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4 Financial Steps to Take Before Bidding 2018 Farewell

The end of the year represents a critical opportunity to check off important financial to-dos


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With the holidays in full swing, most of us are laser-focused on last-minute gift shopping, finalizing travel plans and wrapping up work projects before heading out of the office for some much-needed rest and relaxation. But hot on the heels of the holiday festivities is the year’s end, marking an important monetary milestone in your annual financial planning.

The end of the year represents a critical opportunity to check off important financial to-dos before kicking off a new year. Below are four key considerations to keep in mind as 2018 winds down:

1. CUT YOUR 2018 TAXES

You may think April is the only time to act on your taxes, but December presents an opportunity make important money moves to ensure you’ll owe as little as possible when Tax Day rolls around. The tax law passed in late 2017 may seem like old news, but it could significantly impact your 2018 numbers if you haven’t adjusted your tax strategy accordingly. Specifically, the 2017 changes reduced marginal tax rates, so the amount of taxes withheld from your paycheck is likely to have changed. If you’re not withholding enough, you’ll likely owe a larger sum come tax time. Use this simple IRS calculator to determine if you need to make any adjustments. Additionally, if you had any stocks that lost value this year, you may be able to take advantage of tax-loss harvesting opportunities to offset what you’ll owe on any profits.

2. CONSIDER MAXING OUT YOUR RETIREMENT CONTRIBUTIONS

This month marks your last chance to max out your retirement contributions. When evaluating how much to contribute, consider your financial priorities and larger financial plan – if you have excessive debt or lack substantial savings, think twice about maxing out. But, if you’re on solid financial footing or if you’re planning to retire early, now is the time to make any last-minute deposits. Aside from bolstering your nest egg, maxing out your retirement contributions can also lower your taxable income, depending on whether you contribute to a Traditional or Roth retirement account. And while you’re thinking about retirement, make sure you’re caught up on the changes coming in 2019. Most notably, for the first time in six years, the IRS has boosted the annual IRA contribution limit as well as the contribution limit for employees participating in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan.

3. SPEND YOUR FSA MONEY

If you use a Flexible Spending Account (FSA) to help fund medical expenses throughout the year, be sure to use all of your remaining balance before January 1. With the exception of a few plans that allow a carryover "grace period," most FSA funds operate on a use-it-or-lose-it basis, meaning anything that you don't spend on qualifying health care costs will expire on the last day of the year. If you don’t have any upcoming doctor appointments, don’t worry – FSA money can be used on a broad range of medical-related expended such as prescriptions, contact lenses and equipment, as well as alternative treatments like acupuncture or a chiropractor visit. You can find a full list of applicable expenses here.

4. REVIEW YOUR END-OF-YEAR GIVING

The Tax Cuts and Jobs Act of 2017 increased the standard deduction for individuals from $6,500 to $12,000, and from $13,000 to $24,000 for married couples filing jointly. This could impact the tax benefits people commonly received from their charitable giving, so given these changes, there are a few tax strategies you might consider, like cash or capital asset donations and bundling donations. If you elect not to take the standard deduction, the amount of your cash donations you can deduct has been increased from 50 to 60 percent of adjusted gross income. Also keep in mind, tax reform did not change the deductibility of using a capital asset – like a stock – as a donation. In fact, stocks can make excellent assets to donate to a charity because you get the tax deduction on the fair market value of the asset, and you don’t also have to pay the tax on the gain when it’s donated. Another approach is to bundle your charitable donations into one year to maximize your deduction and alternate years using the standard deduction.   

In the flurry of the holidays, it can be difficult to find time to organize your finances. But slowing down, taking stock and making a few simple moves can help set you up for success in the new year. If you don’t know where to start, you don’t have to go at it alone. Enlisting a financial advisor can help you plan smarter, grow your wealth and get one step closer to reaching your goals – all without spoiling your holiday cheer.


Mike Jones is a Northwestern Mutual Wealth Management Advisor and the founder of Jones Financial. Mike began his career at Northwestern Mutual as a college intern in 1997 and transitioned to a full -ime financial representative in January 2000. Together with his team, Jones helps business owners, families and individuals discover and implement strategies designed to secure their future with personalized, comprehensive financial planning. His unique approach of combining insurance and investment solutions has helped many of his clients accumulate wealth, prepare for retirement and address other financial goals while protecting their families in the process.

Disclosure: G Michael Jones uses Jones Financial as a marketing name for doing business as a representative of Northwestern Mutual. Jones Financial is not a registered investment advisor, broker-dealer, insurance agency or federal savings bank. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities, and life insurance with long-term care benefits) and its subsidiaries. G Michael Jones is a Representative of Northwestern Mutual Wealth Management Company® (NMWMC), Milwaukee, WI (fiduciary and fee-based financial planning services), a subsidiary of NM and federal savings bank. All NMWMC products and services are offered only by properly credentialed Representatives who operate from agency offices of NMWMC. Representative is a District Agent of NM and Northwestern Long Term Care Insurance Company, Milwaukee, WI, (long-term care insurance) a subsidiary of NM, and a Registered Representative of Northwestern Mutual Investment Services, LLC (NMIS) (securities), a subsidiary of NM, registered investment advisor, broker-dealer and member of FINRA and SIPC.

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