Five year-end moves to make you richer

Now is the time to sit down and focus on your finances

By Bloomberg News

Nov 19, 2015 @ 3:20 pm EST

It's a big ask. In the year-end crush, take time to sit down and focus on your finances.

But a fat balance in a savings or investing account beats one on a credit card. And the clock is ticking on a number of tax deductions.

So let friends and family know: Instead of buying them presents they'll only wind up regifting, you will now be me-gifting, redirecting those funds into your Roth IRA.

Or, if that's too radical, just do this.


A volatile year in the markets may have mucked up your mix. Look over any portfolio and 401(k) plan investments and, if you have one, even your target-date fund, which automatically rebalances your holdings between asset classes as you get closer to your retirement date.

Why check something that's on autopilot? First, because many people don't know how their target-date fund is invested. Second, there's a fairly wide range of equity stakes in funds geared to the same retirement year, and you want to be comfortable with your fund's equity risk. T. Rowe Price Retirement's 2025 fund, for example, has 71% in equities now, with 10 years until the date its holders plan to retire, according to Morningstar. The Wells Fargo Advantage DJ 2025 fund has 49%.

The point is simply to know what you own and be comfortable with it, or adjust your holdings. That could stave off any temptation to sell in a panic if there's a big market drop.

Rebalancing also means rethinking your mix of U.S. and foreign stocks, said Randy Bruns of HighPoint Planning Partners in Downers Grove, Ill. With U.S. stock prices historically expensive by many measures, he said, "investors need to rebalance built-up excesses away from U.S. stocks and into foreign stocks simply to keep their risk profile intact."

In the past, having 20% of your stock holdings in foreign shares gave reasonable diversification, said Mr. Bruns. Now he thinks investors with many years before they'll need the money should consider having as much as 50% of their equity stake in foreign stocks.


Charitable contributions made by Dec. 31 can be deducted on itemized income taxes, as long as you have the receipts. If you're mailing in a donation form and charging it to your credit card, try not to procrastinate. Last year, planner June Ann Schroeder of Elm Grove, Wis., tried that at the last minute. Three of the charges weren't processed until January and had to go in this year's taxes.

If you have kids and live in a state that allows tax credits or deductions for 529-fund contributions, be sure to contribute by year-end, said Marguerita Cheng, head of Blue Ocean Global Wealth in Potomac, Md. Thirty-four states and the District of Columbia offer full or partial deductions, according to

Donating appreciated assets such as stocks, real estate and mutual funds also has big tax benefits. Say you want to give your college some money and you have a mutual fund worth $20,000 that you bought ages ago for $5,000. Give it to your college and you can write off the full $20,000 and avoid capital gains on the appreciation.

If you sold the fund to get the money, you'd have to pay those capital gains and then dip into other accounts to give the full $20,000. You could still deduct the cash donation on your taxes, but you wouldn't be making the smartest tax move.


Many employees need to use up the pretax money they contributed to a flexible spending account (FSA) for health-care expenses by Dec. 31. So let the parade of visits to doctors and dentists begin.

While many people race to get new glasses or contact lenses at year-end, the IRS has given employers more flexibility in recent years. Check to see if your company has done one of two things (it can't do both): Let employees stretch the use period for the FSA out two and a half months into the following year (March 15 for most plans), or let them roll $500 of the account over to next year.

Another item to consider now and over the next two years is maximizing contributions to health savings accounts (HSAs), the tax-advantaged savings accounts for medical expenses that are often paired with high-deductible health-care plans, said Michael Baker of Vertex Capital Advisors in Charlotte. In 2018, a provision of the Affordable Care Act called the Cadillac Tax will take effect and could limit savers' ability to fund those kinds of plans, he said.

The details of any changes are being debated in Washington, and "it's likely we won't know how this rule will be interpreted or possibly changed until the last minute," Mr. Baker said. If you want to be prudent with any excess dollars this year, he suggests fully funding an HSA (for 2015 the limits are $3,350 for individuals and $6,750 for a family), particularly since unused HSA funds can eventually be used as retirement savings.


There's an upside to the inevitable downturn in stocks. If a market drop sends the value of your traditional IRA way down, you'll have less money to pay taxes on if you convert that pretax money into an after-tax Roth IRA. There are no income limits on the move, but a conversion is the only way those with high incomes can get into a Roth; for 2016, single people with adjusted gross income of $132,000 or more, and married couples filing jointly with income of $194,000 or more, cannot open regular Roth IRAs.

Taxes will still likely take a painful bite in a conversion, but with a Roth you can withdraw the money tax-free in retirement.


If you expect to get a tax refund, the absolute best way to stop a scammer from getting your refund (except withholding enough so you don't get a refund, which is the ideal situation) is to file as early as possible. That way, you may beat your potential fraudster to the punch. That date will be Jan. 25, 2016, for most people.

The rub: You may not have all the forms you need to file by then. If you need to wait for a "Schedule K-1" from a partnership — and many energy, real estate, hedge fund and private equity investors do — it can sometimes take until late summer to arrive. So you may need to pay whatever you or your accountant estimates you'll owe by April 15 and file for an extension until you can get the forms.

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