Year-End Planning Ideas

By: The Sum Financial Planning | Published 08/12/2019


Year-End Planning Ideas
At The Sum we love planning; it’s our passion.  We believe that financial planning is an ongoing process rather than a one-time event.  Life is dynamic, and your planning should be also. We recommend reviewing your current financial plan often, and especially towards the end of the year.  Here are a few tips to take full advantage of the current year.

1. Roth Conversion
Roth IRAs are powerful tool that you can use as a part of your financial plan.  Many are aware that you can make Roth contributions (with income limitations), but what about Roth conversions (without income limitations)?  A Roth conversion takes money from a Traditional or Rollover IRA, creates a taxable event (in most cases), and converts the money to a Roth IRA.  Why would anyone consider this?  Depending on your time horizon, paying the tax now could result in higher amount in the future. Roth IRAs are unique in that they are funded with after-tax dollars and the growth is tax free.  With a Roth IRA, you also avoid the minimum required distribution (MRD) from a Traditional IRA.  MRDs, as the name suggests, are forced income in the future.  Without proper planning, it’s possible to put yourself in a tax situation that you cannot get out of.  As with any tax strategy, there are rules to make sure you follow in order to stay compliant.  We always recommend working closely with your advisor and your CPA to determine if this is a good fit for you and to determine the proper amounts if applicable.  

2. Capital Gains
Now is the time to review your portfolio for several reasons.  Managing a portfolio requires many different lenses and taxes is only one of them.  The end of the year is a good time to see if it makes sense to realize any capital gains.  This may allow you to re-balance your portfolio also.  Capital gains come in many different forms.  You can create a capital gain by selling an appreciate security (stock, mutual fund, or ETF for example). You can also receive a capital gain as a distribution from a fund even when you didn’t initiate it.  Each year, mutual funds will pay out capital gain distributions.  Typically, this will happen in the 4th quarter and most mutual funds will let you know that it’s coming.  If you weren’t alerted, we encourage you ask your advisor or broker for the information.  Mutual fund distributions can often seem like something they’re not.  A capital gain distribution from a mutual fund is NOT the same as a stock dividend.  It is, however, taxable and should be managed appropriately. Have a discussion around what changes you should be making this year.

3. Charitable Contributions
At The Sum, we’re a fan of giving.  We love the idea of sharing what we have.  We also love the idea of reducing our tax bill along the way.  Along with your regular giving, the end of the year can be a great time to bring efficiencies to your tax bill with proper planning.  Charitable giving can be done in many ways.  How you give, when you give, and what you give should all be taken into consideration.  Let’s look at each:

-How you give - There are many ways to give.  You can give directly to a charity.  You can give to a donor advised fund (DAF) and then to a charity. You can also create a private foundation to give to.  There are pros and cons to each depending on your specific wants and needs.  The DAF and the foundation may offer some flexibility in front-loading your giving for the sake of creating tax efficiencies.  

-When you give - Many people give to their church or favorite charity on a regular, consistent basis.  Many people only give yearly.  There’s not a right or wrong answer, but there may be a better tax answer.  In addition to yearly giving, annual giving can be used to reduce the amount you pay in taxes.  Working with an advisor and your CPA can help fine tune these numbers for tax efficiency. From a pure tax standpoint, a DAF or foundation may be more beneficial in years when your income is higher.  So, if your income fluctuates due to deferred compensation, bonuses, or stock options as examples consider putting in place a long-term gifting strategy.

-What you give – This can also allow tax efficiency.  Many people are familiar with giving cash and do so because it’s simple.  Did you know that you can also give away other items?  Highly appreciated securities are a great example of assets alternative to cash that make for great gifts.  Not only will you receive a tax benefit for gifting, you could also avoid capital gains while rebalancing your portfolio.  There are many types of assets you can give and we encourage exploring the best strategy for your situation. Of course, there are rules to follow when gifting, but this can be a great addition to your overall financial plan.

These are three ideas to consider reviewing (along with many more) before the end of the year.  Of course, these ideas work best in conjunction with your comprehensive financial plan. If you’d like to talk through any of these, or other financial planning ideas, we’d love the opportunity to visit.  Give us a call (281-940-4859), send us an email (, or check out our website ( 

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