A List to Consider

December is time for holiday decorating, parties, family gatherings, and year-end financial planning.  Since I’m not much of a party planner, I will devote this column to the latter and present a list of things for you to consider as you wrap up this year and prepare for the next. It is very likely that Federal Income Tax Law will change in 2017, and some of the items in my list take that                                                                                        likelihood into account.

1.  If you don’t have an investment advisor monitoring your portfolio, review your portfolio and re balance it if needed.  Hopefully you have an investment plan with an allocation that optimizes your risk and return goals.  Maybe your allocation to U.S. equities went up and bonds, or some other asset class or classes, went down.

 The usual year-end tax planning strategy of deferring income and accelerating expenses is more important than ever this year.  The tax proposals of both the President-Elect and Congress call for lower marginal tax rates along with fewer allowable itemized deductions.  They are also likely to raise the standard deduction quite a bit, which might mean that you will no longer receive any benefit from itemizing deductions. Pay whatever property tax bills you can and pay your State estimated Tax Payment, the one that’s due on January 15th,  before December 31st. 

3.  Make charitable contributions before the end of the year.  Pay by credit card if you want the credit card benefits your card offers (miles? Rebates?). Another benefit of paying by credit card is your donation will show up on the credit card statement. It gives you a record of the date and amount of your donation. Follow up with the charity if you don’t get a letter from the charity within four weeks acknowledging the amount of your gift.

4.  Review your retirement accounts for any transactions during the year, especially if you made any deposits, withdrawals, or transfers.  Review your investment allocation. You will get IRS Form 1099-R from your retirement account custodian for any withdrawals early next year and you need to make sure it matches up with your account transactions.  For example, if you transferred funds from one IRA account to another, you shouldn’t get a 1099-R, but if you do it needs to be dealt with on your tax return.  If you made a Qualified Charitable Contribution (QCD) from your IRA, your 1099-R won’t reflect that the withdrawal is a QCD, so you need to make sure it is properly reported on your tax return as a QCD and not included in your income.

5.  Don’t be suckered by the recent stock market rally and load up on stocks.  Market timing doesn’t work.  Savvy investors own a diversified portfolio of stocks and bonds and are in it for the long-term.  Trying to time the market can cause you to “Buy high and sell low” and is a loser’s game.  If you want some sound, basic, investment advice read “Winning the Loser’s Game” (6th Edition) by Charlies D.  Ellis. 



Kenneth B. Petersen CFP®, EA, MBA, AIFA® is an investment advisor and Principal of Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey.   He welcomes questions that you may have concerning investing, taxes, retirement, or estate planning.  Send your questions to: Ken Petersen, 2340 Garden Road Suite 202, Monterey, CA93940 or email them to ken@montereypw.com.