have stocks that did extremely well and you want to take profits, just in case. But that means paying Uncle Sam for the gains. Don’t forget to check for losses in your portfolio.

Tax loss harvesting is selling stocks, mutual funds, or exchange-traded funds that have gone down in value thus creating a capital loss. That loss can then be used to offset capital gains from other investments you sold at a profit.

If you really like stocks that have a loss, keep in mind the Wash Sale Rule from IRS Code section 1092. It allows you to sell at a loss, deduct the loss, and buy back the same investment or one similar in 31 days or more. Buy it back in LESS than 31 days and the deduction is not allowed.

Reallocate and Rebalance

Since coming out of the Great Recession stocks have been on a tear and your portfolio may be out of balance because of the growth. If that’s the case you may be exposed to more risk than you want. And if you’re within sight of retirement, it can be risk that jeopardizes when you retire and what kind of retirement you’ll have.

Review your investment strategy. See what your allocation to stocks, bonds, commodities, and real estate should be and then rebalance. And make sure to include all your accounts—Investment, IRA, Roth, 401(k), 403(b), and 457 accounts.

Roth Conversions

Consider whether this is the time to convert some of your pretax investments into a Roth IRA. The Roth allows you to take money out with taxes or penalties once you pass 59 ½, but for that benefit later you have to pay taxes on it now. The tax reforms have temporarily reduce tax brackets making now a more favorable time for converting 401(k) or IRA funds into their Roth cousins. Tax brackets revert to the old, higher schedule after 2025.

Manage Your Tax Bill

If you haven’t maxed out your retirement accounts you still have time. You can contribute $18,500 to your 401(k) plus an additional $6000 if you’re 50 or older. You can make a one-time contribution before December 31. The limit on IRAs is $5500 with a $1000 catch-up contribution for those over 50.

Retirement contributions can lower your tax bill now and boost your retirement income later.

Required Minimum Distributions

Don’t forget to take your RMD. You want to stay in the good graces of the IRS. If you don’t take the RMD you’ll have to pay a 50% penalty on what you should have withdrawn, still take the RMD amount, and pay income taxes on the withdrawal. Avoid the headache.

If you have an inherited IRA the same thing applies. Remember, the inherited RMD must be withdrawn no matter what the account holder’s age.

All RMDs have to be taken within the calendar year. Don’t miss your December 31 deadline.

Charitable Contributions

It’s not too late to make charitable contributions. And you can front-load your giving. For example, you may want to contribute the amount you plan to give over the next 5 years or 10 years.

If you take advantage of such a donation, you can make the donation to a Donor Advised Fund which gives you the flexibility of deciding later what charity(s) you want the money to go to.

Instead of gifting directly to charities, you establish an account at a sponsor organization. You make an irrevocable contribution to that account and receive a tax deduction that year. Then when you’re ready to grant money to a charity you tell the sponsor who to give it to and how much. The sponsor organization does all the due diligence and all the record keeping.


And, while you’re reviewing everything, check your beneficiaries. Maybe you’ve had a life change, or there’s someone you just don’t like anymore. Whatever the case, review who you’ve listed as beneficiaries on your IRA, Roth IRA, 401(k), 403(b) or 457 plan at your current and former employers, healthcare savings accounts, 529 education savings plans, pensions, life insurance policies, annuities, Transfer on Death (TOD) accounts, beneficiaries in your will and/or trust.

Relationships can change and it’s not unusual to find that beneficiary designations are out of date because of marriage, death, divorce, or the birth of a child or grandchild. Doing a beneficiary audit can save taxes, avoid legal difficulties, and make sure your money goes exactly where you want it to.

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