529s, UGMAs, and various other methods for saving for college.
It's December and it's time to start planning for our 2018 taxes. There are several crucial moves that can save you some money and set yourself up for a a more successful 2019.
This should act as a reminder list for those who get so busy at the end of the year that they miss some very important deadlines and cost themselves serious money!
Remember, some types of accounts are on a calendar year basis and some are not. For those who have not maxed out their 401ks, now is the time since it's on a calendar-year basis. You don't want to leave any match money from your company on the table! The max contribution is $18,500 (this does not include any matches your company may make). Those 50 years of age or older are allowed to make an additional $6,000 catch-up contribution.Think about dumping your final paycheck for 2018 all into your 401k.
IRA accounts on the other hand must be done by tax day (April 15). So it's best to fill out a 401k before topping up the IRA account. Max contributions for an IRA in 2018 are $5,500 and if you are 50 years old or over, you are allowed a $1,000 additional catch-up contribution.
For those that will be itemizing their taxes for 2018, there is still time to make a charitable donation. This doesn't always have to be in the form a check... think about cleaning out the closet of clothes you don't wear, toys from the basement, or even an old junky car you've been meaning to get rid of. Those types of donations allow you to deduct their fair market value on your return, thereby lowering your taxes.
Charities like Vietnam Veterans of America, Salvation Army, and others will come to your home and pick up your donations. For a vehicle or boat, you will generally receive a $500 contribution certificate. If the value of the vehicle exceeds $500 at auction, you will receive a top up certificate of the difference.
You must use your Flexible Spending Accounts (FSA) funds before year end or you lose them. Most plans have an either or option: Either you can roll over some portion of funds to be used in the following year (typically a $500 max) or they will give a grace period of typically around 30 days extended beyond the period end to use those funds.
For those coming to the end of the period with a large amount of funds, be sure to splurge instead of losing them. Grab a new pair of glasses, load up on your medicines, or get a procedure you've always wanted done (think corrective-eye surgery or microderm-abrasion from your dermatologist). Also, if you take over the counter drugs for a condition you've spoken to your doctor about, get an RX or medical necessity letter from your doctor so you can FSA those expneses as well (think fiber pills for regularity issues, Advil for consistent migraines, etc...).
Here are a few stores that list only FSA-eligible items. Stock up on items you may need next year early!
Just be sure to follow the rules for your FSA. Lastly, see if you can pre-order any medications or products like contact lenses for the coming year, if its permitted by the plan.
Don't forget- FSA is different than HSA. Typically, FSA plans are more restrictive on what the funds can and cannot be used on.
Every jurisdiction is different- but many allow exemptions that lower the property taxes of your residence. In NY, there is a STAR exemption that must be filed by January 1. Beyond the basic exemptions many states have, there are numerous other exemptions available out there: military service exemptions, volunteer fire/ police exemptions, and senior citizen exemptions to name just a few. Be sure to inquire about possible exemptions you may be eligible for.
Also, for those that live in jurisdictions that allow you to grieve your property taxes, remember to file that before year end or whatever the deadline is (most are Dec 31 to Mar 31). Now that there is a cap on deductions for property taxes, reducing them outright is the only way to lower your overall property tax liability in many high tax states.
Tax Loss Harvesting
We recently released an article on tax loss harvesting as it pertains to CEFs (read it HERE). More broadly, tax loss harvesting is selling those stocks or funds that are underwater (at a loss). Then taking the loss to offset against gains, reducing your overall tax bill.
Remember, this needs to be in a taxable account like a brokerage account. If its a retirement account, losses are not necessarily tax deductible.
Lastly, if capital losses exceed capital gains, the filer is entitled to claim a deduction against the loss in the amount of $3,000 or the total net loss, whichever is less. When a net capital loss exceeds the $3,000 limit, it can be carried forward to future years.
Tax loss harvesting with CEFs
The “January Effect” and why now may be the time to buy, not sell!
Increased limits for 401k's and IRAs for 2019.
What is the average Net Worth by age group
Set goals to help achieve that net worth you need for a comfortable retirement
Increasing or removing altogether the age required for RMDs
Allowing smaller businesses to join together to offer retirement plans
The basics and not so basics of social security
Differences in payment depending on the age you start
Rebalancing your portfolio forces you to sell high and buy low
The basics on when and how to rebalance.
Retirees today face on the greatest challenges financially compared to nearly any generation.
Longevity risk is going to be something we hear about more and more in the coming decade as people live longer.
We highlight how we structure our approach, which is not risk-free but rather a way to deal with the current environment.
There are multiple paths to passing your wealth on before and after your gone
Which IRA is the better Inherited IRA for your heirs
Baby boomers approaching retirement are woefully unprepared.
It only gets worse with Gen X and Millennials.
Introduction to a multi-part series on retirement strategies.
Our retirement series depicts strategies for all levels to make the most of their options.
We focus on the other side of the coin - reducing expenses rather than solely looking at growing your retirement nest egg.
Where you live in retirement is one of the biggest factors in how long your retirement funding will last.
State, local, sales, and other taxes, especially on social security and pensions, play a key role in the longevity of your retirement funding.
Sequence of Return Risk is a major obstacle to a retiree realizing a fully funded retirement.
Should a retiree go all cash and short-term bonds losing out on long-term growth as the length of retirement increases? Or stay invested in equities and risk a large downturn?
We attempt to mitigate risk, while maintaining both high yield and long-term growth using higher-quality high-yield CEFs plus a wide range of peripheral investments for growth.