New Year Financial Checklist
At CURO, we celebrate and encourage financial wellness all the year through and want to help you do the same. We have compiled a New Year Financial Checklist to help you review your financial decisions and new ones to consider in order to improve your financial well-being and help you accomplish your goals. Take a look at these important check points when making a plan for your year and we’ll also discuss these considerations with you at our yearly review.
Please note - There has been a HUGE change to retirement planning due to SECURE ACT: Elimination of the lifetime stretch" provision for non-spouse beneficiaries of inherited IRA and other retirement accounts, replaced by 10- year distribution cap.
1: Contribute More to Your Retirement Plans this Year
□ Contribute up to $19,500 to any kind of 401(k), 403(b), or 457 Plan with a $6,500 catch- up contribution if you are 50 or older.
□ If you are self-employed, investigate whether you can establish and fund a Solo 401(k) before the end of 2020. You may direct $57,000 into one of those plans.
□ Make your 2020 tax year contribution to a Roth or Traditional IRA as early as possible ($6,000 or $7,000 if age 50 or over). The SECURE Act made Traditional IRA contributions available beyond 70 1/2.
□ Consider making after tax contributions to your employer sponsored retirement plan up to $63,500 in total.
2: Go Roth in 2020
□ Understand that if you are a high earner, income phase-out limits may affect your chance to make Roth IRA contributions.
□ For 2020, phase-outs kick in at $206,000 for joint filers and $139,000 for single filers and heads of households.
□ Contribute to a Traditional IRA in 2020 and then convert to a Roth IRA if your income prevents you from initially contributing to a Roth IRA.
□ Don’t forget that partial Roth conversions are always possible.
3: Make a Charitable Gift the Smart Way
□ Claim the charitable deduction on your 2020 return, provided you itemize your deductions on Schedule A
If you give cash, document it with a bank record or written communication from charity with the date and amount
If you gift appreciated securities that you have owned for more than a year, you will be in line to take a deduction for 100% of their fair market value, and avoid capital gains tax that would have resulted from simply selling the investment and donating the proceeds
□ Consider a donor advised fund if you will not be itemizing your deductions in 2020.
□ Qualified Charitable Distributions (QCDs) still allowed at 70 1/2. Consider making them to lower your RMDs at 72 which is a new limit due to the 2019 SECURE Act.
4: Open a Health Savings Account (HSA)
□ Set up and fund a Health Savings Account in 2020 if you are enrolled in a high- deductible health plan
□ Make fully tax-deductible HSA contributions to of up to $3,550 (singles) or
$7,100 (families); catch-up contributions of up to $1,000 are permitted for those 55 or
older
HSA assets grow tax deferred and withdrawals from these accounts are tax free if used
to pay for qualified health care expenses. If you don’t take any withdrawals while working, they can be used tax-free in retirement to pay for Medicare premiums.
5: Pay Attention to Asset Location
□ Make sure your least tax-efficient securities go in pre-tax accounts and your most tax- efficient securities should be held in taxable accounts.
6: Review Your Withholding Status
□ Make sure to adjust your withholding status due to any of the following factors:
You pay a great deal of income tax each year
You get a big federal tax refund each year
You recently married or divorced
A family member recently passed away
You have a new job and are earning much more than before
You started a business venture or became self-employed
You back-ended contributions to your employer sponsored retirement plan last year
7: If You’re Getting Married or Divorced in 2020
□ Make changes to the relevant beneficiary forms (don’t forget group or personal insurance)
□ Adjust and revise your retirement savings and investments accounts
□ Make sure to get a new Social Security card if your last name is going to change
8: If You’re Retired and Older than 72, Remember Your RMDs
□ Make sure you begin taking Required Minimum Distributions from traditional IRAs 401(k), 403(b), and profit-sharing plans by December 31st of each year. IRS penalty for failing to take an RMD equals 50% of the RMD amount that is not withdrawn.
9: Consider the Tax Impact of Upcoming Transactions if You Are:
□ Planning to sell or buy real estate this year
□ If you are going to exercise stock options in the coming months
□ If any large commissions or bonuses are coming your way in 2020
□ If you anticipate selling an investment that is held outside a tax-deferred account
While this checklist can help you get started, speaking to us is the best way to get your 2020 financial life in order. Reach out to us today – we are always happy to help you or someone you care about achieve your financial dreams.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Commonwealth Financial Network® nor any of its representatives may give legal or tax advice.
Limitations and Early Withdrawals: Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney.
Retirement Plans: Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 1/2, may be subject to an additional 10% IRS tax penalty.
Roth IRA: Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 1/2 or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.Download our checklist today and get started on making your New Year’s Resolutions stick.