4 Year-End Planning Tips

You may have noticed that 2018 is quickly coming to an end. When it comes to retirement and tax planning, right now can be a really good time to take care of some things that need to be done before the year is out. Unfortunately, this is also a time where people tend to make some not-so-good decisions about RMDs, Roth conversions, asset appreciation – things like that.

So as the year winds down, here are a few things you may want to take a look at:

1. Required Minimum Distributions

First, Required Minimum Distributions (RMDs). If you’re over age 70½ this year, and you haven’t taken at least the minimum out of your tax-deferred accounts by the end of the year, you’ll face some stiff penalties: 50 percent of the shortfall. So make sure you’ve transferred the correct amounts out of ALL of your tax-deferred plans: 401(k)s, IRAs, including SEPs, SIMPLEs, and so forth.

2. Check Your Estimated Taxes on Your RMDs

Second, check your estimated taxes on your RMDs to see if you’ve had enough money withheld or paid in through estimated tax payments to avoid penalties. If you find that you’re coming up short on the payments, it might be a good idea to withhold taxes from your year-end IRA distributions. In fact, some people prefer to always withhold taxes from their RMDs, just to make sure they’re paid.

3. Qualified Charitable Distributions

Third, see if you want to do any qualified charitable distributions (QCDs). I talked about these in an earlier video. But the nice thing about the QCD is that it may help you to be able to get a “de-facto” tax deduction for your charitable contribution, even if the new standard deduction won’t let you itemize. If you’re over 70 ½ and you’re going to give money to a charity anyway, the QCD may be the best way to do it.

4. Roth Conversions Can No Longer Be Reversed

Fourth, if you’re planning on doing any Roth conversions, keep in mind that starting this year, they can no longer be reversed. They are permanent, and you’ll have to pay the taxes once the funds are converted. And if you own a business, check to see if the conversion will have an effect on the new 20 percent deduction for qualified business income (Section 199A). You’ll want to do this before you commit to a Roth that can’t be undone.

These are just a few important things to think about as 2018 comes to a close. Right now is a really good time to go over these tax strategies before the year ends and it’s too late. Give us a call – we’re here to help.

Information presented should not be considered specific tax, legal, or investment advice. You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed. Accordingly, no client or prospective client should assume that the presentation (or any component thereof) serves as the receipt of, or a substitute for, personalized advice from Lucia Capital Group or from any other investment professional.

Roth IRA distributions of principal from a Roth IRA are tax-free; however, any earnings will be taxed at ordinary income rates and a 10% penalty tax will apply if withdrawn prior to age 59½ or within five years of the date the Roth IRA was established, whichever is longer.

IRA withdrawals will be taxed at ordinary income rates. Withdrawals prior to age 59½ may also be subject to a 10% penalty tax.

Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy will be either suitable or profitable for a client's or prospective client's portfolio.

Raymond J. Lucia Jr. is chairman of Lucia Capital Group, a registered investment advisor and CEO of its affiliated broker-dealer, Lucia Securities, LLC, member FINRA/SIPC. Advisory services offered through Lucia Capital Group. Securities offered through Lucia Securities, LLC. Registration with the SEC does not imply a certain level of skill or training.

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