Investors’ year-end checklist

As the holiday season is upon us and 2017 is rapidly approaching, it might be useful to have a checklist of financial ideas to consider before the year ends. If you are eligible to participate in an employer-sponsored retirement plan, make an effort to maximize your contribution before year-end. Generally, you are able to contribute up to $18,000 in 2016 ($24,000 if over age 50).

Be charitable. Cash donations, including those made by credit card, can be made up to Saturday, Dec. 31. Also consider gifting appreciated stock. You will likely claim a deduction for the current value of the stock, and the receiving charity will not pay capital gains should they decide to liquidate the stock.

For those over the age of 70 ½, remember your Required Minimum Distribution from your retirement accounts must be taken before year-end. The IRS penalty for not taking the distribution on time is particularly onerous. Be especially aware of any inherited retirement accounts, since not all custodians alert you to a mandatory distribution that is due.

Check your beneficiaries on retirement accounts. Make sure you have primary as well as contingent beneficiaries named. Along these lines, now is a good time to review your other estate documents as well. Having an updated will and associated documents can avoid unnecessary cost and emotional anguish for your family.

If you are planning on gifting money to family or others, remember to do so before year-end. The gifting allowance limit is currently $14,000 per person per year. In other words, you can give up to $14,000 this year to as many people as you desire without incurring taxes for the gift. A couple can effectively double this to $28,000.

Take advantage of investment losses in taxable accounts. Losses taken this year can offset gains, and excess losses can be carried forward into future tax years. While it is not necessarily prudent to sell an investment only for the tax loss, it can certainly be a factor when evaluating the investments you plan to carry into 2017.

Be careful of mutual fund purchases in December. Many mutual funds declare taxable distributions this time of year, and you would want to avoid an unwanted tax liability by purchasing a mutual fund just before it declares a distribution. Check with the fund company before purchasing, or simply wait until January. Of course, this is not an issue in IRAs and other retirement accounts.

Recalculate your asset allocation. Your asset allocation is the mix of stocks versus bonds versus cash or alternative investments that you own. As the year progresses, one asset category may have performed particularly well relative to others, resulting in a higher weighting in your portfolio. This can create unwanted or unforeseen risk. Now is a good time to evaluate how much risk is appropriate for the coming year.

Evaluate your liquidity needs. Every investor should have a cash cushion to weather the inevitable market corrections. How much is enough can vary widely based on each investor’s needs and risk appetite. However, as a guideline, I recommend retirees consider having two years of living expenses in cash or short-term investments, and those still working having three to six months on hand.

Finally, don't hesitate to consult with your financial or tax advisor on these or other year-end ideas before implementing. Here's to a healthy and prosperous 2017!

Jonathan Lokken, CIMA, is managing principal of Lokken Investment Group LLC in Lewes. If you would like to submit a question for consideration in the next Q&A column, email jlokken@lokkeninvest.com.

Disclaimer: The foregoing content reflects the opinions of Lokken Investment Group, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss.