Here’s a look at the five financial tasks advisors recommend investors consider before the end of the year—and a few that can wait until after the New Year.

The end of the year is a busy time, financially speaking. With vacations, holiday celebrations, and gift buying, and family gatherings, it can be easy to neglect several gestures that could have important financial impacts on your nest egg or tax bill in the coming year. Some of these moves must be made by December 31, while others can wait until mid-April, when taxes are due.

Make portfolio changes related to tax loss harvesting.

When to do it: Before December 31

“If you have big gains or losses to offset, December is the latest month when you and your advisor can make those decisions for the year,” says John Flavin, a CFO with Synergy Financial Management in Seattle.

Flavin says many investors meet with him during fourth quarter each year to look at whether they need to engage in tax loss harvesting. This is the practice of selling one investment at a loss to offset the capital gains owed on another investment. Where an investor actually likes the investment they’re selling, but is making the maneuver for tax reasons, they often replace it with a similar asset (stock, mutual fund, etc.) from the same industry category or with other similarities.

Catch up on your 401k

When to do it: Before December 31

Some investors don’t max out the contributions possible with their workplace 401k for reasons such as a change in financial status, a job change, or a time delay before they became eligible to begin 401k contributions. For such investors, however, there are a few ways to catch up on contributions, Flavin says.

For those who haven’t made the maximum 401k contribution and who have a savings cushion that can cover several pay periods, it’s possible to increase the percentage of the year’s remaining paychecks going toward retirement accounts. “You can adjust the contribution level all the way up to 100% of your paycheck,” Flavin notes. “The key, though, is to reset how much of each paycheck goes into your 401k come January 1.”

Give financial gifts to family members

When to do it: Before December 31, if the gift is large.

If you’re giving a financial gift to a family member—or expecting to receive one—that typically happen within the calendar year. Adults can gift $14,000 apiece to an individual within their family. This is a per-individual gift limit, not a household one: This means each partner in a married couple could do what’s known as a “gift split” and each could give $14,000 to the same person (such that this person received $28,000).

In a scenario where two parents planned to gift a grown child $40,000 in funds for, say, a down payment on a home, the parents together could both make gifts totaling $28,000 to their offspring by December 31. The remainder ($12,000) could be gifted after January 1 if the couple in this example wanted to sidestep gift tax complications.

Satisfy your required minimum distribution

When to do it: Before December 31

“Clients in retirement and over 70.5 years of age must remember to take their required minimum distribution by the end of the calendar year,” says Rita Cheng, a CFP and CEO at Blue Ocean Global Wealth in Rockville, Md.

The required minimum distribution (also known as RMD) is a minimum withdrawal amount that investors with SEP, SIMPLE, or employer-sponsored retirement plans must take out of their retirement account. During the maiden year of withdrawal, it is possible to push the withdrawal to April 1 of a future year, but once withdrawals are underway because of an investor’s retirement status or age they’ll need to take place by end of year.

“You need to satisfy your RMD, but you don’t have to remove money from all retirement accounts—and can satisfy it from just one account,” notes Cheng. “You can be strategic about which assets to sell and when to sell them.”

Make charitable contributions

When to do it: Before December 31

If you make charitable giving a habit, either to support issues and causes you believe in and/or to receive a tax deduction for your gift, you’ll need to make sure to complete donations by the end of the calendar year so that you can take applicable tax deductions when you pay your taxes in April.

IRA contributions

When to do it: By mid-April

Investors have until mid-April to fund their regular IRA accounts as well as their Roth IRAs. The self-employed and those with small businesses also have until mid-April to fund the SEP IRA and Simple IRA accounts they use to save for retirement. With a mid-April deadline, investors have time to work on their taxes or talk to their accountant to see if increasing contributions to non-Roth accounts would lower their tax bill—or, in the case of many self-employed investors, if they would like to contribute to both a SEP IRA and Roth IRA, notes Cheng. Additionally, those who seek a tax filing extension may have until October 15 can also wait through that date to fund certain account types (SEP IRA) for the tax year they extended to October, notes Flavin.

It’s hard to focus on finances at the end of the year, but by spending some time with a portfolio at year-end and making financial gestures before the New Year, investors can enter the coming year in the best possible financial position.

 

Do you need help finding a financial advisor in 2017? Speak to a Concierge Now and book an appointment.


Jane Hodges

Jane Hodges

Jane Hodges is the author of Rent Vs. Own (Chronicle Books) and has written about real estate and personal finance for The Wall Street Journal, New York Times, Seattle Times, Fortune and many other publications. Follow Jane on Twitter and Google+