Financial Resolutions for 2019


New Year’s resolutions can seem a bit contrived, but at the dawn of 2019 at least two factors — the recent stock market volatility and changes to the tax code — lend more urgency than usual to the task of putting your finances in order.

The following recommendations will put you on a good footing for financial security in the years ahead.

–Rebalance your portfolio. This is simply a matter of selling assets in your portfolio to maintain your chosen proportions of stocks and bonds. I do this at least once a year. The recent stock market volatility, which is unlikely to abate anytime soon, may have made portfolio adjustments necessary. If your common stock portfolio value has decreased substantially, you may want to dollar-cost average, purchasing more stocks and taking advantage of market fluctuations.

–Maximize your retirement account contributions. If you can afford it, you should make the maximum contribution to your 401(k). In 2019, that’s $19,000 ($25,000 for those aged 50 and older). Even if you can’t afford to contribute that much, you should at least make the minimum contribution necessary to receive the employer match.

If you haven’t maxed out your IRA contributions for 2018 ($5,500; $6,500 for those aged 50 and over), you have until April 15, 2019 to make your contribution.

Many retirees past the age of 70 1/2 still have earned income. Those retirees can no longer make traditional IRA contributions, but they can make Roth IRA contributions. You can initiate a Roth account as long as you have earned income.

–Plan to take any required distributions from retirement accounts. By law, you have to start taking required minimum distributions (RMDs) from your 401(k), traditional IRA and certain other retirement accounts every year beginning no later than April 1 of the year after you turn 70 1/2.

If you reach 70 1/2 in 2019, make sure you understand your options. You can postpone making your first RMD up to April 1, 2020, but if you do so you will have to take two RMDs in 2020, the last one by the end of 2020.

If you are required to take an RMD in 2019, you shouldn’t wait until the end of the year to make your withdrawal. As many found out in 2018, if you wait until December, you may be forced to make withdrawals at the wrong time. No one can predict when the stock market has its peaks and valleys.

–Protect the funds you’ll need for near-term expenses. Because of market volatility, and its likely continuation, don’t wait until the last minute to withdraw funds for expenditures you know you will face. Withdraw the funds you know you will need and keep those funds in vehicles you know are safe, such as money market accounts, Treasury bills and short-term bond funds.

–Get your estate in order. If you’re a head of a household and you haven’t created a will, do so now. There is no reason not to. If you care about your beneficiaries, it is mandatory to create one, and modify the will/trusts as conditions change.

For that matter, review the beneficiaries named in your retirement accounts and plans, and update them as necessary. As I have written before in this space, it is critical that the beneficiaries you identify in the documents maintained by the trustees of these accounts are up-to-date. You cannot override these selections in your will. If there have been major life changes that require changing your beneficiaries, don’t hesitate. Make those changes immediately.

Also create end-of-life documents such as a living will, a health care proxy, and/or a financial power of attorney.

–Consider using retirement accounts to make charitable contributions. Many taxpayers will no longer choose to itemize in 2019 because of the doubling of the standard deduction. If you are 70 1/2 or older — that is, at the age when RMDs apply — it’s a good idea to have the trustee of your IRA account make direct contributions to your charities, which allows you to take advantage of tax deductibility. If it turns out you won’t itemize on your next tax return, you would have reduced your taxes. You would still have the option to itemize if it’s worthwhile.

(Article written by Elliot Raphaelson)