LRPC’s Monday Morning Minute for this week, “Year-End Portfolio Checkup: Five Tax-Smart Tips” (presented below) comes to you courtesy of Charles Schwab & Co. As an independent, objective Registered Investment Advisory (RIA) firm, Lawton Retirement Plan Consultants, LLC (LRPC) has access to research from many sources. Be assured that I will share enlightening, useful information with you each week.
There is time yet to make adjustments to your portfolio that can help you when you file your 2017 taxes. Take a look at the list below from Schwab to see if any make sense for you.
Have a wonderful week!
Year-End Portfolio Checkup: Five Tax-Smart Tips
By Hayden Adams, Charles Schwab & Co.
The end of the year is a good time for investors to think about their portfolios and their overall savings and investing approach. There’s still time to take steps that could help to minimize your tax liability for the current tax year and to position your portfolio for the coming year.
Here are five steps you should consider now:
1. Rebalance your portfolio
Market changes can skew your asset allocation from its original target. Over time, assets that have gained in value will account for more of your portfolio, while those that have declined will account for less. This can leave you exposed to unintended risk if the market environment should suddenly change, turning former “winners” into underperformers.
Rebalancing means selling positions that have become overweight in relation to your target allocation and moving the proceeds to positions that have become underweight. The end of the year is a good time to take a look at your portfolio allocation and make sure it’s aligned to your goals and risk tolerance. This can be especially important for people nearing or in retirement, who might not be able to withstand sudden volatility.
2. Consider tax-loss harvesting
Tax-loss harvesting is an underappreciated investing strategy that investors should consider while rebalancing their portfolios. Investors generally don’t want to sell anything at a loss, but there can be a significant tax benefit if you have capital gains to offset. Tax-loss harvesting can also serve as a motivation to sell underperforming investments or to re-diversify overly concentrated stock positions.
3. Max out retirement savings (if you can)
The end of the year is a good time to evaluate your overall savings and determine if you can bump up what you’re putting away for retirement. It’s a good idea to take full advantage of your employee retirement plan, at least to the point of any employer match. You can also use lump sums, like an annual bonus, to give your savings a boost. If you’re self-employed, consider a small business retirement account such as a SEP-IRA, SIMPLE IRA or individual 401(k).
4. Consider a Health Savings Account (HSA)
It’s open-enrollment season, and if your employer offers an HSA — and you qualify to contribute to one — this tax-advantaged way of setting aside money for qualified medical expenses may be worth a look. HSAs offer a triple tax advantage: you pay no federal taxes on your contributions, no federal taxes on investment earnings and no taxes on withdrawals as long as the money is used for qualified medical expenses.
5. Charitable giving
The end of the year is a time when many people think about charitable giving. As with other aspects of your finances, it’s important for charitable giving to be part of a broader financial plan. Two considerations, particularly for older investors, are: taking advantage of the charitable gift exclusion to contribute to a child or grandchild’s 529 college savings account; and donating a portion of your retirement income that you don’t need for living expenses, as you can deduct contributions to qualified organizations.
If you’re 70½ or older, you could also consider donating directly to a charity from your retirement account, using a qualified charitable distribution (QCD). A QCD allows you to meet the required minimum distribution and has the added benefit of not being included in your taxable income.
Year-end is a great time to give your portfolio a checkup. Consider these tax-smart strategies to help boost your after-tax returns.
Lawton Retirement Plan Consultants, LLC (LRPC) Monday Morning Minute is crafted to provide decision-makers with important information about the economy, investments and corporate retirement plans in a format that allows a reader to consume the information in less than 60 seconds. As an independent, objective investment adviser, LRPC has access to many sources of research and shares the best and most relevant information with its readers each week.
Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Adviser (RIA) providing investment advisory, fiduciary compliance, employee education, provider management and plan design services to retirement plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or email@example.com or visit the firm’s website at http://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.