It’s December and it won’t be long before the Times Square Ball drops and marks the end of 2014.
Before you completely check out for year-end holiday festivities, do yourself a favor and take a serious year-end look at your personal finances.
With a little bit of focus and attentiveness, you should be able to work your way through a punch list of essential tasks during the first half of the month.
Here’s a quick checklist of that will help guide you.
Tax Prep
Take a cool and dispassionate look at your portfolio. Are there stocks with big losses you are planning to dump in 2015?
If you’re planning to sell the better performing stocks to realize capital gains, consider selling before the end of year to “harvest” tax losses.
Tax loss harvesting can be an an effective way to minimize your tax hit.
There are risks, though, so consult with your financial adviser or a certified public accountant before employing this strategy in a big way.
Portfolio proofing
It’s time to truth-test your investments.
Do you have the right lineup for a more volatile market, higher geopolitical risk, growth risks in the Eurozone, China and Japan, and lower commodity prices?
Now that the year is winding down, it may be an opportune time to consider where the vulnerabilities are in your portfolio.
Time for more defensive positions with high dividend yields? How exposed are your key holdings to the depressed energy prices.
Take a deep dive into your year-end statement. Which stocks are lagging and why. Is the overall portfolio diversified enough?
Retirement accounts
Time is running out to max out on your contributions to your 401(k) or an IRA to save on a tax-deferred basis and lower your 2014 tax bill, now is the time.
Contributions to your 401(k) or other retirement plans need to be made by December 31.
Remember: the 2014 contribution limit is $17,500, or $23,000 for people age 50 or older.
401(k) rollovers
Disappointed with the returns and fees of your current or past employee-sponsored plans that you have failed to rollover?
Take action: it might be time to rethink your strategy and look outside your company for other options.
Ask your employer if the company offers in-service distributions.
Federal tax law allows workers to roll their 401(k) assets into an IRA once they hit 59½ without the federal 10% penalty and the state penalty.
If you are ready to make a move and are worried about the paperwork involved to rollover an existing 401(k) or take an in-service distribution, don’t be.
Many online platforms offer easy setup and transparent views of fees and returns, so you’ll have the data you need to compare the costs, service and convenience with your current portfolio manager.
So what’s holding you up? Get moving. The clock is ticking on 2014.
DISCLAIMER: The information contained in this article is general in nature and not intended as specific advice. Neither Covestor nor its representatives are engaged in rendering tax or legal advice. A qualified professional should be consulted regarding the effect of such considerations on the matters covered in this contributed article.
