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Your New Year financial checklist

New Year's DayBefore 2019 comes to a close, it’s a good time to run through a financial checklist before the New Year. There are several reasons this will help any financial profile, including covering events such as birthdays or marriages, or less fortunate but still real events such as deaths and divorce. All are cause for a financial review – here are some things to include on your own financial checklist!

Did you turn 70 ½ in 2019?

If so, be sure you have taken your required minimum distribution (RMD) from your IRA and any retirement plan. This is important because the IRS requires you to start taking money from your IRA and 401k in the year you turn 70 ½. (This does not apply to ROTH IRA and ROTH 401k). If you fail to take a RMD, you can face a stiff IRS penalty.

In reality — you have until April 1st of the following year. However, if you wait until then, you will need to take two distributions in the same calendar year. For example, if you turned 70 ½ in 2019 and wait until April 1st of 2020 to take your first RMD — you’ll need to take a second RMD in 2020; the April distribution for 2019 and the next distribution for 2020 both need to be taken. If you’re still working at the job where your 401k is held, you’re not required to take a distribution unless you own 5% or more of the company.

What if an IRA owner over age 70 ½ passed away in 2019?

Mother and Son

If the RMD was not taken prior to death, the distributions should be paid to beneficiaries prior to year-end. Beneficiary IRAs have distribution requirements as well! Even ROTH IRAs have requirements that must be fulfilled once the original owner has died. The rules for spousal beneficiaries and non-spousal beneficiaries vary, so be sure to talk with your financial advisor about these.

If you’re planning on making a QCD

Are you planning to make a Qualified Charitable Distribution (QCD)? This is a distribution from an IRA that is going to a charity, something I’ve discussed in a previous blog. Basically — provided you are at least 70 ½ — you can transfer up to $100,000 from an IRA to a charity tax-free. This must be done by year end, and the transfer must be done AFTER age 70 1/2.

Financial Paperwork

If you performed a direct transfer of a 401k in 2019

If you did and you used a Net Unrealized Appreciation (NUA) strategy on stock that may have been in that plan, be sure that old plan is empty. If is not, get it done to be sure all requirements are met.

No matter what – check your beneficiary designations

For example, you may have married, gotten a divorce or had a death in the family in 2019. Be sure the people listed as beneficiaries are those you would want the money to go to in the event of your death. This not only applies to retirement accounts, but annuity and life insurance policies as well. It’s not uncommon for many people to have life insurance policies around that haven’t been reviewed in years! Plus, many changes may have occurred since you purchased the policy and listed your beneficiaries.

Contingent beneficiaries need to be reviewed as well. Let’s say you listed your three children as a beneficiary and one of those children pre-deceased you. If the “beneficiary to the beneficiary” is no longer someone you want to inherit money, a change may be in order.

Get started with your financial checklist in 2019!

I hope this helps you get ahead of 2020 with your financial planning. While Santa is “checking his list twice,” so should you! Have a safe and Happy New Year!

December 2019


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

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