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Let our advance worrying become advance thinking and planning. Winston Churchill

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Smart planning moves to consider

The end of the year is fast approaching and now is the perfect time to review items you might want to consider and discuss as we get set to enter 2017. Before we get started, we want to stress that it is our job to assist and help you! We can’t over-emphasize this, and we would be happy to review the options that are best suited to your situation. When it comes to tax matters, we recommend you check with your tax advisor.

Investment and financial planning:

  1. Rebalance your portfolio. In general, we believe in annual rebalancing during the first quarter of each year. Changes in the market can cause shifts in your asset allocation. As we enter the homestretch of 2016, we can see that gains have been modest this year—so year-end is a great time to review your portfolio and consider any necessary adjustments for next year.
  2. Assess your income or portfolio strategy. Are you reaching a milestone like retirement or facing a change in your circumstances? These things would affect your allocation and rebalancing. Has your tolerance for risk-taking changed? If so, this may be just the right time to evaluate your approach.
  3. Consider changes in your life and review insurance and beneficiaries. Let’s be sure you are adequately covered. At the same time, it’s a good idea to update primary and contingent beneficiaries if necessary.

Tax planning:

  1. Stay informed about tax reform. The possibility of tax reform looms large over 2017. It’s an unknown, what shape it will take and how it may affect a various array of investments and tax-deferred accounts. While headlines suggest that terms will be more favorable, the devil is in the details. Furthermore, Republicans have long wanted to kill the estate tax, and Donald Trump has said he would like to repeal the gift tax. Until Congress passes the appropriate legislation, estate and tax planning in general will be a murky endeavor.
  2. Remember the tax loss deadline. You have until December 31, 2016, to harvest any tax losses and/or offset any capital gains. But let’s be careful. There are distinctions between short- and long-term capital gains, and your capital gains tax rate is a function of your income tax bracket.
  3. Take required minimum distributions. RMDs generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year he or she reaches 70½ years of age. However, the first payment can be delayed until April 1 of the year following the year in which you turn 70½. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of that year. The RMD rules also apply to 401(k), profit-sharing, 403(b), 457(b) or other defined contribution plans, as well as SEP IRAs and Simple IRAs. Let’s work together to ensure you don’t miss the deadline or you could be subject to steep penalties.
  4. Consider a Roth IRA. A Roth gives you the potential to earn tax-free growth (not just deferred tax-free growth) and allows for federal-tax free withdrawals if certain requirements are met. There are income limits, but if you qualify, you may contribute $5,500 or $6,500 if you are 50 or older. You can make contributions to your Roth IRA after you reach age 70½ and there are no requirements to take mandatory distributions. You can make 2016 IRA contributions until April 17, 2017.
  5. Consider converting a traditional IRA to a Roth IRA. There are a number of items you may want to consider, including current and future tax rates as well as the potential for tax reform next year, but if the situation is right, it can be advantageous to convert to a Roth IRA.
  6. Don’t forget about charitable giving. You can donate cash, stocks, or bonds to your favorite charity by December 31, potentially offsetting any income. Did you know that you may qualify for what’s called a “qualified charitable distribution?” A QCD is a distribution from an IRA owned by an individual who is age 70½ or over that would otherwise be taxable but not if paid directly from the IRA to a qualified charity. QCD’s may qualify as an RMD or portion of an RMD mentioned above. Thus the QCD satisfies RMDs, but does not increase taxable income.

Once again, before making any decisions that may affect your taxes, please consult with your tax advisor.

We hope you’ve found this review to be educational and helpful. As we like to emphasize, it is our job as financial advisors to assist you. Thank you very much for the trust and confidence you’ve placed in our firm.  We treasure our relationships with our clients, and seek to serve a few more people like you.  If you know of someone who would benefit from our advice and services, we would welcome an introduction.


DISCLOSURES: The information provided in this letter is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal, or tax advice. The Nalls Sherbakoff Group, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of, or reliance on the information. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of The Nalls Sherbakoff Group, LLC. Past performance does not guarantee future results.