Ask Jill:

9 Year-End Money Moves

A monthly Q&A with Jill Schlesinger, CFP®, host of the Jill on Money podcast

Disclaimer: Jill Schlesinger is an ambassador for Marcus by Goldman Sachs and has received financial compensation. However, all thoughts and opinions are hers.

Marcus by Goldman Sachs is the sponsor of the Jill on Money podcast, featuring Jill Schlesinger, a Certified Financial Planner, CBS News Business Analyst and author of the new book “The Dumb Things Smart People Do With Their Money”. Listen to her podcast on Apple and Stitcher.

The Scenario:

The end of the year is quickly approaching and you want to make sure you’ve tied up any financial loose ends. 

The Question:

What can I be doing before 2019 comes to a close?

Jill’s Take:

It’s the most wonderful time of the year…the time to make money saving and headache-preventing moves before we roll into 2020. Here are nine tips to help you close out the year right.

Heads up: some of this stuff – especially the taxes – can get a little tricky, so it’s always wise to talk to your financial advisor or a tax professional for help.

1. Confirm your withholding

The IRS has a withholding estimator you can use to see if you are on track this year, before it is too late. Your company’s payroll department can help you with any withholding adjustments.

2. Self-employed tax check

If you are earning income and no organization is withholding taxes on your behalf, you should be making estimated quarterly tax payments to avoid the dreaded April surprise. If you have not done so, now is the time to figure out what is due so you can address how much you owe.

3. Determine whether you can itemize

90% of taxpayers are expected to claim the standard deduction (the amount of income that is not subject to tax). The standard deduction is $12,200 for individuals, $24,400 for married filing jointly and $18,350 for head of household. The standard deduction was expanded with the tax overhaul that went into effect in last year. Additionally, many itemized deductions were eliminated or limited which means that many who used to write off certain items were no longer able to do so.

However, according to the IRS, you might consider itemizing if your total deductions exceed the standard deduction amounts. So for instance, this could apply to you if you purchased a house in an area with high local taxes, have assumed a mortgage or were especially charitable this year.

Given the higher standard deduction threshold, consider “bundling” or “bunching” charitable gifts, whereby you give larger, lump-sum gifts, which represent present and future contributions. Doing so may allow you to itemize and as a result, capture a potential tax benefit associated with giving. But this strategy can be complex and requires quite a bit of planning. So it’s a good idea to consult with a tax professional to get all the details. 

4. Maximize your retirement plan contributions 

One way you may be able to reduce your tax liability for this calendar year is to maximize your contributions to certain retirement plan options. If your cash flow allows, contact your HR department to see if you can increase your contributions before the end of the year.

If you are self-employed or have made some extra money from a part time job or as a contractor, you may want to establish your own retirement plan. 

If you are self-employed or have made some extra money from a part time job or as a contractor, you may want to establish your own retirement plan.

Setting up your own plan can be challenging, as there are a number of IRS rules you must follow. For example, certain types of plans must be established by a certain time within the year. So talk to a retirement plan professional to understand your options and obligations. 

5. Take the bull by the horns

If you itemize and have a taxable investment account, you may want to use the multi-year bull market to your advantage. US stock indexes are up over 20% this year, which could make it a great time to gift appreciated securities from a taxable investment account because there could be potential tax advantages for the donor. That being said, the tax aspects of charitable donations can be complicated, so it’s always wise to consult with a tax professional.

6. Embrace the losers

Despite stock indexes rising in 2019, you may still have a clunker in your account. The good news is that you can sell investments with losses in taxable accounts, which may offer a tax advantage.

If you have more capital losses than gains, you can deduct up to $3,000 per year (or $1,500 if married and filing a separate return) against ordinary income; if you have more than $3,000 in losses, you can carry over that amount to future years. 

7. Take Required Minimum Distributions (RMD)

Generally, you’ll need to withdraw money from retirement accounts (excluding Roth IRAs) once you turn 70½. Failure to do may result in a 50% penalty on the amount you should have taken.

If you have multiple IRAs, you only need to take one RMD based on your age and the total value of the accounts. BUT, if you also have a 401(k) or 403(b), you need to take the RMD from each account individually. Be sure to visit the IRS for specifics.

If you don’t need your RMD, you might consider a Qualified Charitable Distribution (QCD), which allows you to direct some or all of your RMD to the charity of your choice. You don’t get to count a QCD towards your charitable deduction, but generally, the distribution isn’t taxed. 

8. Consider a Roth conversion

You may want to consider converting a Traditional IRA into a Roth IRA if one of these scenarios apply to you: your income was lower in 2019 than previous years; you believe that tax rates are likely to rise in the future; or you want to limit the impact of RMDs in the future because it could negatively impact future taxation of Social Security benefits or increase Medicare costs.

Be careful to check out IRS tax brackets, because the amount of money you convert will add to your taxable income. Once you pay the tax due on the conversion amount, the money will grow tax-free in the Roth.

9. Get creative with using your FSA

If you have a Flexible Spending Account, you’re probably familiar that these are use-it-or-lose-it accounts. It’s worth noting that some companies have a year-end deadline to use the funds, and some may allow you to carry over up to $500 into the next plan year. But between your busy holiday schedule and the availability of your doctor, it may seem like a challenge to figure out how you’re going to use your extra FSA money, if you have it.

Now is a great time to stock up on items like certain over-the-counter meds, vitamins, sunscreen, baby essentials and more. You can use your FSA dollars to cover many of these expenses.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.