2018 Year-End Financial Planning Checklist


While it is often the norm to spend the final days of the year preoccupied with checking items off long shopping lists, we urge you not to let your finances get lost in the shuffle.

To simplify your end-of-year planning, we have prepared a detailed financial planning checklist. It is based on current tax law. As we learn more about tax reform in the coming days and weeks, we will be sure to relay the latest information.

The below guidelines provide additional details on the checklist items.
    1. Maximize Retirement Plan Contributions: If you have a 401(k) or other retirement plan at work, remember to make your allowable 2018 contributions before year-end. In 2018, you can elect to defer up to $18,500 of your compensation to a 401(k). Those aged 50-plus can defer an extra $6,000 for a total of $24,500. Additionally, some plans allow you to make after tax contributions, up to the IRS limit of $55,000.
    2. Fund Non-Deductible IRAs & Convert to Roth: Although your income may be too high to make a direct contribution to a Roth IRA, you can fund a Roth IRA by making a non-deductible IRA contribution and immediately converting it to a Roth IRA.
    3. Rebalance 401(k): Periodically rebalancing your 401(k) ensures you’re not taking on too much risk and your account is in line with your overall asset allocation.
    4. Take Required Minimum Distributions: If you are 70½ you must take your Required Minimum Distribution for 2018. If you have several IRA accounts, you may take the distribution from just one, but the distribution must be calculated on the aggregate of your IRA balances. Please note once an RMD is taken, it is irrevocably distributed (and taxable).
    5. Make Deferred Comp Elections: If applicable you will need to determine ahead of year-end whether to defer a portion of your 2019 compensation. Benefits of deferring include possible tax savings and the opportunity to grow assets at a potentially higher rate of return. As with any investment decision, it is important to weigh the benefits of deferring with your liquidity needs, time horizon and lifestyle choices. Additionally, you will be required to decide on a distribution election at the time of selection.
    6. Complete Annual Exclusion Gifts: In 2018, you can gift $15,000 per person ($30,000 per couple, if the decision is made to split gifts) to any individual. You should continue to use this annual exemption to help transfer assets and reduce your taxable estate. Please keep in mind contributions to 529 plans are considered gifts as are premiums paid on life insurance policies owned in an Irrevocable Life Insurance Trust. The current lifetime gift exemption is $11,180,000 in 2018.
    7. Fund 529 Plans: If you plan to contribute to a 529 account this year, be sure to do so by December 31st to take advantage of annual gift exclusions and to qualify for any state tax deductions on your 2018 taxes. If you pay for college directly to the institution, your payment is not considered a gift and there is no limitation on your contributions (please remember contributions to 529 plans are considered gifts). If you plan to pay bills directly and reimburse yourself from a 529 plan, make sure you reimburse yourself in the same calendar year that the expenses incurred in.
    8. Open and Fund Roth IRAs for Children: If your children have earned income, you can use part of their annual gifting exclusion to fund a Roth IRA for each working child. This strategy helps transfer wealth to the next generation in a tax-efficient manner.
    9. Execute Crummey Notices: Confirm with your estate planning attorney or trustees that written notice (Crummey Notice) is being provided to beneficiaries of their withdrawal power each year a gift is made to an irrevocable life insurance trust or other trust that contains Crummey powers. It is important to store these notices in the event the IRS challenges past gifting. Failure to provide this documentation could compromise the tax status of assets held in the trust.
    10. Review Estate Plan & Fiduciary/Beneficiary Designations: Year-end is a good time to review your overall estate plan & fiduciary designations to make sure they are still in line with your wishes. Additionally, you should verify/update your beneficiary designations on your retirement accounts and life insurance policies.
    11. Adjust Tax Withholding: Under the new tax law, many people saw their tax brackets change in 2018 as well as changes to other common tax credits. These changes could affect how many allowances you should claim and how much tax should be withheld from your paycheck. Take some time to review your W-4 and update your withholding amount if necessary.
    12. Consider Roth IRA Conversion: Anyone, regardless of income, is now eligible to convert a Traditional IRA to a Roth IRA. The Roth IRA carries significant income tax advantages for both you and your beneficiaries, especially if the conversion is done with reduced asset levels. Please consult with your accountant to discuss potential taxes that could be owed in the same year as the Roth conversion.
    13. Make Charitable Gifts/Consider Bundling Itemized Deductions: All charitable contributions must be made prior to December 31st to be taken as a deduction on this year’s tax return. Please keep in mind the new tax law when completing gifts as the laws have changed since last year. In 2018, the standard deduction increased ($12,000 for single filers and $24,000 for couples) and many popular itemized deductions were reduced or eliminated. Some of the more prevalent changes include a $10,000 cap on state and local tax deductions and the elimination of itemized deductions subject to the 2% floor (i.e. investment fees, tax prep fees). Charitably inclined individuals who are unable to itemize under the new law may want to consider bundling two or more years of gifting into a single year (possibly through a Donor Advised Fund). This will increase the likelihood of being able to itemize deductions in alternate years. Taxpayers can deduct cash gifts up to 60% of adjusted gross income (AGI) and stock gifts up to 30% of AGI. If you do intend to make a gift for 2018, we encourage you to do so by December 1st.
    14. Consider Making a Qualified Charitable Distribution (QCD) from your IRA: Individuals who are charitably inclined and are required to take a Required Minimum Distribution (RMD) from their IRA should consider whether a Qualified Charitable Distribution (QCD) is a better way to do this. A QCD is a non-taxable distribution from your IRA directly to a qualified charity, which still counts towards your RMD. When making a QCD election, the amount you select will not be added to your adjusted gross income. Please be aware the amount you contribute is limited to $100,000 and you cannot make the distribution from SEP and SIMPLE plans if an employer contribution is made for that year.
    15. Review Group Benefit Elections & Make Updates for the Coming Year: Open enrollment is under way at many employers. Please take time to review your employee benefit elections (group health, dental, life, disability, FSA, HSA) to ensure you have selected the right plan with the right coverage amount and a deductible that you are comfortable paying.
    16. Enroll in New Health Insurance Plan Through Healthcare.gov: The 2019 open enrollment period for marketplace health insurance plans runs from Thursday, November 1st, to Saturday, December 15th. If you fail to act by the end of that period you will not be able to get 2019 coverage unless you qualify for a special enrollment period.
    17. Complete Medicare Open Enrollment: If you’re on Medicare you have until December 7th to decide whether to keep your current coverage or make changes that will take effect January 1st, 2019. Beneficiaries can pick a new Medicare Part D drug plan, a new Medicare Advantage plan or switch from original Medicare into a Medicare Advantage plan. Please remember Medicare supplement plans are not part of this open enrollment.
    18. Request Annual Credit Report: We recommend that you review a full credit report annually to make sure there are no surprises. You are allowed one free copy of your credit report each year. To request, go to annualcreditreport.com or call 877-322-8228. For those of you who have not done so already, you should consider signing up for a credit monitoring service.
    19. Consider Updating Passwords & Security Questions: We recommend you regularly update your passwords and security questions to prevent against fraud and cyber security attacks. Additionally, to assist family members in the event you become incapacitated or pass away prematurely, create a list of usernames and passwords for all of your digital assets and properties and store this in a secure place.

The material shown is for informational purposes only and should not be construed as accounting, legal, or tax advice.  Altair Advisers LLC is a registered investment adviser with the Securities and Exchange Commission; registration does not imply a certain level of skill or training.  While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented.