2019 Year-End Financial Planning Checklist


With 2019 quickly coming to a close, we’ve compiled a checklist of important financial moves to consider before the end of the year. While everyone’s situation is different and not every action will apply to you, taking small steps today will lay the foundation for a successful 2020 and years to come.

The below guidelines provide additional details on the checklist items.
    1. Maximize Employer Retirement Plan Contributions: If you have a 401(k) or other retirement plan at work, remember to make your allowable 2019 contributions before year-end. In 2019, you can elect to defer up to $19,000 of your compensation to a 401(k). Those aged 50-plus can defer an extra $6,000 for a total of $25,000. Additionally, some plans allow you to make after-tax contributions, up to the IRS limit of $56,000.
    2. Rebalance 401(k): Periodically rebalancing your 401(k) ensures your account is in line with your overall asset allocation.
    3. Take Required Minimum Distributions: If you are 70 ½ or older you must take your Required Minimum Distribution for 2019. 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). RMDs are not required for Roth IRAs (unless inherited).
    4. Make Deferred Comp Elections: If applicable, determine before December 31st whether to defer a portion of your 2020 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 make a distribution election.
    5. Use up FSA Money: If you have a Flexible Spending Account (FSA), you have until December 31st (or March 15th of the new year for some plans) to spend your balance. FSA dollars work on a use-it-or-lose-it provision. Remaining dollars on January 1st of each year will be forfeited. FSA dollars can be used to pay for medical expenses that aren’t covered by a health plan, like co-pays, deductibles, dental and vision care, or dependent day care. You can also use dollars to purchase items like sunscreen and first aid kits. In 2019, individuals can contribute $2,700 to a health care FSA and $5,000 to a dependent care FSA. The end of the year is also a good time to calculate your FSA allotment for next year, based on your current account excess or deficit.
    6. Complete Annual Exclusion Gifts: In 2019, 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 exclusion to 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.
    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 2019 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, in which the expenses occurred in.
    8. Execute Crummey Notices: Confirm with your estate planning attorney or trustees that beneficiaries are being provided written notice (Crummey Notice) 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.
    9. Review Estate Plan & Fiduciary/Beneficiary Designations: The end of the year 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.
    10. Defer or Reduce Income: If you’re on the threshold of a tax bracket, consider deferring income to reduce your tax exposure. If applicable, consider deferring the sale of capital gain property, or receipt of distributions to delay income into 2020.e comfortable paying.
    11. Adjust Tax Withholding: Review your W-4 and update your withholding if necessary.
    12. Consider Roth IRA Conversion: Anyone, regardless of income, is 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 at reduced asset levels. Please consult your accountant to discuss potential taxes that could be owed on a Roth conversion, and consult Altair to determine whether a Roth conversion makes sense for you.
    13. Make Charitable Donations/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 many popular itemized deductions used in years past are now reduced or eliminated. Charitably-inclined individuals who are unable to itemize may benefit from bundling two or more years of donations into a single year (possibly though a Donor Advised Fund). This will increase the likelihood of being able to itemize deductions in alternate years. Taxpayers can deduct cash donations up to 60% of adjusted gross income (AGI) and stock donations up to 30% of AGI. If you do intend to make a donation for 2019, we encourage you to do so by December 1st to ensure your gift is processed in the current tax year.
    14. Consider Making a Qualified Charitable Distribution (QCD) from your IRA: Charitably-inclined individuals who are required to take Required Minimum Distributions (RMDs) from their IRA should consider a Qualified Charitable Distribution (QCD). A QCD is a non-taxable distribution from your IRA directly to a qualified charity, which counts towards your RMD. When making a QCD election, the amount you select will not be included in your adjusted gross income. The total of all QCDs 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. A QCD cannot be made to a Donor Advised Fund.
    15. Review Group Benefit Elections & Make Updates for the Coming Year: Open enrollment is underway 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 2020 open enrollment period for marketplace health insurance plans runs from Friday, November 1st to Sunday, December 15th. If you fail to act by the end of that period, you will not be able to get 2020 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, 2020. 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, 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 fraud and cyber security attacks. Additionally, to assist family members if you become incapacitated or pass away, create a list of usernames and passwords for all of your digital assets 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.