FISCAL FITNESS

MICHAEL J. DONNELLAN King Financial, Inc.

YEAR-END FINANCIAL CHECKLIST

So many people can’t wait for this crazy 2020 year to end, so here are some important considerations investors should work on as the holidays quickly approach. There are several reasons to make year-end financial and estate planning a priority, because when the year turns over there is no going back.

TAX ISSUES Probably the most complicated and time-consuming issue, but the one that can cost you, or save you, the most money. Some clients may need to generate gains or losses this year while the tax environment is still favorable.

Another issue in this category is the Required Minimum Distributions (RMD) from qualified retirement accounts. Clients over 72 (new rule for 2020) must take their RMD this year or face stiff tax penalties of 50%. Also be aware of required distributions from Beneficiary IRAs.

MUTUAL FUND DISTRIBUTIONS As a general rule, don’t buy a mutual fund near the end of the year, without first checking when, and if, the fund will be paying out a capital gain for the year. If you buy Fund ABCDX on December 5th and they distribute a capital gain for the year on December 15th, you are responsible for the tax on this year’s whole capital gain, even though you held the fund for only 10 days. Remember, a tax-sheltered account, such as an IRA, SEP, 401(k), etc. will not have this tax consequence.

REVIEW YOUR WILL, BENEFICIARIES & INSURANCE POLICIES Double-check that changes or updates are not needed on your accounts. It’s all too common to leave an ex-spouse, for example, assigned accidentally. Make sure you have the right amount of insurance for your needs. The insurance industry has become quite competitive and you can easily compare rates and possibly save hundreds, if not thousands of dollars. continued on page 14

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BUDGET/GOALS The holidays can be a busy time, but also a good time to set a budget. This is the time of the year when lots of your money is being spent. There’s no better time to look at your finances than now. Think of ways to cut some of your expenses and/or plan on contributing more to retirement or college savings plans.

Set financial goals, but also personal, professional, entertainment and educational goals. This is another great time to do that.

ANALYZE PORTFOLIO This is important because any mix of investments will get out of whack over time. One stock may have had a spectacular run and is now a large percentage of your portfolio. Your bond investments/funds won’t grow at the same rate as your stock, your U.S. and foreign investments will post differing returns, and funds following different investment styles will behave differently from each other, too.

That shifting mix matters. You had a reason for dedicating a certain portion of your portfolio to U.S. stocks, a certain portion to foreign, and so on. You built your portfolio to reflect your investment goals and the level of risk that you’re comfortable with. But if your portfolio has drifted far enough away from that original mix, it will no longer be the same fit for you.

ROTH IRA CONVERSION If you’re unable to contribute to a Roth IRA directly because you don’t qualify, you may benefit from contributing to a Traditional IRA, then converting the funds to a Roth IRA. Another option is to convert existing IRA assets to a Roth IRA.

Scenarios illustrated are hypothetical in nature, results may vary. Investing is subject to risk which may involve loss of principal. Past performance is not indicative of future results. Many clients have seen their incomes slashed this year due to Covid-19. This could be an opportunity to convert, possibly paying less tax this year.

CHARITY/GIVING If you itemize your deductions, you can claim the money you have given to charity. I have recommended clients donate highly appreciated stock, which gives them the full deduction and avoids the Capital Gains Tax.

SCHEDULE REVIEW Arrange meetings with your financial professional. Make it a priority and prepare by creating a list of topics to help get the most out of your discussion.

As always, talk to your financial professionals and tax advisors, to determine your specific needs and goals.

The M3 Wealth Management Office does not provide legal or tax advice. Consult an attorney or tax professional regarding your specific situation. The information herein is general and educational in nature and should not be considered legal or tax advice.

Michael J. Donnellan specializes in stock selection and retirement planning. Feel free to contact him with any questions or comments at the M3 Wealth Management office at 17601 W. 130th Street – Suite 1 in North Royalton, Ohio. Phone number (440) 652-6370 Email: donnellan@m3wealthmanagement.com

Securities and advisory services offered through L.M. Kohn & Company Registered Broker/Dealer Member FINRA/SIPC/MSRB 10151 Carver Rd. Suite 100 – Cincinnati, Ohio 45242 (800) 478-0788

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