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Ten things to do before year-end

Financial check-in: Size up your portfolio, prep for 2015 taxes, donate, and save more.

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Now is a good time to get started on some important year-end financial tasks. Wouldn’t you rather enjoy the holidays with family and friends than scramble to meet a December 31 deadline?

Here’s a list of 10 smart money moves to consider—some that need to be addressed by December 31 and others that are an important part of a year-end financial check-in. Most of them can be accomplished quickly, but the benefits can last a lifetime.

1. Size up your portfolio.

This year’s stock market swings may have changed your mix of stocks and bonds. You may need to bring your portfolio back in line with a diversified mix that is appropriate for your situation (read Viewpoints: “The pros’ guide to diversification”). For help analyzing your overall portfolio, choosing a target asset mix, and rebalancing your portfolio to bring it in line with that target mix, use our Planning & Guidance Center.

2. See if you may be able to put any losses to work.

Tax-loss harvesting might sound complicated, but the principle is pretty simple. Offset your realized taxable gains on your investments (capital gains) with losses (capital losses). That means selling stocks, bonds, and mutual funds that have lost value to help reduce taxes on gains from winning investments. (Of course, you don’t want to undermine your long-term investing goals by selling an investment just for tax purposes.) Tax-loss harvesting needs to be done by December 31. For more information, read Viewpoints: "Harvesting losses: One benefit of a correction."

3. Give to a charity or your family.

Give to others. Charitable donations are an effective way to reduce your taxable income when you itemize on your tax returns. If you’ve been meaning to make a donation and want to lower your tax bill for 2015, be sure to make your contributions by December 31. Now is also a good time to clean out a closet or basement and donate clothing and household goods. Remember to get receipts for non-cash donations.

Give to family members. You are able to give up to $14,000 a year to as many individuals as you choose without paying gift taxes, which helps reduce the amount of your estate. You can give cash, stocks, bonds, and portions of real estate. You must do this by December 31. Get ideas for family gifting. Read Viewpoints: “Getting serious about your giving?

4. Bundle your tax write-offs.

One way to maximize the value of tax deductions is to bunch two years’ worth of itemized deductions into a single year, especially if you expect your income to be higher. For example, if you have unreimbursed work expenses that you incurred early in the year, you might be able to pull next year’s expenses into this year and double up your 2015 deduction.

Consider making an extra mortgage payment or prepay taxes (state and real estate) to allow additional deductions. For tax-deduction tips, read Viewpoints: “Tips for deducting more at tax time.”

5. Max and match: Reduce your taxable income and save too.

Even if you contribute regularly to your 401(k) or 403(b), take a few minutes to see whether you can make an additional contribution before the end of the year—especially if you aren’t on track to contribute the full amount your employer matches. The maximum you can contribute in pretax dollars for 2015 is $18,000, or $24,000 if you’re age 50 or older, and contributions must be made by December 31, 2015.

You may be able to reduce your taxable income1 by making a contribution to an IRA or spousal IRA. While you can make an IRA contribution for 2015 by April 18, 2016 (the tax-filing deadline for 2016 due to a federal holiday), doing so now will give your money more potential to grow in a tax-advantaged way. The maximum contribution is $5,500 per person ($6,500 if you are age 50 or older) or 100% of employment compensation, whichever is less. For age-based tips on retirement savings, read Viewpoints: “Retirement roadmap: rules of the road.”

6. Use the money in your flexible spending account.

There are two types of flexible spending accounts that allow you to set aside pretax money and then reimburse yourself, with calendar-year “use-it-or-lose-it” deadlines: health care and dependent care. The U.S. Treasury Department has relaxed the rules a bit this year. Employers can allow participants to carry over up to $500 in unused funds into next year, so make sure your balance doesn’t exceed that. Some plans allow you to submit 2015 claims until March 2016—check with your employer.

7. Do a financial reality check.

Understanding how you are saving and spending can be a valuable step to helping put your financial house in order. You don’t necessarily need to manage every penny. Consider our guidelines: Not more than 50% of your take-home pay should go to essential expenses, 15% of your pretax income to retirement savings, and 5% of your take-home pay to short-term savings. Use our saving and spending checkup to see where you stand.

