More Smart Financial Moves to Make Before Year-End


We just flipped to the last page on the calendar. There are a limited number of shopping days left before Christmas, and you are probably busy attending a variety of holiday events and parties. The hustle and bustle of the holiday season makes it difficult to remember some of the financial moves you should make before you hang up the new calendar. The purpose of this post is to remind you of some to get done before you ring in the new year. And please make sure to check out our previous post on year-end financial moves for more ideas.

Watch out for capital gain distributions. If you own mutual funds in a taxable account, keep an eye out for distributions that can impact your tax bill. Mutual funds are required to distribute any gains that the fund realized through the year, and most of them do so in early to-mid December. These distributions are taxable to you even if you reinvest the distribution. With the rally we have had in the markets over the last several years, some of these distributions will be sizable. If you are faced with a taxable distribution, review your other holdings to see if there are any which have declined in value that you could sell and trigger a loss. You can use losses to offset gains and reduce your tax burden.

On a related note, if you are planning to buy a fund before the end of the year, make sure to check whether they are going to be making a distribution. You don’t want to buy the fund just before the distribution and end up paying taxes on gains that occurred before you owned the fund.


Check your retirement accounts. If you have access to a 401(k), 403(b), or Thrift Savings Plan (TSP), you can contribute up to $18,500 for 2018. If you are over 50, you can kick in an additional $6,000 for a total contribution of $24,500. If you haven’t maxed out your contributions yet, you have a couple of paychecks left to increase your contribution. Or, you may be able to contribute part of any bonus you may receive. 

If you are making pre-tax contributions, any extra money you contribute before year-end will reduce your taxes. If making your contributions to a Roth plan, your contributions won’t save you on current taxes, but the future distributions will be tax-free. If you don’t have access to an employer-sponsored plan, you can contribute to a traditional or Roth IRA (subject to some income limitation rules). You have until April 15 of 2019 to make that contribution. Another thing to keep in mind is that even if you can’t max out your contributions, every little bit that you can contribute will help.

Consider a Roth conversion. The previous two suggestions are designed to reduce your tax bill for this year. A Roth conversion will increase your tax bill—but it may be well worth it. By converting some of the money you have in a traditional IRA to a Roth, you’ll pay taxes now on the amount you convert. Why would you do such a thing? Because it gives you an opportunity to turn tax-deferred money into tax-free money. You should only convert funds that will get you to the top of your current tax bracket. We are particularly fond of this strategy this year because with the tax cuts that went into effect this year, we think you will be paying taxes now at rates that we expect will only increase in the future.


Consider prepaying college expenses. If you have a child in college, you could prepay the first tuition costs of 2019 at the end of this year. This way, you can claim the American Opportunity tax credit on this year’s return. This is a tax credit, a dollar-for-dollar reduction in your tax bill if you are below the income limits ($160,000 adjusted gross income for married couples get the full credit, partial credit for those with adjusted gross income up to $180,000). If you are continuing your own education, you might be able to claim the Lifetime Learning Credit for this year. Another dollar-for-dollar credit, this one is worth 20% of your costs, up to $2,000. The full credit is available for married couples with modified adjusted gross income up to $112,000. A partial credit is available for those with MAGI up to $132,000.

A few other ideas that don’t necessarily have an end-of-year deadline, but they are just good to get done include freezing your credit, checking your credit report, and redeeming some of those credit card points you’ve accumulated to buy some of those presents you’ll be putting under the tree!