3 Year-End Tips for Retirees

The end of the year is often viewed as a time of spending… for gifts, vacations, holiday events, etc…  It can also be a time to consider tax-saving strategies.  As the year winds down, here are some tips for retirees to consider:

  1. Take your required minimum distributions (RMDs)

When you reach age 70 ½, you’re required to withdraw a certain amount of money from your retirement accounts each year.  That amount is called a required minimum distribution, or RMD.  The deadline for taking RMDs is December 31 each year.  If you have an IRA, you may delay taking your first RMD (and only your first) until April 1 of the year after you turn 70 ½. 

If you miss the RMD deadline, there is a 50% tax penalty on the amount that you should have taken, i.e.  you’ll owe taxes not just on your distribution amount but also have to pay a stiff penalty to the IRS.

A good advisor can help you calculate the amount to take each year, and help you plan for what to do with the cash.  Remember, you do not have to spend the RMD.  You can also invest the cash back in your portfolio in a taxable account, or if you or your spouse have earned income, you can reinvest in a Roth IRA.

  1. Look for Tax-Loss Sales (or Tax Gains)

It may make sense to sell positions with losses at year-end.  Tax-loss selling is a technique to lower taxes while maintaining the expected return and risk profile in your portfolio.  Particularly, if you have sold securities with capital gains earlier in the year, you can use losses to offset an equivalent amount of gains, or if your losses exceed your gains, you may deduct up to $3,000 in losses from ordinary income. 

This may be a tough year for tax loss selling, as it’s generally been a good year for investors.  However, individual stock investors may be able to identify losing positions. 

There are also cases where it makes sense to harvest tax gains.  If your total income comes in under $39,375 (single filers) or $78,750 (married couples filing jointly), you may be in the 0% tax bracket for long-term capital gains. 

  1. Consider Charitable Giving

Changes in tax laws this year calls for new thinking to charitable giving.  Many fewer taxpayers are likely to benefit from itemized deductions.  If you’re taking required minimum distributions (see above), you can use a qualified charitable distribution.   You may direct all or a portion of your RMD, up to $100,000, to the charities of your choice.  The amount of your contribution reduces your adjusted gross income. 

A savvy financial advisor can help investors navigate year-end planning.  With many new tax laws in effect this year, tax-planning can get complicated.  Of course, there are also many other items that may warrant attention.  These include insurance needs, updates to wills and estate plans, long-term care, cash flow needs, etc…  Collectively, all these issues can be overwhelming.  Signet Advisors use this time of year to help identify and attend to the most pressing financial needs of our clients.   



Past performance may not be indicative of future results. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that their future performance will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. The statements made in this newsletter are, to the best of our ability and knowledge, accurate as of the date they were originally made. But due to various factors, including changing market conditions and/or applicable laws, the content may in the future no longer be reflective of current opinions or positions. Any forward-looking statements, information and opinions including descriptions of anticipated market changes and expectations of future activity contained in this newsletter are based upon reasonable estimates and assumptions. However, they are inherently uncertain and actual events or results may differ materially from those reflected in the newsletter. Nothing in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. Please remember to contact Signet Financial Management, LLC, if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and/or services. No portion of the newsletter content should be construed as legal, tax, or accounting advice. A copy of Signet Financial Management, LLC’s current written disclosure statements discussing our advisory services, fees, investment advisory personnel and operations are available upon request.

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