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As the Decade Ends, Check These Financial Items off Your List

Hunter Yarbrough, CPA, CFP
Hunter Yarbrough, CPA, CFP, Vice President and Financial Advisor

We tend to end the year thinking about goals we met or failed to accomplish during the year and ways we might improve in the new year. As the end of the decade rolls around, have you considered your financial goals?

Each year, saving more and spending less are among the most common resolutions. If you aim to increase your financial stability, here are five things you can do to end the year right.

1. Sell losers to offset gains.
The U.S. economy has now been in a bull market for over a decade, and that often means substantial capital gains for taxable (non-retirement) accounts. Any “losers” in your portfolio (whether mutual funds, ETFs, or individual securities) could be sold, at least for a time, to offset gains. Tax nerds like me call this “tax loss harvesting.”

2. Increase retirement savings.
A good rule of thumb to start with is saving 10-15% of income in retirement accounts. Contributions to 401(k)s and 403(b)s must be made before year-end to receive a deduction for 2019, but contributions made to IRAs can be made up until your tax filing deadline.

3. Make your charitable contributions.
Many nonprofits receive substantial donations during the last month of the year. To receive a tax deduction for 2019, gifts must be made in the calendar year. For those that might have highly appreciated securities in a taxable account, you can “sweeten the deal” by gifting these securities, which means you are no longer subject to taxes on those capital gains. Many organizations accept gifts of stock directly, and you can also consider gifting through a donor advised fund. By gifting to a donor advised fund, individuals receive a tax deduction in the year the securities are deposited into a donor advised fund. They can then make the gift to the charity of their choice at a later date.

4. Consider a Roth conversion.
Do you have a retirement account, such as a 401(k), 403(b), IRA, etc.? If so, make sure you know what tax bracket you are going to end up in this year. If your income is lower this year compared to previous and/or future years, it may make sense to pay taxes now, rather than at a higher rate in retirement.

Contributions to IRAs are different than Roth conversions. While contributions are cash additions to IRAs, a Roth conversion just means a traditional, pre-tax IRA is being “converted” to a Roth (after tax) account and will not be taxed upon distribution in retirement.

5. Take a look at next year’s budget.
What will be different in next year’s budget, and how can you adjust? Consider income changes and expenses – from needs, like groceries to long term goals, like retirement and college savings. For Christmas presents next year, it might make sense to save a little bit each month ahead of time. To help keep things simple and organized, consider using a low-cost (or no-cost) online budgeting tool.

As 2020 approaches, take some time to reflect on all the hard work you’ve put in this year as you continue to plan for the future.

Hunter Yarbrough, CPA, CFP, is a vice president and financial adviser with CapWealth. He is passionate about taking a holistic view of personal finance, including investments, taxes, retirement, education, estate planning, and insurance. This article was originally published in The Tennessean on Dec. 22, 2019.

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