Financial Checklist for the New Year

The New Year always gives us a sense of new beginnings and an opportunity to create positive results for ourselves, family, friends and community.  It’s the perfect time to reset the course of our financial lives.  Here’s a checklist of things you should consider:

⃝ Traditional or Roth IRA contribution for 2018.  If you’re eligible to make a contribution for 2018, you have until April 15, 2019 to do so.  For 2018, the limit is 100% of your earned income up to $5,500 plus an additional $1,000 if you turned age 50 (or older) in 2018.

⃝ Traditional or Roth IRA contribution for 2019.  Consider making your 2019 contribution now so that your money will have an opportunity to work for you all year long.  Good news!  This year the limits increased to $6,000 plus an additional $1,000 if you are age 50 or older this year.

⃝ Two-Step Roth IRA Strategy.  If your income is too high to qualify for a traditional (deductible) IRA or Roth IRA, consider using our two-step strategy, sometimes called a ‘back-door Roth IRA strategy’.  To do this, you contribute to a non-deductible IRA then roll it over to a Roth IRA.  I do this personally the first week of January each year.

⃝ Up your 401k contribution.  Wages are rising.  Use increased income as an opportunity to increase your 401k contribution, particularly if your company will provide a matching contribution.  There’s great power in free money!  Also, the amount you can contribute for 2019 has been increased to $19,000 (v. $18,500) plus an additional $6,000 if you’re age 50 or older this year.

⃝ Review your investment strategy/allocation.  Is your allocation to stocks versus bonds the way you want it?  Take a moment to review and adjust as appropriate.

⃝ Double-check your beneficiary designations.  This would include all retirement plans such as 401k, IRA, life insurance and annuities.  Pay particular attention to who you’ve designated as your contingent beneficiary.

⃝ Required Minimum Distributions (RMDs).  If you turn age 70½ this year, you must begin taking RMDs from your IRAs. You can wait until April 1,2020 but then you’ll be required to take two distributions that year. Everyone with RMDs who plans to donate money to qualified charities should consider the benefits of using a Qualified Charitable Deduction (QCD) which allows you to transfer your RMD directly to your favorite charity and possibly receive income tax benefits.

⃝ Pre-pay funeral expenses?  Ok, an odd one, I admit.  This one’s on my mind because I plan to do this soon.  I’ll write a follow up column on the topic.

Note that many of these strategies have rules/regulations associated with them.  Print this list out and visit with your tax or financial advisor and, together, determine which strategies make sense for you.