End of the Year Money Moves

Why It Matters:

  • End of the year is coming, don’t forget your finances.
  • Save on the amount of taxes you pay this year.
  • Meet requirements to avoid penalties and losing money.

Kastle Waserman tkc.profilePicture Written by: Kastle Waserman | Transamerica
Dec. 31, 2019

2-3 Min readClock Icon

The end of the year is hurtling towards us, and while it may be easy to become preoccupied with seasonal delights and holiday festivities, don’t neglect your finances. Be ready to make some smart money moves to reduce your tax load, save and invest more, and have an updated strategy to reach your goals in the new year.

Take Inventory

Take a look at where you are financially. Are there expenses you could be cutting, more you could put towards paying off debt or contributing to a retirement account? Do you have the recommended three to six months of emergency savings in place? What are your goals for next year? Are there some big-ticket items coming up such as home repairs, a new car, college education, a wedding, or a new baby? Get your budget updated to cover your current needs. A financial professional can help you strategize and find where you can fill in gaps you may be missing.

Wrangle All Those Taxes

Nobody is a big fan of the taxman, but some careful strategizing can help you give him less and keep more of what you earned this year. Income, capital gains, property sales, and early withdrawals can all have an impact on what you’ll need to pay in taxes. And, it’s hard to know how to calculate it all, especially when the rules change frequently. A good CPA can help review your paystubs and investments to see where you stand and suggest any moves you can make to keep more of your hard-earned cash in your pocket.

Maximize That Retirement Account

Saving for your retirement is important, and you may not be putting away as much as you should. Take this time between now and the end of the year to boost your 401(k) contributions and take advantage of the tax savings. The more you contribute, the lower your annual taxable income will be.

Maintain a Healthy Health Savings Account (HSA)

In the same way contributions to your 401(k) lower your annual taxable income, contributions to your HSA will do the same, whether they are contributed pre-tax through your employer or as a tax deduction for an individual account. This money is never taxed as long as it’s used for qualified health expenses, and it rolls over each year, so it’s yours to keep. You never know what medical bills you’ll need to cover down the road.

Flex Your Spending Muscle

If you’re enrolled in a flexible spending account (FSA) with your employer for health or dependent care expenses not covered by insurance, now’s the time to use that money. If you don’t, you’ll lose it. All those dollars you worked so hard to put away will go back to your employer. And nobody wants that! So do some spending on your self-care. Need to restock your contact lenses? Have some dental work you’ve been putting off? Haven’t done your preventative checkup this year? Do it now while you have a little time on the calendar to get those appointments made.

Harvest for Tax Losses

Think of the fall season as a time for harvesting … which includes reviewing your investments for those bum securities that decreased in value. But if you do, you can sell them and write off the loss against any capital gains or income to reduce your tax bill. You can then buy a similar security that’s performing better to keep your asset allocation well balanced. If you’re not sure how to do this, talk to your CPA or financial professional.

Take Required Minimum Distributions (RMDs)

If you are over age 72, you have to take the required minimum distribution from any IRA or retirement plan account by the end of the calendar year. To calculate your RMD, go to the IRS Uniform Lifetime Table, find the age you’ll reach in 2020 and the corresponding life expectancy factor. Divide your retirement account balance as of December 31 the prior year by your life expectancy factor. You’re free to spend or reinvest your RMDs, just don’t forget to pay taxes on them at your income tax rate.

Note the Changes for Charitable Giving

While charitable giving used to be a recommended move to make at the end of the year, those little donations to organizations you’re passionate about and that closet cleanout you donated to Goodwill may no longer help you in the tax deduction department. The tax law changed when President Trump signed the Tax Cuts and Jobs Act in 2017. Under the new law, total itemized deductions would need to exceed $12,400 for an individual and $24,800 for married couples, making it more challenging for small donations to count. However, some savvy strategists did come up with a clever way to hit this threshold by “bunching” or “bundling,” where you hold off giving one year then donate a large amount the following year that meets the minimum requirement. If you’re not in the position to make donations of these amounts, you can still contribute your favorite charities, but it will be purely altruistic.

Things to Consider: 

  • Review your overall financial strategy and make updates. 
  • Charitable giving may no longer be a tax deduction for you. 
  • Smart tax-saving moves can leave you with more to invest.

Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.

The information provided is for educational purposes only and should not be construed as tax, legal or financial advice or guidance. Please consult your personal independent advisors for answers to your specific questions.

Neither Transamerica nor its agents or representatives may provide tax, investment or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.



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