Year-End Planning

Sep 2015

I knrick -2ow it’s a little early to start thinking about the end of the year, but before you know it, the leaves will fall and you will be rushing to buy year-end holiday gifts.  That is why this is a great time to start thinking about some year-end planning.  The worst time to do year-end planning is when you’re rushed and forced to make a knee-jerk decision.  The best time to make a decision is when you have the time to accumulate the necessary information and have the time to make sure you’re making an informed decision.  That is why I think now is a great time to start the process of deciding whether you should do some year-end planning or not.


Like everything else in the financial and legal world, there is no one piece of advice for everyone.  Everyone’s situation is different and what may be good for your next door neighbor or best friend, is not necessarily good for you.  Therefore, it is always important to take any information and apply it to your own individual situation.  In that regard, one area that I think many people should look at taking advantage of before the end of the year, is to potentially do a Roth conversion.


I have mentioned this for many years, I think more and more people ought to convert some or all of their traditional IRAs into a Roth IRA.  The main benefit of this transaction is two-fold.  The first is that money in a Roth IRA grows tax free versus money in a traditional IRA that grows tax deferred.  In addition, money in a Roth IRA is not subject to required minimum distribution rules at 70½.  Of course, nothing comes without a cost and the cost of converting money into a Roth IRA is that you are paying taxes on the amount that you are converting.  You would have always paid taxes on the amount; however, by converting you are paying the tax earlier than you would have had to.


The rules I have lived by in deciding whether you should convert existing IRA money into a Roth IRA are as follows:  1) By converting the money and paying the tax on the amount converted, it won’t throw you into a higher tax bracket; 2) you have the money (other than the money you are converting) to pay the additional tax liability and; 3) you won’t need the money for at least five to seven years.  If you meet these three criterion then a Roth conversion would make sense.


All you need in order to do a Roth conversion is to contact your IRA custodian and they can assist you.


Other year-end tax moves that make sense are either to accelerate your itemized deductions into this tax year or to delay them until next year.  For example, if you are charitable in nature and you traditionally make year-end charitable contributions, the issue is do those deductions make sense this year or do you delay them until next year.  There’s no one right answer because it all depends upon your individual situation.  If you are not itemizing your deductions this year, then certainly you want to delay those deductions until next year.  On the other hand, if you are itemizing your deductions and you’re in a higher bracket this year than you anticipate you’ll be next year, then it pays to take those deductions this year.


Before you know it, 2016 will be here.  If you plan to do any year-end planning, don’t procrastinate; start the process as soon as you can.  By giving yourself the time to study your situation and talk to your professionals, you’ll make the right decision for yourself and in addition, you’ll save yourself a lot of grief and aggravation by rushing to do something at the last moment.


Good luck!`




Rick is a fee-only financial advisor.  His website is  If you would like Rick to respond to your questions, please email Rick at