Don’t ever say we aren’t giving. Here is Part 2 of our end of the year checklist. If you haven’t checked out Part 1, we recommend you start there.
If you aren’t too busy refreshing your Twitter feed about the latest political scandal or mortgaging your house for Bitcoin futures (hint: probably not a good idea), take a look at our guide and take the steps to improve your financial self this next year. Here are five steps to securing your financial future:
- Take your required minimum distributions. In the year following the year you reach age 70 ½, you must take required minimum distributions from your IRA by April 1. The penalty for failing to take RMD is a 50 percent tax on what should have been withdrawn, so “make sure if you’re 70 ½ that you calculate and take the appropriate RMD for the year. You are literally leaving money on the table if you don’t take these distributions.
- Make 529 plan contributions. Money saved in a 529 plan grows tax-free when used for eligible educational expenses, and some states have additional tax benefits for residents who contribute to a plan in that state. New parents or grandparents can make 529 contributions of an unlimited Amount , but the $14,000 gift tax exemption still applies per beneficiary. If you have a baby or grand baby on the way, see if these pre-tax contributions could lower your taxable income and provide an education for your future family member. This way, your highly educated offspring can take care of you when your Bitcoin mortgage crashes.
- Consider a Roth conversion. An individual with a traditional IRA and low taxable income might want to convert that traditional IRA to a Roth IRA before the end of the year. This can save you significant taxes if you are in a lower-income bracket now. Ask a tax professional before considering this option. Hint: seeing a tax professional is always a good idea this time of year.
- Maximize your gift allowance. Those who are likely to leave an estate large enough to incur estate taxes might consider maxing out your gift allowance, which is $14,000 per person per year (meaning a couple can gift up to $28,000 per year to as many people as they want). Grandparents or other relatives can also pay college tuition directly to the institution so that money doesn’t apply toward the $14,000 gift allowance. There is no carry-over of gift allowances from year to year so gifts need to be made on or before Dec. 31. If you have too much money, go see an Estate Planner and create a legacy. Studies show this type of gifting is great for your wallet and your well-being.
- Adjust your tax withholding. If you’ve gotten married, divorced or had kids in 2017, then you probably need to update your withholding with your employer’s human resources department. Remember, tax refunds mean you gave the government an interest free loan for a year.
Did you like how they spent that money? I thought not.
You have two weeks before the New Year begins . . .you still have time to plan. If not, well . . .you can read this again next December.
Stay Rational
-B&T