Everywhere you look end-of-the-year preparations are in full-swing. The FinServ industry is no different, with advisors desperate to get their clients in a position to take 2020 by financial storm.
As advisors guide their clients through the remaining weeks of 2019, keeping these tips in mind will go a long way for advisors and clients.
To check some items off the to-do list, advisors should start with the easiest items. These include:
• Review any life changes that may have occurred in the past year – marriage, divorce, kids, etc. This is also an ideal time to recommend any will and estate planning needs.
• Discuss plans for 2020. Discuss and set financial goals for the New Year, this includes items like saving for vacations or increasing contributions to retirement accounts.
• Conduct a benefits review. If clients have an HSA or 401(k) through work, the end of the year is the perfect time to plan the funding for these accounts for next year.
• Tax preparation. Now is the perfect time to begin tax prep with clients. Start by reviewing paycheck withholdings and IRS updates on retirement contribution limits.
• Evaluate charitable giving. Are clients going to itemize or take the standard deduction? From there, advisors can evaluate gifting shares of stock directly to charities, creating a donor-advised fund or utilizing a qualified charitable distribution.
• Review spending habits. The numbers don’t lie, and the end of the year is a great time to show clients how much or low little they are spending. Advisors can review spending habits and recommend budgeting tools for each client’s needs.
Assets & Debts
After the easier items are completed, it’s time to dive into the nitty-gritty. This includes addressing and reviewing any asset or debt-related issues.
Does your client have investment losses? If so, this could require any gains to be offset. Does your client have investments in taxable accounts that are subject to end-of-the-year capital gain distributions? If the answer is yes, advisors will need to review strategies that help minimize the clients’ tax liability.
Required minimum distributions need special attention this time of year. If your client is over 70.5 or is taking RMDs from an inherited (stretch) IRA, a host of strategies needs to be discussed to make sure aggregation is taken where allowed. These strategies should be used on a case-by-case basis.
Savings & Cash Flow
Following the rules for savings contributions can be tricky. Reviewing your clients’ allocations now is a great way to make sure they are maximizing their savings and still within contribution limits.
Review the following:
• Additional savings. For clients with HSAs, additional savings may be possible if they are over age 55.
• Exceptions to the rules. For 401(k) contributions, the 2019 limit is $19,000. However, clients over age 50 can make catch-up contributions of an additional $6,000/year.
• 529 Plans. The yearly limit for 529 plan contribution is $15,000/year. Clients can enroll in a five-year accelerated gift of up to $75,000. Some states also offer tax deductions for contributions made to 529 plans.
Cassie Miller is a contributing writer for AdvisorNews. She has spent nearly two years covering Finserv topics. She also has an extensive background in magazine writing, editing and design.