The Unconventional Guide To 11 Year End Financial Planning Ideas


The end of the year is fast approaching and now is the perfect time to review items you might want to consider as the calendar gets ready to change to 2015.

Let me stress that it is my job to assist and help you, and I would be happy to review the options that are best suited to your needs. And remember, when it comes to tax matters, it’s always a good idea to check with your tax advisor.


1. Tax loss deadline.

You have until December 31, 2014 to harvest any tax losses and/or offset any capital gains. But be careful. There are distinctions between short- and long-term capital gains, and you must be aware of wash-sale rules.

Under IRS rules, you cannot deduct losses from sales or trades of stock or securities in a wash sale. A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

  • Buy substantially identical stock or securities,
  • Acquire substantially identical stock or securities in a fully taxable trade, or
  • Acquire a contract or option to buy substantially identical stock or securities.

2. Begin gathering the tax documents you’ll need to complete your tax returns.

W-2s and 1099s won’t show up until next year, but everything from receipts for donations to business expenses will be needed if you are to minimize this year’s tax bite.

3. Is it time to rebalance your portfolio?

Changes in the market can cause your asset allocation targets to shift. Now may be the time to consider adjustments. But let’s review what’s happened in your portfolio. If the asset classes in your portfolio have had 2013 gains, any adjustments we might recommend should not generate a negative taxable event this year.

In other words, let’s be careful about taking profits in December when you may want to consider taking them in January and defer any potential capital gain until tax year 2015. Please keep in mind, each individual situation is different

4. Take stock of changes in your life and review insurance and beneficiaries.

Let’s be sure you are adequately covered. At the same time, it’s a good idea to update beneficiaries if the need has arisen. Circumstances in your life may have changed in the last year. Documents must be updated or you may deny an intended beneficiary their rightful inheritance.

5. Use it or lose it.

As the year draws to a close, many people with a flexible spending account (FSA) for medical expenses must spend any savings or forfeit them. Some FSAs offer a grace period, and the money in accounts can carry over from year to year. But when that grace period ends, the cash is gone forever.

6. Contribute to a Roth IRA.

A Roth gives you the potential to earn tax-free growth (not just deferred tax-free growth) and allows for federal-tax-free withdrawals if certain requirements are met. There are income limits, but if you qualify, you may contribute $5,500 or $6,500 if you are 50 or older.

You may also be eligible to contribute to a traditional IRA, and contributions may be fully or partially deductible, depending on your circumstances. The same contribution limit that applies to a Roth IRA also applies to traditional IRAs. Total contributions for both accounts cannot exceed the prescribed limit.

Although we won’t hit the 2014 deadline until April 15, 2015, let’s start thinking about funding your account if your income permits. The sooner the account is funded, the sooner you begin taking advantage of tax-deferred or tax-free growth.

7. Consider converting a traditional IRA to a Roth IRA.

There are a number of items you may want to consider, including current and future tax rates, but if the situation is right, it can be very advantageous to convert to a Roth IRA.  Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.

8. Address college savings.

Explore the advantages of a 529 college savings plan for your child or a grandchild.  A 529 plan is operated by a state or educational institution, with tax advantages and that make it easier to save for college and other post-secondary training for a designated beneficiary. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary. Contributions, however, are not deductible.

A second but more limited option includes a Coverdale Education Savings Account. Total contributions for a beneficiary of this account cannot be more than $2,000 in any year. Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual’s modified adjusted gross income for the year is less than $110,000. For individuals filing joint returns, that amount is $220,000.

However, contribution limits begin to get phased out at $95,000 for individual filers and $190,000 for joint filers. Like an IRA, the deadline is April 15 of the following year. Like a 529 plan, contributions are not tax deductible.

9. Do your charitable giving.

Whether it is cash, stocks, or bonds, you can donate to your favorite charity by December 31, potentially offsetting any income.

Did you know that you may qualify for what’s called a “qualified charitable distribution (QCD)?”  A QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity.

But there’s one small rub. QCDs are expected to be renewed by Congress, but technically, they expired December 31, 2013. Assuming they are renewed with no changes, an IRA owner can exclude from gross income up to $100,000 of a QCD made for a year, and a QCD can be used to satisfy any IRA required minimum distributions (RMDs) for the year.

You might also consider a donor-advised fund. Once the donation is made, you can realize immediate tax benefits, but it is up to the donor when the distribution to a qualified charity may be made.

10. Speaking of IRAs, is it time to take a required minimum distribution?

RMDs are minimum amounts that retirement plan account owners must withdraw annually starting with the year they reach 70 ½ years of age or, if later, the year in which they retire.

However, the first payment can be delayed until April 1 of the year following the year in which a person turns 70½. For all subsequent years–including the year the initial RMD is paid out by April 1–account owners must take the RMD by December 31 of the year.

The RMD rules apply to all employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs.

Don’t miss the deadline or you could be subject to steep penalties! If an account owner fails to withdraw an RMD, fails to withdraw the full amount of the RMD, or fails to withdraw the RMD by the applicable deadline, the amount not withdrawn is taxed at 50%.

11. Review your income or portfolio strategy.

Reaching a milestone in your life, such as retirement, or experiencing a change in your circumstances may be just the right time to evaluate your approach.

I hope you’ve found this review to be educational and helpful. Let me emphasize, it is my job to assist you! If you have any questions or would like to discuss any matters, please feel free to call or email me.


I hope you have a Happy Holidays and a Wonderful New Years.


As always, another Thought From The Factory on Main


Peter Huminski, AWMA®


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.