‘Tis the season for hot cocoa, holiday festivities, and getting your financial ducks in a row. Here is Alexis Advisors’ year-end checklist to help you plan ahead while looking back on another year passed.


1. Schedule a meeting with your financial advisor and accountant. The end of the year is a good time for a “financial checkup.” Send financial updates to your advisor and schedule a time to review your accounts or your financial plan, if necessary. If you use a tax advisor, consider checking in before December 31 as there may be time-sensitive strategies worth considering. The Tax Cuts & Jobs Act (TCJA) has made some of these strategies even more relevant – for example, doing Roth conversions now that income tax brackets are lower and the standard deductions are higher.

2. Review/update your Medicare coverage. Each year, the Medicare Open Enrollment Period begins on October 15th and runs through December 7th. During this time, Medicare participants have the opportunity to make changes to their coverage that are not generally allowed at other times during the year. These potential changes include adding a Medicare Part D prescription drug plan or switching to a new one; changing between original Medicare and a Medicare Advantage Plan; or switching from one Medicare Advantage plan to another.

It’s especially important to review your Medicare Part D coverage at this time. Often, the providers will switch formularies, meaning that certain favorably-priced drugs will be covered in a certain year. It’s important to monitor this and update your coverage if needed to avoid a spike in healthcare costs caused by key drugs no longer being covered.

3. Donate to charity. December 31 is the deadline for charitable contributions you plan to deduct from your 2018 tax return. You can donate cash, or you can donate securities, such as low-basis stocks or mutual funds, to avoid capital gains taxes. Again, consult with your tax advisor on the best strategies.

If you aren’t certain where you want your charitable contributions to go, contact Molly Dean Bittner at The Community Foundation Serving Richmond and Central Virginia (mdbittner@tcfrichmond.org) to learn more about setting up a donor-advised fund (DAF). A DAF allows you to gift money and get a tax deduction this year, but distribute funds to charities of your choice in the future, while the assets are invested.

4. Max out retirement contributions. Contributions to 401(k), 403(b), and other retirement savings plans are only deductible for 2018 if made by year-end. The 2018 contribution limit for 401(k)s is $18,000, with a catch-up contribution for those 50 and older of $6,000.

Contributions to both Traditional and Roth IRAs can be made any time until the tax deadline in April, with a maximum contribution of $5,500 and catch-up contribution for those 50 and older of $1,000. Keep in mind that your income level will determine the tax deductibility of Traditional IRA contributions and the contribution limits for Roth IRAs. If one spouse doesn’t work, funding a spousal IRA may be a way to contribute more. Check with your tax professional if you aren’t sure about the deductibility and contribution limits.

5. Make contributions to college savings plans. Contributions to 529 plans must be made by December 31 to be deductible for the current year. Virginia 529 contributions are state tax deductible up to $4,000 per account, with unlimited deductibility carryforward for contributions in excess of $4,000. Additionally, contributions may be treated as a gift to the beneficiary, which means that contributions up to $14,000 per year or $28,000 if married and filing jointly are free of gift tax.

6. Check your FSA deadline. If you still have money set aside in an employer Flexible Spending Account (FSA) for health care expenses, check with your Human Resources department regarding the deadline for using these funds. In most instances, companies are now required to offer a grace period after year end. However, it’s important to check the provisions because the grace period does not change the “use-it-or-lose-it” component. Contributions are made pre-tax, and aren’t taxable if applied to qualified medical expenses.

7. Fund your HSA. A Health Savings Account (HSA) is different than an FSA. While both can be used to pay for healthcare expenses, you can carry over your HSA from year to year, providing another tax-deferred savings vehicle. Contribution limits are $3,450 for a single person and $6,900 for a family, with a catch-up contribution for those 55 or older of $1,000. Contributions must be made by December 31 to be deductible in 2018.

8. Check that your beneficiary designations are up to date. You can check the beneficiaries on your retirement accounts or insurance policies at any time, but it’s a good idea to do this at least annually, particularly if you have gone through a significant life event (birth of a child, death of a loved one, divorce, etc.) And remember – beneficiary designations trump what’s in your will, so checking these is doubly important!

9. Review your will and estate documents. If you have gone through a significant life event during the course of the year, it’s very important to update your estate documents. Otherwise, reviewing these every five years is typically a good rule of thumb.

Here are some additional steps that apply in certain circumstances:

  • Take your required minimum distribution. In the year following the year you reach age 70 ½, you must take the required minimum distribution (RMD) from your Traditional IRA by April 1. The penalty for failing to take your RMD is a 50% tax on what should have been withdrawn. (Clients will receive notification of RMD amounts required over the coming months.)
  • Defer income and accelerate expenses. Income that arrives in 2018 is taxable in 2018, so in some instances, it might make sense to delay income in order to delay the tax bill. The bulk of these strategies are mainly appropriate for small business owners, but it may be worth asking your employer if they are willing to pay your bonus on the first of the year, if such a strategy would assist in your tax planning.

On the other side of the equation, those who want to reduce their current tax liability may want to accelerate tax-deductible expenses (i.e., if your medical costs exceed 10% of your adjusted gross income in a single year) or prepay recurring expenses (i.e., property taxes) before the end of the year.