Frederick Fisher: Year end tax and investment planning can help you avoid tax suprises and save you money
November 19, 2017
As the holiday season approaches many of us are planning for all the events that the season brings. This is always a very busy for all of us.
In the midst of it all we often do not set aside time for one of the most important tasks of the year. One that if we made a higher priority, could potentially save us hundreds if not thousands of dollars each and every year.
What I am referring to is year end tax and investment planning. Now is the time we should be taking a look at where we are year to date in our investment and tax goals.
The items we need to check on are many, but I will focus on three, Retirement Plan Contributions, Charitable Deductions and Payroll Withholding Options.
To illustrate, we will take the hypothetical case of the Smith's.
Greg is a self-employed consultant, and his wife Jan is a nurse at the local hospital. Greg and Jan each make around $80,000 per year. They are both 52 years old, want to minimize their tax liability and maximize their retirement funding.
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Greg currently has as Simplified Employee Pension Individual Retirement Arrangement that he has funded for many years. However some years he has not had the cash necessary to fully fund his Simplified Employee Pension. Since the limits to fund the pension are based on his self-employed income, which fluxuates year to year, the amount changes year to year.
This year he decided to track his income each month and then save 20 percent of that number, put it in savings so he would have enough to fully fund this year and subsequent years till retirement.
In order to prepare for their year-end tax planning meeting with their Certified Public Accountant, they gathered information on year to date retirement plan funding and reviewed what they had given so far to charity.
Greg had invested $15,000 in his pension so far, and has another $5,000 in savings that is earmarked for additional investment if possible. Jan has been deferring 5 percent of her income into the hospital's 401k, in order to receive the full match of 5 percent.
They have a goal of contributing 5-10 percent of their take home to a list of local charities. Upon review they had to date donated $3,000 in cash and approximately $1,000 in furniture, clothing and books to a local Thrift Store.
That's calculates to 4 percent, so they made a list of donations they planned to make before the year end.
Finally, Jan reviewed her latest pay stub, to see if her year to date withholding was just right per income projection. Their goal was to have the withholding cover her income, and to avoid having the government holding her money for the year.
They reviewed these items with their tax professional and left the meeting confident that they were on track for the year and that they would not have any tax surprises come April.
If you are not certain of where you stand regarding your financial and tax goals, contact your financial professionals for a year end planning review.
Frederick Fisher is a Certified Financial Planning Practitioner, and Insurance Agent with Ostrofe Financial Consultants, Inc. managing over $208 million in assets, with clients in 29 states. Advisory services provided by Ostrofe Financial Consultants, Inc., a registered investment advisor. Separate advisory and securities services may be provided by National Planning Corporation (NPC), Member FINRA/SIPC, and a S.E.C registered investment advisor. Ostrofe Financial Consultants, Inc. and NPC are independent and unrelated companies. Please consult with your representative to confirm on which company's behalf services are being provided. For questions or suggestions, contact Rick Fisher at 530-273-4425, or firstname.lastname@example.org, or visit ostrofefinancial.com. Branch address: 565 Brunswick Road, Ste. 15, Grass Valley. This information is general in nature and should not be construed as tax advice. Hypothetical example used for illustrative purposes only. Individual results will vary.
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