Now that we've entered the last month of the year, our thoughts tend to stray to holiday thinking. Christmas, Chanukah, New Year's... it's all about thinking and being about the holidays. The joys (and stresses) of setting up the house in all its festive colors, shop till you drop (or your fingers get numb!), thinking about time spent with the kids off from school, or perhaps a vacation. It's a festive time to say the least, resplendent with all that glitters and things that make you smile. It's also a time to think about those end-of-year issues that should be considered before the beginning of 2018. Let's take a look:
Tax selling. "Harvesting losses" is the action of selling those positions in your portfolio that may not have performed as good as you had hoped, and are clocking in at a loss. Losses taken in year 2017 can be used to offset any gains taken in the same calendar year. This means that if you sold a position and realized a gain, you would be paying taxes on the gain. If you held the position less than 12 months, it's considered a "short term gain:" taxed at your current tax bracket. If you held the stock for more than 12 months, that same gain is considered "long term gains:" taxed at a flat 15%, or a max of 20% if you are in the upper end 39% tax bracket. Tax harvesting, or selling your positions that are at a loss can be used to offset the taxes you would be paying on your gains. Additionally, if you have used your losses against your gains and have some losses in excess, you can use an additional $3000 per year- the rest is allowed to be saved to next year to do it all again. The gains and losses though must be done in year 2017- now is the time to asses your non-retirement money to see how you can tidy up your portfolio and use the tax advantages to your benefit.
When is the last time you really took the time to review your asset allocation in your 401(k) or school or medical 403(b) plan, or IRA and Roth IRA accounts? The market changes over time, and selections offered in your plan such as varied sectors, growth and value mutual funds, small, mid and large cap, domestic, international and emerging markets (as well as other areas of investment choices) also move in and out of favor. Using 2017 as an example, the difference between being in the areas in favor as opposed to out of favor could have been a difference of 5%, 10% or more in your overall yearly performance, meaning the capability of earning more for you in your later years. If you don't understand the markets or don't want to be bothered, this is the time to connect with a tenured, Certified Financial Planner® to help you manage your retirement nest egg- the cost may be far outweighed by the benefits of professional assistance.
Go clean your closet. No, I mean it... the clothes you are hanging onto for no reason are the same clothes that could be worn by folks not as fortunate as you. Charitable deductions may save you money when itemizing your taxes, and more so, helping those who could use your help- that's all a part of the holiday season. It also feels good to see space in your closet- making room for all those holiday presents coming! So, remember to think about others, surround yourself with those you love and care about, and enjoy December like never before. For me? It's easy... sing, laugh, spend time with Elizabeth and the kids, and spend some time up at our second home- Seville! See you on the tee!