Friday, December 27, 2019

2019 Year-End Tips from Potomac Wealth Strategies


December 27, 2019

Year-End Tips on Taxes, Investments, and Planning

To:       Clients and friends of Potomac Wealth Strategies, LLC
From:   Gary Partoyan

Please consult a tax professional for advice on tax-related matters.  I am here to guide you but am not able to give formal tax advice.

Taxes
·       Required Minimum Distributions "RMD" are due by 12/31/19 from IRAs and 401(k)s and some other retirement accounts.  ALL PWS clients are good to go on this now—THANK YOU for working with me in November and early-December to get it all done!
·       Ask your tax professional if you are subject to RMD (usually only if over age 70.5).
·       Pay your estimated taxes if applicable.
·       Set your 2020 tax withholding elections with your Payroll/HR team at work
·       Harvest gains/losses in taxable investment accounts, if applicable, by 12/31/19.  FEW clients need to do this; applicable only to taxable accounts.
·       Hire a tax pro to help with these and other decisions.  Contact me if you want referrals.

Retirement Savings/Contributions
·       401(k) and similar... contribution limits are $19,500 ($26,000 if age 50+) for 2020, increased from $19,000/$25,000 for 2019.
·       Make sure you’re on track to contribute maximum allowed, or maximum you can afford.
·       Make sure you contribute at least minimum necessary to get maximum “free money” (company matching or profit sharing) from your employer.
·       Contribution limits apply to all 401(k) plans combined.
o   If you changed jobs, you new 401(k) may not know how much you contributed to your old 401(k), so talk to HR/Payroll at new job to try to adjust if necessary.
·       IRA/Roth IRA... contribution limits are $6000 ($7000 if age 50+) for 2020, same s 2019.
o   Ask your tax pro or me about "Roth Conversion" as a way to reduce taxes in retirement.
·       SIMPLE IRA contribution limit increased to $13,500 (from $13,000 in 2019); for age 50+ it’s now $16,500 ($16,000)
·       Retirement savings target should be ~15% of your salary (gross pay), but please do an Investment Plan with me to be more clear about your specific situation.
·       If you are a business-owner, let's talk.  Great opportunities to save more than typical "employees" using SEP-IRA and/or Individual 401(k) plans.

529 college savings plans
·       Contributions for this year are due by 12/31 in most states, but there are some exceptions.
·       Contributions may be deductible, so check with the 529 Plan and your tax advisor.
o   If you have cash set aside already, try to put it into a 529 before 12/31 so you can get any possible state income tax deductions.
·       Anyone can contribute to a 529.  But do NOT make check payable to the child when giving a gift.  Best to contact the 529 plan for most efficient way to write the check.
·       Ask your tax pro or me, or click here, for more about 529 plans.

Employee Benefits
·       Most employers offering healthcare insurance and other benefits have a schedule for renewing or changing for next year, aka "open enrollment".
·       Please make sure your benefits are the way you want for the coming year.
·       Consider child care benefits offered.
·       Consider tax advantages of using a Healthcare Savings Account (HSA).
·       Contact HR/Benefits for help.

Review Investments
·       Know your risk tolerance profile and asset allocation targets.  I can help you determine this.
·       Is your portfolio Conservative, Moderate, Aggressive, or somewhere in-between?  Is that suitable for your risk tolerance?
·       Are the investments high-quality, or do you need to use better mutual funds or ETFs?
·       Change your portfolios accordingly.

Miscellaneous
·       Flexible Spending Accounts (FSA) and Healthcare Savings Accounts (HSA) can provide many advantages.  Find out if they are available through employer or otherwise.
·       Save your receipts/confirmations for charitable contributions, in case they are needed.
·       Beneficiary Designations on your IRAs, 401(k)s, insurance policies, annuities, and other retirement plans out-rank what you specify in your Will and/or Trust, so be sure to synchronize your accounts with your estate plan.
o   Consult your tax and estate planning advisors if you have complexities such as blended families and multiple marriages.  I can help you figure out what to ask those pros.

How To Be Financially Successful
·       My most "successful" clients are on track to meet their personal goals and prepared for emergencies, regardless of income or size of nest egg.
o   Saving enough, investing prudently, insured for disability and death.
·       Do an Investment Plan with me—it's worth the extra time/effort, and it's included in your fee.
·       Schedule a call or meeting for January.

Be well and enjoy the holiday season.  Thank you for your business!


Gary Partoyan
Financial Advisor