Can you believe 2018 is almost over? With just over a month to tie up most financial loose ends, here are some items you’ll be sure you won’t want to miss.
Be Sure To Max Out Tax Advantaged Retirement Accounts
Hopefully you’ve already set up your work retirement accounts to max out along the year (aka dollar cost averaging). Or better yet you front loaded them and are done for the year!
Work retirement accounts such as 401(k), 403(b), and 457(b) generally have a deadline of by your last paycheck of the year. It can also take 1-2 pay cycles for any changes to your contributions – so do this ASAP if you need to increase your contributions. Don’t forget to reset this in January unless you want to frontload the accounts.
Don’t forget to fund your Roth IRA! Most physicians will need to backdoor it. You do have until Tax Day in April to fund it, however, it is cleaner if you do the IRA contribution & conversion this calendar year. This is due to Form 8606. You report the contribution on the tax year (2018) but you report the conversion in the calendar year tax year. So if you wait till January 2019 to backdoor, you’ll have to report this on Form 8606 in 2018 and 2019. Not a big deal, but you’ll need to keep track of that or make sure your CPA does for you.
Are you self employed or have a side hustle? You have until 1/15 to contribute your employee contributions and till tax day April for the employer contributions for solo-401(k). If you don’t have a solo-401(k) you have until 12/31 to open one – so get on it! If you’re a procrastinator, then you’ll need to open a SEP-IRA. You have until tax day extension in October to open and fund one.
If you’re lucky to have access to a Health Savings Account (HSA) and are using it as a Stealth IRA, you have until Tax Day in April to fund one. Most folks will fund one via paycheck through work. I self fund it and contributed to it in one lump sum at Lively. Don’t forget to invest the money inside the HSA as well.
Tax Loss Harvesting
This was a great year to take advantage of Tax Loss Harvesting (TLH). TLH lets you capture losses in your taxable or regular brokerage account to reduce your tax burden. You can carry forward losses > $3,000 to use in future tax returns as well.
Speaking of investments, make sure you know when to rebalance your portfolio. I recommend doing this once a year and definitely not more than twice a year. Pick an annual date to do this.
Be Smart about Charitable Donations
The new Tax Law makes it more difficult to itemize deductions since the standard deduction is much higher. Hopefully no one donates just for the tax write off. The best way to donate and get a tax break is to lump your donations every other year (or more) so that you are able to itemize deductions.
The best way to do this is to open and fund a Donor Advised Fund (DAF). Why? You take the tax write off the year you contribute to the fund, then you’re free to donate to any charity you’d like without having to keep track and save receipts for tax day. You can also donate anonymously very easily via a DAF. I will be opening one next year for this reason.
Claim FSA Money
Don’t forget to use up your Flexible Spending Account(s). Some will let you carry forward up to $500 to the following year. However most of the plans are “use it or lose it.” Your plan can also offer a two and a half month grace period (March 15). Bottom line – read the fine print of your FSA plan.
The same applies for Dependent Care FSA plans. I wonder where the lost money goes – anyone know?
There is no end of year deadline for this per se … however this ends up being an non-urgent item on the to-do list. If you’re reading this and you do not have a will – what are you waiting for? Perhaps you elected a legal plan through your employer and the deadline to use it or lose is coming up. If you are married and/or have children having a will is a must to elect a guardian in case of your early demise. Otherwise the state will pick for you.
Along these lines, if you or your partner passes, do you have access to his/her accounts, logins and passwords? First, you’ll want to make sure you have Power Of Attorney. This is not valid upon death but many things can happen where you’ll need access to accounts. For password and secure digital document management I recommend a program like Lastpass. For most folks, the family plan will be appropriate. This allows the whole family to use Lastpass to manage passwords. Lastpass can also generate secure passwords (you’re not using the same password for all your logins, right?).
You can also use it as a secure digital vault – I upload copies of important documents such as driver’s licenses, passports, social security cards, life insurance policies and other insurance policies. I essentially use it as a digital death book.
Anything else? Comment below!