8. Check the beneficiaries on financial accounts.

When reviewing your investments, also make sure you have designated a beneficiary for each account. This can be as important as writing a will, but it isn’t as complex. It is especially important if there have been changes in your life, such as a birth, a death, or a change in marital status.

One important point to keep in mind is that retirement accounts pass directly to named beneficiaries, rather than becoming part of your estate. This can provide significant tax advantages for your heirs.

If you are married, keep in mind that most employer-sponsored retirement plans automatically designate your spouse as the beneficiary unless you name another beneficiary and your spouse has consented in writing. For more details, read Viewpoints: “Five ways to protect what’s yours.”

9. Go for tax-free growth: Consider converting a traditional IRA to a Roth IRA.

Who wouldn’t want the tax-free growth potential and withdrawals in retirement that a Roth IRA offers?2 The problem is, not everyone can contribute to a Roth IRA because of income limits. But you may be able to convert existing money in a traditional IRA or other retirement savings account into a Roth IRA. Because pretax contributions and gains in a traditional IRA are generally considered taxable income when you convert, later in the year is a good time to take a look. That's because you have more information about your taxable income for the year, which may enable you to convert a more targeted amount to ensure that the income from the conversion doesn’t bump you into a higher income tax bracket.

If you don’t have an existing traditional IRA, you may want to open one, make a nondeductible contribution, and convert it to a Roth IRA before it accumulates any earnings. That way it would not be considered taxable income. See if a conversion may make sense with our Roth Conversion Evaluator.

10. If you’re age 70½ or older: Take your minimum required distribution.

Beginning when you turn 70½, IRS regulations generally require you to withdraw a minimum amount of money each year from your tax-deferred retirement accounts, like traditional IRAs and 401(k) plans, or pay penalties of up to 50% of your minimum required distribution (MRD).3

If you reached 70½ this year, you have until April 1, 2016, to take your 2015 distribution, but it still might be a good idea to do so before the end of this year. Why? Because if you wait, you’ll have to take two distributions in one year (the grace period applies only to your first distribution, so your 2016 MRD will have to be taken before December 31 of next year). That could push you into a higher tax bracket for 2016. To determine your MRD, use our MRD calculator. And for ideas on how to manage tax brackets in retirement, read Viewpoints: “Save taxes in retirement.”

Learn more

  • Get a holistic view of your retirement plan with our Planning & Guidance Center, and explore changes that may help you become better prepared.
  • Review your year-to-date tax information on your nonretirement Fidelity accounts. Go to Fidelity.com, click on Accounts & Trade, then "Portfolio." Log in, choose an account, and then Tax Info (Year-to-Date) under the More tab. 
  • For a wide range of information and tools, visit the Fidelity Tax Center.
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Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and are subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
1. For a traditional IRA, full deductibility of a contribution is available to active participants whose 2015 modified adjusted gross income (MAGI) is $98,000 or less (joint) and $61,000 or less (single); partial deductibility for MAGI up to $118,000 (joint) and $71,000 (single). In addition, full deductibility of a 2015 contribution is available for working or nonworking spouses who are not covered by an employer-sponsored plan, whose MAGI is less than $183,000 for 2015; partial deductibility for MAGI up to $193,000.
2. A distribution from a Roth IRA is tax free and penalty free provided that the five-year aging requirement has been satisfied and at least one of the following conditions is met: you reach age 59½, become disabled, make a qualified first-time home purchase, or die.
3. Minimum required distribution rules do not apply to Roth accounts during the lifetime of the original owner or to participants in workplace retirement plans who are less than 5% owners of the business they work for until they retire. MRDs are also required from 403(b) and 457(b) plans, as well as SEP IRAs, SARSEPs, and SIMPLE IRA plans. There’s an exception to this rule. If you’re still working, you can generally delay MRDs, but only from the retirement plans you participate in with your current employer. In these situations, your first distribution must be made by April 1 of the year following the year of your retirement.
Guidance provided by Fidelity through the Planning & Guidance Center is educational in nature, is not individualized, and is not intended to serve as the primary basis for your investment or tax-planning decisions.
IMPORTANT: The projections or other information generated by Fidelity’s Planning & Guidance Center Retirement Analysis regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time.
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