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FINANCE: End-of-the-year financial planning considerations

By David Guttery, Keystone Financial Group

Let me preface my comments by saying that the following information is sourced from the 2019 Tax Code.  Everyone reading this should consult a tax professional for individual guidance before following the ideas discussed in this article.

Required Minimum Distributions.  As we close the year, there are many items about which people should be mindful, but if you’re over 70 ½, it is critical to insure that you’ve taken the required amount from your qualified accounts by the end of the year.  When someone with an IRA or qualified plan balance turns 70 ½, they are required to begin taking at least a minimal amount from that account, and we call this the required minimum distribution.

If someone is in the RMD phase, and does not take at least the full required distribution, then a 50% penalty will apply to the difference between the amount that should have been withdrawn, and the amount that was actually withdrawn.  I routinely help clients with this calculation, and this is a good time of the year to just review what you have taken through November, to make sure that you can make up for any shortfall in December.

David Guttery

Loss Harvesting.  For those who maintain non-qualified brokerage investments, this time of year presents a good opportunity to evaluate the degree by which you may have losses within invested positions, that might be harvested to offset the tax due on any gains that may have been realized during the year.  Investors may claim short term losses against short term gains, and long-term losses against long term gains.  Any excess loss may be carried forward to another tax year.  Investors without capital gains can deduct up to $3,000 of capital loss in a tax year.

It’s always a good idea to think ahead over the next six weeks, and anticipate the degree by which you might benefit from harvesting losses, and matching those with realized gains.

Retirement Plan Contributions.  The IRA contribution limits for 2019 are $6,000 for those under 50 years of age, and $7,000 for those over 50 years of age.  Husbands and wives can both contribute to such accounts, and possibly deduct the entire contribution.  Deductibility depends on whether or not a phase out schedule might apply.  Also, contributions must be made from earned income.  You have until the 15th of April of 2020 to make deductible contributions into an IRA for 2019.

For those making contributions to a 401k, the contribution limit for 2019 was $19,000.  For those over 50 years of age, a $6,000 catch up contribution provision applies, and thus the maximum limit would be $25,000.  For those who haven’t maximized their limits before the end of December, you still have a few pay periods left in the year to adjust withholding and maximize deferrals.

Charitable Contributions.  Many people make contributions throughout the year to various and sundry charitable organizations, and beyond that, we also make lump sum contributions around the holidays.  If you’re looking for a way to be of benefit to others, and to yourself, consider your end of the year ability to make a special lump sum extra gift, or to go ahead and pre fund a pledge that you may have made to a foundation or organization.

(*) = Securities products are subject to investment risk, including possible loss of principal.  Before investing, carefully consider the investment objectives, risks, limitations, charges and expenses of the product and any underlying investment options.  This information can be found in the prospectuses or offering statements.  Please read carefully before investing.  Variable products are subject to investment risk, including possible loss of principal.  Before investing, carefully consider the investment objectives, risks, limitations, charges and expenses of the product and its underlying investment options. This information can be found in the product and investment option prospectuses.  Copies are available from my office.  Please read carefully before investing.

David has been in practice for 29 years, with a distinctive focus on the management of retirement assets for the production of durable income.  David R. Guttery, RFC, RFS, CAM, is an Investment Advisory Representative of Ameritas Investment Corp, and President of Keystone Financial Group, in Trussville, Alabama.  David independently offers securities and investment advisory services through Ameritas Investment Corp. (AIC) member FINRA/SIPC. AIC and Keystone Financial Group are not affiliated.  Additional products and services may be available through David R. Guttery or Keystone Financial Group that are not offered through AIC.

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