Tips for Year-End Planning

Tips for Year-End Planning

The end of 2017 is in sight. But there still is time to make some adjustments to your finances and get ready to start 2018 strong. Here are a few tips to consider:

Retirement saving: If you are enrolled in a 401(k) or other retirement plan at work, check how much you have contributed year to date. We recommend maximizing your annual contribution, cash-flow permitting, of course.  For 401(k), 403(b) and 457 plans, this is $18,000 with a $6,000 catch-up for employees age 50 and over.  You have until April 15th to contribute to an Individual Retirement Account (IRA). The 2017 contribution limit is $5,500 with a $1,000 catch-up.

Prepare for tax changes: it is likely that a tax bill will be approved that will take effect in 2018. While none of the proposed changes are final yet, it is safe to assume that brackets will change. For most people it will be a beneficial strategy to defer income and accelerate deductions. For example, if you turned 70.5 in 2017, you can wait to take your first Required Minimum Distribution (RMD) from your IRA until April 2018. If you can delay a year-end bonus into 2018, it might be worthwhile. To accelerate your deductions you could prepay the taxes on your home this year.

Tax changes are likely in 2018

Charitable giving: There are three points to keep in mind for your charitable donations for 2017:

  1. If you are still pondering your 2017 charitable giving and are debating transferring (part of) your RMD to a 501(c)(3) organization, we recommend reaching out to your advisor who can help you figure out which is the better option for you this year. This is likely to change again next year due to proposed changes to the tax code.
  2. Those tax law changes that are under way are likely to significantly increase the standard deduction. This might mean that your charitable donation in 2018 will not be deductible. This could mean it is worthwhile to consider advancing your 2018 giving to this month so you still get the full tax benefit.
  3. Since many portfolios hold stocks with sizeable gains, you might want to gift appreciated stock instead of cash. If you have owned the asset for more than a year, you can deduct the full value and neither you nor the charity will pay taxes on the appreciation.

As always, please do not hesitate to reach out to your CFM advisor to discuss these options or any other questions you might have.

Barbara Lommen

Barbara Lommen is a financial advisor at Colorado Financial Management.

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