Back to News

Ten Actions to Take Before the New Year

By David Thatcher, CFP®,

Partner & Senior Financial Advisor

December 2016

The Cypress Group

It’s always exciting to start a new year! It’s a time to renew your focus, set new goals, and start fresh. But before you ring in the new year, set aside some time to take stock of your financial situation. Don’t let your financial plan fall to the wayside amidst the celebrations and festivities December brings.

Here are ten critical financial moves to take before you enter 2017.

1. Make the Most of Your Retirement Accounts

Your retirement accounts are there to work for you and earn you the money you will need in retirement. Make sure you are maximizing these savings vehicles by increasing your contributions. For 2016, you can contribute as much as $18,000 (or $24,000 if you are 50 or older) to a 401(k). You may also consider contributing to a Roth IRA. For 2016, you can add as much as $5,500 (or $6,500 if you are 50 or older). Keep in mind that if your income is over $132,000 if you're single or $194,000 if you’re married filing jointly, you won’t be eligible to contribute to a Roth IRA.

2. Use Up Your Medical and Dental Benefits

Have you been planning to get a root canal, blood work, or other medical or dental procedure? Now’s the time to take advantage of all your health care needs before your deductible resets. Dental plans, in particular, often have a maximum coverage amount. If you haven’t used up the full amount and anticipate treatments, make an appointment before December 31st.

3. Verify Expiring Sick and Vacation Time

Depending on your employer, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any deadlines. If your sick or vacation time does expire, fit in a last-minute vacation, a staycation, or trips to the doctor so you don’t lose this valuable benefit.

4. Use Your Flexible Spending Account

Like your health insurance benefits, you’ll want to use up your FSA (Flexible Spending Account) dollars by year’s end. Your benefits won’t carry over and you’ll lose any unspent money in your account at the end of the year. Review the restrictions for your account to see what the funds can and cannot be used for.

5. Review Required RMDs

If you are already retired, review your retirement accounts’ required minimum distributions (RMDs). A RMD is the amount the federal government requires you to withdraw each year from your retirement accounts, including 401(k)s, SIMPLE IRAs, SEP IRAs, and traditional IRAs, usually starting at age 70½. If you don’t, you may face steep penalties. To calculate your RMD, use one of the IRS worksheets or consult with your advisor who can assist you in calculating your RMD with your account custodians.

6. Stay on Top of Charitable Contributions

If you made a charitable contribution in 2016, you might be able to lower your total tax bill when you file early next year. It can be especially advantageous if you donated appreciated securities to avoid paying taxes on the gains. Along with your other tax documents, find and organize any receipts you have from donating to charities, whether it was a cash donation, securities contribution, or another type of gift.

7. Consider a Roth Conversion

Roth IRAs are attractive because you don’t pay income tax when you withdraw funds in retirement. However, if you’re a high-income earner, you may not be eligible to contribute and instead invest in a Traditional IRA. If you have a Traditional IRA, you may have the opportunity to convert to a Roth IRA and save money on taxes in the long run. The deadline to convert to a Roth IRA is December 31st, so if you’ve been considering doing so, or wonder if it’s an appropriate option for you, talk to your financial advisor ASAP.

8. Consult With Your Advisor About Harvesting Losses

If you invest in bonds, mutual funds, or stocks in accounts other than your 401(k) or IRA, review your realized and unrealized gains and losses. You might be able to offset some of your gains by selling some losses. Tax-loss harvesting can help you save on taxes, but you want to make sure the move also makes financial sense for your situation. Talk with your advisor about potentially harvesting your losses and if it makes sense for you. Should you determine tax-loss harvesting is appropriate, you’ll need to complete it by December 31st.

9. Keep Your Holiday Spending in Check

Not surprisingly, Americans will spend nearly $1,000 this year on holiday gifts alone. During such an expensive time of year, a budget is a must to avoid overspending. Break down your spending and allocate a set amount of funds for everything you need this holiday season, including gifts (with an individual budget for each person), food, transportation, postage, and gift wrap. Be realistic about what you can afford to spend.

10. Avoid Gift Tax Consequences

It’s never too early to start thinking about the legacy you want to leave for your loved ones without sharing a good portion of it with Uncle Sam. You may want to consider gifting. Each year, you can gift up to $14,000 to as many people as you wish without those gifts counting against your lifetime exemption of $5.4 million. If you’ve yet to gift this year or haven’t reached $14,000, consider gifting to your children or grandchildren by December 31st.

Do you have questions about last-minute financial actions you can take before 2016 ends? Do you want to start off on the right financial foot for the new year? We’d love the opportunity to offer you support along your financial journey. If you are interested in starting the year off strong, I encourage you to reach out to us for a year-end review. Call our office at 866.888.6563 to set-up an appointment today.


About Cypress Wealth Services

Cypress Wealth Services, an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. CWS is comprised of professionals with diverse backgrounds and extensive experience and qualifications. CWS is uniquely qualified to serve a broad range of client needs. Their experience and expertise act as a foundation for their client service process, The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert, and Anchorage, the firm serves clients across the country. Learn more by visiting