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Finish this Financial To-Do List and You’re DONE for the Season!

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There are certain things that always make peoples’ December to-do lists: Buy a gift for your mother-in-law who’s impossible to shop for, find the perfect outfit for the office holiday party, get cards out to family and friends with a picture that always seems to have one person not looking at the camera.

What often gets overlooked in the busy shuffle of the holiday season is the financial to-do list – the bridge that successfully brings you from one year to the next. We get it – as you’re busy putting cookies in the oven and planning dinner for 30 people, sitting down and thinking about your investments is something you’re not sure you have time to do.

That’s why Wisdom Wealth Strategies has created this list of what you should consider before the new year is upon us. You don’t have to go it alone; we’re here to answer your questions to make it even easier.

So, give yourself the ultimate holiday gift of peace of mind after you consider the 11 items we’ve outlined for you. Who knows? You might even make it to the “nice” list if you do!

Can you contribute more to your retirement plans this year? In 2020, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $6,000 ($7,000 for those making “catch-up” contributions). The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is increasing to $19,500. The catch-up contribution limit for employees 50 and older is $6,500, for a total of $26,000. Traditional IRAs, Roth IRAs, and employer-sponsored retirement plans don’t follow all of the same rules. It is wise to make sure you coordinate your savings strategy and consider all of the implications of your choices.

Before making any changes, remember that withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½.

Plan your charitable gifts wisely. You can claim the deduction on your tax return, provided you itemize your deductions with Schedule A. The paper trail is important. If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Considering a larger gift? You should know the various methods for making gifts that are best for the charity and best for your personal financial strategy. Learn more here.

Consider a health insurance plan that qualifies you for a HSA. Health Savings Account (HSA) contributions are allowed for health insurance plans that are subject to a high deductible. HSA contributions are tax advantaged; they are not subject to federal taxes or payroll taxes. The funds grow tax deferred. When distributions are made for health-related qualified expenses, they are free from income tax.

Taxpayers with single coverage are limited to $3,550 in contributions for 2020. Family plans are limited to $7,100 in coverage. The limits allow an additional $1,000 “catch-up” for those over age 55. HSA contributions aren’t “use it or lose it,” as is the case with employee benefit plans like the flex spending account. HSA funds that aren’t spent stay in your account year after year and can even be invested if your plan allows for it.

If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you will pay ordinary income taxes on HSA funds used for nonmedical expenses, but no penalty. An exception exists for HSA funds used to pay for long-term care premiums. Some or all of the premiums associated with a qualified policy may be eligible for payment from your HSA.

Pay attention to asset location. Tax-efficient asset location is an ignored fundamental of investing. Broadly speaking, your least tax-efficient securities should go in pretax accounts, and your most tax-efficient securities should be held in taxable accounts. Proper asset location makes a meaningful difference in the short term and the long run. We’ve written extensively about asset location on the Wisdom Wealth Strategies blog. For more, click here.

Review your withholding status. Should it be adjusted due to any of the following factors?

  • You tend to pay a great deal of income tax each year when you file your taxes.
  • You tend to get a big federal tax refund each year.
  • You recently married or divorced.
  • You no longer have dependents.
  • You can’t itemize any longer.
  • You have a new job and you are earning much more (or much less) than you previously did.
  • You started a business venture or became self-employed.

The IRS offers a withholding calculator here, but if you’d rather work through it with an expert, we’ll be happy to help.

Are you marrying (or divorcing) in 2020? Remember to review the beneficiaries of your retirement accounts and insurance policies. The way your accounts are titled is also critical to your planning.

Are you coming home from active duty? If so, check the status of your credit and the state of any tax and legal proceedings that might have been preempted by your orders. Make sure any employee health insurance is still there and revoke any power of attorney you may have granted to another person.

Consider the tax impact of any upcoming transactions. Are you planning to sell any real estate this year? Are you starting a business? Do you think you might exercise a stock option? Might any large commissions or bonuses come your way in 2020? Do you anticipate selling an investment that is held outside of a tax-deferred account? We appreciate being in the loop with you and any changes you are facing, as it helps us give you good advice in a timely manner.

If you are retired and older than 70½, remember your year-end RMD. Retirees over age 70½ must begin taking Required Minimum Distributions from traditional IRAs and 401(k), 403(b), and profit-sharing plans by December 31st of each year. The I.R.S. penalty for failing to take an RMD can be as much as 50% of the RMD amount that is not withdrawn. If 2020 will be your first RMD, we have written a blog post with you in mind!

Should you make 13 mortgage payments this year? There may be some merit to making a January 2020 mortgage payment in December 2019. If you have a fixed-rate loan, a lump-sum payment can reduce the principal and the total interest paid on it by that much more.

Make 2020 the year you update or complete your estate plan. Time sure flies, doesn’t it? Is your will dated before your second child was born (and that child is now in college)? Having proper and updated powers of attorney, a will, and a few other documents is so important. Let’s have a conversation about how to move forward if you’ve been struggling with the decisions you face in this area.

We know this is a long list. Your financial life is complicated, but that’s where we come in. Let’s talk about the expectations you have for 2020 and we’ll make a plan together to ensure you have your best year yet.




wisdom wealth strategies

Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.


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