Fiscally Fit Year End

Patrick Cote |


As we begin November, - there’s something about shorter days and cooler temperatures that has my mind thinking about year-end.  As we creep closer to December 31st , it’s important to start taking an inventory of your finances. Below are a few tips and suggestions to help you get fiscally fit as we approach year-end.     


  1. RebalanceVery few people like to sell winners and buy losers.  But that’s essentially what rebalancing is, selling high and buying low. However, it’s an important step to take, especially this year as the equity market is up over 24% year to date (as measured by the S&P 500 Index.) Why is rebalancing important? Most investors began the year with a diversified portfolio, e.g., 70% equities/30% bonds.  The asset mix of your portfolio was likely driven by your risk tolerance, time horizon, or stated goal or objective.With the equity markets up over 20% this year, your diversified portfolio may no longer be in line with your objective. If your goals have NOT changed, it’s important to bring your portfolio back in line.  Before you rebalance, consider the tax consequences. If you have both a tax deferred account (401k, IRA) and a taxable account (Brokerage), consider rebalancing in your tax deferred account as there are NO tax consequences from trading in a tax deferred account.  If you are rebalancing in a taxable account, consider selling those holdings you have held the longest (preferably longer than 12 months), as they will be taxed differently than holdings held for less than 12 months.      


  1. Check In with Your Tax Preparerit’s unclear where tax rates may go in the future, but it’s likely that they may increase for some investors.  Scheduling a strategy session with your tax preparer to review your financials is important.  Your income may have changed this year or it may change in the future due to a sale of a business or promotion. It’s important to share income projections with your tax preparer, so they can advise you properly. Putting a tax plan in place now ahead of year end will give you time to implement any necessary actions to take .


  1. Understand your Required Minimum Distributions (RMDs) whether you are the owner of an Individual Retirement Account (IRA) or a beneficiary of an IRA, there are specific rules you need to follow when you claim your RMD.  Consult with your financial adviser or tax preparer before doing so. RMD’s taken from a tax deferred (traditional) IRA are taxable income, which is why it’s important to discuss withdrawal strategies.  Brokerage firms get very busy at year end, so don’t wait until mid-December to set up your RMDs.


While there are other tips to consider, the three listed above should help to get you fiscally fit before year end.  As always feel free to reach out to us if you need any assistance with your financial planning .