These 5 simple steps could make a huge difference in the upcoming year
By: Josh Koehnen, MsBA, CFP®
1. Rebalance Your Portfolio
The stock market has had a strong run up in 2019, so you could be taking on more risk than you’re comfortable with going into the new year. Most investors who own stocks, bonds or mutual funds should consider rebalancing their portfolio before the year’s end. In order to do this, you can review your asset allocation and then sell some portion of the asset classes that have performed well and buy some of those asset classes that have not done as well. It’s the old adage of “sell high and buy low”. The key is to sit down with your financial advisor and figure out how much downside you are comfortable with and then rebalance your portfolio, so it aligns with that target risk level.
2. Maximize Retirement Plan Contributions
For some folks, the biggest tax deduction available is their workplace retirement plan where you can lock away up to $19,000 or $25,000 if you’re over the age of 50. Some employers will match your 401(k) contributions so be sure to take advantage of that as well. If you’re over age 70 ½, you also must be sure to start withdrawing from your IRA account before the end of the year or you’ll be penalized for not withdrawing the required minimum distribution.
2. Consolidate or Pay Off High Interest Rate Debt
The Federal Reserve has now cut interest rates three times since July and mortgage rates are near historical lows. It could be a good time for you to lock in a lower interest rate and consolidate or pay off debt. Debt consolidation is a great way to simplify your monthly payments if you want to lock in those low rates and stop juggling multiple debt accounts.
3. Make a Charitable Gift
If you itemize deductions, charitable contributions still count as a deduction that will lower your income. Also, if you are over the age of 70 ½ you can take a Qualified Charitable Distribution directly from your IRA to an eligible charity. Charities will take cash, property or even stocks as gifts. A more effective way to give could be to contribute to a donor-advised fund as it ensures immediate tax deduction for the giver; but, while your deciding which charities to support those funds can be invested for tax-free growth. If the gift is over $250, get a written receipt from the IRS approved charity to be sure the deduction is taken from your taxes correctly.
5. Review Your Estate Plan
It may be a good time to double check to make sure your beneficiary designations are correct on all your retirement accounts and insurance policies. Also, you should review your Will, Power of Attorney, Advanced Health Care Directive and Trust to be certain that you have the right people named to step in if anything happens to you in the upcoming year. Talk to your financial advisor to be sure all of this is up to date.
Plan now; enjoy your 2020 later.
Investment Advisor Representatives offering advisory services through Premier Wealth Advisors (PWA), a registered investment adviser. Securities and additional advisory services offered through Independent Financial Group, LLC (IFG), a registered broker dealer and a registered investment adviser. Member FINRA/SIPC. PWA and IFG are unaffiliated entities