Year-End Financial Checklist

Year-End Financial Checklist

December 13, 2017

The end of the year is always busy with holiday related activities – shopping, travel, work parties, etc. One important year-end item that should be on everyone’s to-do list, but often isn’t, is a financial checklist. There are a number of tax and investment related items that should be looked at before year end. We’ll take a look at a few of these below:

Take your Required Minimum Distributions (RMDs)

For many, this can be one of the most important actions to take before year-end. The year in which you turn age 70.5, the IRS requires you to take a portion of your retirement accounts. Considering this, you are allowed to push back the first-year distribution only to April 1st of the next calendar year. If you do not take the distribution by December 31st, there is a 50% excise tax on the amount you should have taken – in addition to the income taxes still due on the withdrawal itself.

If you need to take a distribution, it must be done no later than the last market trading day of the year, which may or may not be December 31st.

The good news? Most every company will make you aware of the requirement, as well as tell you exactly how much you need to withdraw. Often, the company that houses your IRA can establish an automatic distribution every year in the amount of your RMD.

Rebalance your portfolio

When the stock market has had a strong year like 2017, your investments will most likely benefit from it – assuming you’re broadly invested in the stock market, not just one or two companies.

A very common strategy in today’s investment environment is to target a certain percentage of stocks and bonds in your portfolio. When your portfolio deviates from that target – because of strong or poor markets – you need to rebalance it. This allows you to control risk as well as remove some of your profits before the market does it for you. Of course, no strategy is foolproof, including this one, but at least you’re taking advantage of a great year in stocks.

Lastly, you can rebalance your portfolio by taking your RMD from an asset class that you have too much of. For example, if you have too much stock relative to your target, then take part or all of your RMD from an investment that is invested in stock.

Consider tax-deductible charitable contributions

For those that are philanthropic, or give to charity purely for the tax benefits, doing so at year-end has its benefits.

Once we get into November, barring a windfall of money or major change to the tax code, we have some clarity of what our tax picture for the year will look like. If you are hovering above a certain tax bracket (i.e. 25 or 28%), making a qualified charitable contribution could drop you to the lower bracket – or at least reduce your tax bill from what it would be.

In addition, you will want to verify the type of charity you are giving to as that can impact the tax-deductible nature of your contribution.

This planning very well may require the work of a CPA or tax planning professional, but there is the hope that you save more on your tax bill than the amount you pay to your CPA.

There are numerous topics that should be addressed at year-end, while others are helpful to review as part of an annual financial review. If you are working through some of these, or considering other action items that need to be addressed before New Year’s comes around, please let us know. These are often things we look at with our clients, when applicable.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. This information is not intended as tax advice. You should consult with your tax advisor for guidance on your specific situation.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser. Member FINRA/SIPC.