7 financial planning tips for the end of the year
By: Solid Serenity Legal Solutions
With 2019 coming to an end, we face another new year, and even a new decade. Here are 7 financial planning tips for the end of the year to help you get ahead of the game for 2020.
(1) Contribute All You Can to Your Retirement Accounts
You can only contribute a set amount to your retirement accounts each year. In 2019, you can contribute up to $19,000 to employer-sponsored plans. If you are 50 years old or older, you can increase that amount to $25,000.
Roth IRAs and Traditional IRAs have a cap of $6,000 for 2019 and $7,000 if you are 50 or older. The IRA contribution deadline for 2019 is April 15, 2020.
(2) Consider Converting Your Retirement Accounts
If you make too much money to contribute to an IRA, you may still qualify for a ROTH conversion. ROTH conversions allow you to grow your money tax-free and ROTHs do not have required minimum distributions like other retirement accounts. Consider whether a ROTH would be beneficial for you and your family.
(3) Use the Money in Your Flex Spending Account
Flexible spending accounts are special, tax-free accounts that allow you to save money to pay for medical services your health insurance doesn’t cover. Many policies require you to use the money you have saved in that year, or you will lose it. Make sure to speak to your employer’s benefits office to see if your FSA money will roll over to next year.
(4) Consider a Health Savings Account
A Health Savings Account is a tax-deductible account where you can save for medical expenses and take qualified distributions tax-free. You may qualify if you have a high-deductible health plan. Families can save up to $7,000 and individuals can save up to $3,500 in the account each year. If you are 50 or older, you can save an additional $1,000.
(5) Take Required Minimum Distributions
For those of you who turned 70 1/2 in 2019, and own an IRA and other qualified retirement accounts, you will be required to take distributions this year. The deadline to take your distribution is December 31.
If you don’t need the money, you can open an after-tax brokerage account to invest the distribution into, or donate to a charitable cause and likely avoid taxes on the distribution.
(6) Support a Charity or Loved One
Donating to a charity doesn’t just give you the feel-goods. If your charity qualifies, there may also be tax benefits for your donation. Charitable donations must be made by December 31 to qualify for this tax year.
Another option to help reduce your estate, if you are concerned about estate taxes, is gifting money to loved ones. For 2019, each individual can give up to $15,000 to another individual. There is no limit to the number of individuals you can give this gift to, but there is a lifetime exemption of $11.4 million.
(7) Reduce Taxable Income
If you have investments in non-retirement accounts, consider offsetting your gains for the year with losses. You may also qualify for up to $3,000 reduction of your income beyond the offsets.