- Show clients how to use the last few weeks of the year for tax savings.
- Help your clients avoid penalties for missing year-end tasks.
- Share changes to charitable giving and contribution maximums.
The end of the year is coming quickly. While your clients may be starting to get busy with holiday festivities, now is a good time to let them know there are some smart money moves to be made.
Tax deductible contributions
Check in with your client on their contributions to 401(k) and Health Savings Accounts. Both of these will lower their taxable income for the year and benefit them when they are ready to withdraw for retirement or medical bills. If they can reach their maximum allowable (which increased this year) or at least add a little more, they can turbocharge their contributions until the end of the year.
- 401(k) maximum contribution: $18,500 ($24,500 if age 50+)
- Traditional and Roth IRA maximum contribution: $5,500 ($6,500 if age 50+)
- HSA maximum contribution: $3,450 self-only, $6,900 family ($1000 more if age 50+)
They may have already enjoyed the tax benefit of contributing to a Flexible Spending Account, but remind them to use up those funds before the end of the year so they don’t lose them.
Tax Loss Harvesting
Some investments may have turned out to be losers. Hopefully, with a strong market this year, your clients didn’t encounter too many. But for those stones that sank, your client can still use the loss to their benefit. They can sell them and write off the loss against any capital gains or income to reduce their tax bill. Then buy a similar security that is performing better to keep their asset allocation well balanced.
Required Minimum Distributions (RMDs)
If your clients are over age 70 ½, help them calculate the required minimum distribution from their IRA or retirement plan accounts and taxes owed, which has to be done by the end of the calendar year. (If they just turned 70 ½, they have until April 1.) If they’re not sure what to do with the money besides treating themselves to a shopping spree or buying holiday gifts, you can suggest reinvesting, donating to charity, or using it to pay off debt.
One of the biggest changes this year is for charitable donations due to the Tax Cuts and Jobs Act. Check to see how much your client is donating and make sure they are aware of the new minimum requirement for it to count as a tax deduction ($12,000 for individuals and $24,000 for married couples). If they are hitting those amounts, they should be keeping receipts and itemizing so their deductions are documented for tax purposes.
Review and Strategize
Now is a good time to review the big picture of your client’s strategy. Were they on track to meet their goals? Where did they fall off? What could they do better next year? Consider these questions:
- Could they contribute a little more to their retirement accounts and HSAs throughout the year rather than a big lump sum at the end?
- Do they have adequate emergency savings in place?
- What are some big ticket items coming up (home repairs, new car, wedding, baby) they need to factor into their budget?
- Are their investments optimized and balanced according to their goals or any changes to their goals?
Download the Year End Money Moves Checklist for seven tips to share with your clients and guide your client conversations.
Once everything is in order, you and your client can feel good and truly have something to be grateful for and celebrate over the holidays.
Things to Consider
- Encourage clients to ramp up their tax-saving contributions to retirement and health savings accounts.
- “Harvest” for stock market losers and use it to the client’s tax benefit.
- Review if your client is financially on track for goals and what can be done in the new year.
Neither Transamerica nor its agents or representatives may provide medical, tax, investment, or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as, medical, insurance, securities, tax, legal or financial advice or guidance. Please consult your personal independent advisors for answers to your specific questions.