Six Financial Moves to Make Before 2015 Ends

There's never a reason to leave money on the table.



At the start of 2015, 25 percent of Americans resolved to “spend less and save more,” for their New Year’s resolution. In fact, that financial goal was the fourth most-popular resolution of the year, according to January 2015 research by Nielsen. While it’s common to focus on finances after the holiday rush in January, now is the best time to maximize savings. Here are a few key areas to focus on before December 31 to help ensure you begin 2016 on strong financial footing:

1. Offset gains with losses. If you sold stocks at a profit this year, you may be able to offset that gain by reviewing your portfolio and selling assets at a loss. You can also check with your CPA to see if there are any carry-forward losses from previous years, which you could use in place of a sale. Counterbalancing gains and losses helps minimize capital gains taxes.

2. Invest in your retirement plan. The deadline for contributing to a qualified 401(k) plan, which includes most employer accounts, is December 31. Do your best to take advantage of any employer-matching programs to avoid leaving free money on the table. You can contribute up to $18,000 if you are under 50 years of age, otherwise you can contribute up to $24,000. Other plans, such as Roth and traditional IRAs, will allow you to contribute funds until April 15, 2016 for the 2015 calendar year, but the limit is $5,500 under 50 and $6,500 over 50. Make sure you know the deadline for your account. There are deduction limits for traditional IRAs and contribution limits for Roth IRAs based on income.

If you are self-employed and have no employees, you have the option of establishing a one-participant 401(k) by year-end. This has significantly higher limits of $53,000 to $59,000 in pre-tax dollars, depending on age. I recommend discussing this option with a CPA and financial planner if it is appropriate for you.

3. Take the required minimum distribution in your 401(k). The requirement to withdraw a certain amount from retirement accounts each year does not just apply to individuals aged 70 ½ and older. It can apply to anyone, regardless of age, who has recently inherited a retirement account from someone other than a spouse. If you were named the beneficiary of such an account, you must take a required minimum distribution each year by December 31. The amounts vary, and can be based on the original owner’s age and your life expectancy. The penalty for not taking this distribution is 50 percent of the amount that should have been withdrawn.

4. Spend money in your flexible spending account. An FSA account, typically set up by your employer, can be a great way to save for healthcare expenses by setting aside pre-tax dollars throughout the year. But, unless your employer offers a limited carry-over option, you will lose any saved money that is not spent by December 31. Medical FSAs can cover a variety of costs, from regular physician exams to dental cleanings to new eyeglasses — so it’s worth checking your plan and seeing what you can purchase now. If you have a significant amount of money left over, you may want to adjust your monthly contributions for 2016.

5. Donate to charity. The holiday season is a popular time for giving, both to spread the holiday cheer and to benefit from potential deductions on yearly taxes. In 2014, 31 percent of all yearly charitable giving occurred in December, with a full 12 percent gifted in the final three days of the year, according to Network for Good’s Digital Giving Index. If you are inclined to give philanthropically, I recommend developing a strategy and a gifting budget to make the most of donations to your favorite charities. UBS’ Q4 2014 Investor Watch surveyDoing well at doing good” found that such a plan raises donors’ confidence in the impact of their gift by nearly 50 percent.

With this plan in place, you can work with your CPA to structure donations in a tax-efficient manner to maximize your impact. It may be beneficial to donate highly-appreciated stocks directly to a charity, as you receive the full value of the deduction without being taxed for the sale. As a 501(3)(c) organization, the charity can then sell the stock without being taxed on the profits.

You may also want to consider gifting securities into a Donor Advised Fund. With this vehicle, you will receive the tax deduction for 2015, but can select the charity and actually donate the funds at a later date if you haven’t decided on an organization. If gifting securities, make sure to do so a few days before December 31 to leave time for the wire transfer. Otherwise, it will be marked as a 2016 donation.

6. Make sure your documents are in order. It’s always wise to review your insurance plans and estate-planning documents to ensure they are up-to-date – especially if there has been any major life change in the last year, such as a marriage, divorce, birth or death. It’s important to keep your retirement or investment account beneficiary designations current. A quick, routine review could help prevent potential legal problems down the road.

Now that you have taken advantage of the opportunities to make the most of your money by year’s end, there’s no better time to set goals for the new year. Take some time in January to review your financial plan or work with an advisor to create one that is aligned with your short- and long-term goals. An advisor will also help you to rebalance your assets back to your ideal allocation based on this plan. This can help put you well on your way to meeting that New Year’s resolution and growing your finances in 2016.

Bradford Bernstein is a financial advisor with UBS Financial Services Inc. Consult experienced legal and tax counsel before implementing a strategy.

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