This time of year, our lives can become full of to-do lists — gifts to buy for loved ones, grocery runs to stock up for the next celebration, and let’s not forget the biggest to-do list of all: your New Year’s resolutions. With all the holiday whirl, however, it’s easy to forget about your financial to-do list. This year make sure you include these three important steps.
Max out your retirement savings plan contribution.
The maximum amount an individual can contribute to a 401(k) plan in 2018 is $18,500 if they’re under the age of 50 and $24,500 if they’re 50 or older. The maximum amount an individual can contribute to an IRA in 2018 is $5,500 if they’re under the age of 50 and $6,500 if they’re 50 or older. If you haven’t yet reached your contribution limit, try to direct some dollars into those accounts. Your future self will thank you.
Plan your charitable gifts.
Contributions are deductible in the year made. Thus, donations made via credit card before the end of 2018 count for 2018 even if the credit card bill isn’t paid until 2019. Also, checks count for 2018 if they are mailed in 2018. Contributions made by text message are deductible in the year your contribution is charged to your telephone or wireless account (even though you might pay the bill the following year).
Cash donations, regardless of the amount, must be proven by a bank record such as a canceled check or credit card receipt showing the name of the charity, or a written document from the organization showing its name, the date and the amount donated. For noncash donations worth $250 or more, including clothing and household items, get a receipt from the charity showing its name, date of the gift and a reasonably detailed description of the property. If a donation is left at a charity’s unattended drop site, keep a written record that includes that same information, as well as the fair market value of the property at the time of donation and the method used to determine that value.
If you have a taxable brokerage account, your advisor can help you balance any losses with any gains you may have to help minimize the tax bill you’ll owe in 2019. Essentially, you’ll want to sell off taxable investments that have losses, which reduces the gain that other assets in your account may have produced throughout the year — which in turn can help shrink the amount of taxes you’ll pay on your gains for the year. Also known as “tax harvesting,” the process can be complex to do correctly, so you’ll want to seek the help of a professional to cross this item off your to-do list.
Lists can be an important part of staying on track at any time of the year, but they become especially important in December.
This year, don’t forget to include these key financial tasks on your to-do list. They may not be as festive as putting up lights or planning for the next holiday celebration, but they’ll ultimately be helpful in achieving a goal that can be enjoyable any time of year: financial security.