Maximize Savings: Your End of Year Financial Checklist

As 2018 comes to a close, it’s an important time to revisit your financials to maximize savings, ensure you start the new year strong and to stay on track to accomplish your goals. From tax managing your investments to executing your charitable gifting strategy, here are some checklist financial planning items you might want to consider as you get ready for 2019:

end of year financial checklist and tips

Tax Manage your Investments.

  • Tax loss harvesting.  Look to sell losing investment positions to offset capital gains.  Be aware of the wash sale rules.

  • Coordinate tax-aware rebalancing of your portfolio. With the markets up substantially over the last several years, you’ll probably want to bring your asset allocation to their target weights, but you might want to delay taking those large gains until January so you can delay paying the taxes another 12 months.

  • Optimize income and expenses. If possible, delay the receipt of end of year bonuses into 2019 and accelerate expenses into 2018 to potentially lower your 2018 tax bill.

  • Watch out for mutual fund distributions.  Mutual funds distribute capital gains distributions toward the end of the year.  If you’re buying into a fund late in the year, check to see if they’ve already made the distribution.  You don’t want to essentially buy someone else’s large capital gains distributions.

  • Max out contributions. If possible, ensure that you max out contributions to 401Ks, IRAs (not due until April 15th), SEPs (due April 15th or extension deadline), Simple IRAs (April 15th deadline) or other qualified accounts.

  • Consider a Roth conversion.  With a Roth conversion (December 31st deadline), you’ll convert pre-tax IRA money into nontaxable Roth IRA money.  You’ll be taxed on the conversion amount as ordinary income, but all future gains and distributions within the limitations won’t be taxed.  This makes the most sense to do if you’ve had a down year income wise. Also, unlike in previous years, you can’t change your mind and reverse the Roth conversion through a Roth re-characterization due to Tax Cuts and Jobs Act (TCJA).

Review the Basics and Tidy Up your Accounts.

  • Review health savings accounts (HSA) contributions.  You have until the April tax deadline to make an HSA contribution.  If you don’t have an HSA, we’d strongly encourage you to explore if you’re eligible, given the account’s triple tax benefits.

  • Spend Flexible Savings Account (FSA) remaining balances.  If you don’t use the money in the account by December 31st, you lose out on the opportunity to spend that money.    

  • Update your beneficiaries on your retirement accounts and insurance policies.  Failing to update beneficiaries can be one of the biggest financial and estate planning blunders one can make.  If there’s been a change in your circumstances, it’s important to address this.

  • Make annual gifts to reduce the size of your estate.  The annual gift tax exclusion is $15,000 for 2018.   

Execute your Charitable Gifting Strategy.

  • Donate to a Donor Advised Fund (DAF). With the TCJA’s higher standard deduction, fewer people will be itemizing.  You may want to consider donating to a donor-advised fund (DAF) in 2018 the next several years of expected charitable contributions.  The DAF will let you make the contributions to the charity over time, but you can take the deduction immediately.

  • Choose how you fund charitable gifts wisely.  If you’re making a charitable contribution, it’s preferable tax-wise to donate low basis stock to a charity or donor-advised fund as opposed to selling positions and giving cash.

  • Consider a Qualified Charitable Distribution (QCD). Another way to minimize your tax burden for those that may not be able to itemize anymore and are over 70.5, is to take a QCD, which is a direct distribution under $100,000 from an IRA to a charity. The QCD counts toward the RMD and reduces the tax burden of your distribution. Moreover, the QCD can lower the impact of how much your Social Security benefit is taxed.

tips to maximize savings for retirement

Be Mindful of Age Milestones.

  • Over 50:  You are now eligible to take a “catch-up contribution” to your IRAs and some qualified plans (401K, etc.).

  • Over 55:  You are now eligible to take certain types of distributions from your old 401Ks without penalty.

  • Over 59.5:  You are now eligible to take an IRA distribution without a 10% penalty.

  • Over 62:  You are now eligible for Social Security.

  • Over 65: You are now eligible for Medicare. If you sign up late, you could face a 10% penalty.

  • Over 70.5:  Don’t forget to take your required minimum distributions (RMDs) on your IRA accounts. There’s a massive 50% penalty if you fail to take the RMD, but you can potentially get a waiver if you miss the deadline.

Open New Accounts for your Children or Grandchildren to Maximize Savings.

  • Open Roth IRA or traditional IRA accounts for children or grandchildren who have had earned income.  Child IRA assets are non-assessable in the FAFSA for student aid eligibility.  You don’t necessarily have to put the money they’ve earned into the Roth IRA or IRA, you can let them spend the money they’ve made and then redirect other money that’s going toward college savings into a Roth IRA.

  • Consider 529 contributions for your children, grandchildren or yourself. If you already have children, opening a 529 is simply a must to begin saving for those college years. People without children can also open 529s for themselves and change the beneficiary once they have children.  This maximizes the amount of time of tax-free compounding in the accounts.

David Flores Wilson, CFP®, CFA, is a New York City-based Senior Wealth Advisor at Watts Capital. He can be reached at