Transcript:
Easan Arulanantham:
“What should I have on my annual financial checklist?”
Tom Vaughan:
Okay, so “end of the year financial checklist?” Yeah, that’s a good question. Actually, there are some things you know, a matter of fact, we get pretty busy at the end of the year, because there’s a whole bunch of things that we might be able to do. So obviously, one of the things you want to take a look at, is do you have anything at a loss, that is in a taxable account? And you might want to sell it, and take that loss, and kind of harvest it: it’s called “tax loss harvesting.” You want to harvest that loss. And maybe have some gains that you want to take at the same time, to kind of offset that would be fine, or you can just keep those losses. And you’ll be able to take $3,000 of those losses off of your tax return as a deduction, or write it off against future gains; I think up to 15 years is how that works. And so anything that you have as a loss of a taxable account, in my opinion, it needs to be something worthwhile. If I’ve got $100,000 in something that’s down $100, I’m not going to sell it just because I don’t want to deal with it, but if it’s down $3,000 or something I might sell it. So maybe I would move from short term government bond fund that was down a little bit to a short term Treasury Inflation Protected Securities ETF.
Similar scenario, but hopefully different enough to get through, what they call “the wash sale.” Or you can just sell something and wait 31 days and then buy it back, if you’re if you’re interested in buying it again. So that would be one thing is tax loss harvesting. The other thing, of course, is Required Minimum Distributions. So for those of you that are over 72, you have to take money out. If you haven’t taken it out yet, you should be working on that now. And making sure that you know, you get that completed before the end of the year, because there’s a penalty of 50%: If you’re supposed to take out $10,000 and you don’t for some reason, you’ll have a $5,000 penalty; so nobody wants to pay that. Oftentimes you’re able to give to charities… through your Required Minimum Distribution: it’s called a Qualified Charitable Distribution. I would really be working on that right now, because the charity has to cash the check, in order for it to count as part of your Required Minimum Distribution. So for example, if I’m, if I need to take out $10,000, I can give $1000 of that to the charity. And as long as they cash, it will count as $1,000 distribution out of my IRA; but only $9,000 now will end up on my tax return.
So I just got rid of $1,000 worth of income. And I was going to give $1,000 to that charity anyway, so that’s a really efficient way of doing it. But if they don’t cash it until next year, for some reason, so that’s why you got to kind of get early on the charitable contributions. That’s true in general, even for a normal charitable contribution. The charity needs to cash the check. So, you know, that aspect of it is, is important to work on to. So those are a couple things that jumped out at me as year end, oh! Roth IRA conversions, right? That’s what we’re kind of busy doing right now. So obviously, often wait till the end of the year for those because we want to be able to see, you know, how much taxable income somebody has, how much room under one of the tax brackets, we have to do conversion? And so that would be another thing that’s on the checklist, if you’re going to do any Roth IRA conversions, obviously, that’s that needs to get done now too.