top of page
Search

Your Annual Financial To-Do List

  • Bob Lawson
  • Dec 10, 2019
  • 5 min read

What financial, business, or life priorities do you need to address for the coming year? Now is a good time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:


Can you contribute more to your retirement plans this year?

In 2020, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA: singles and heads of household with MAGI above $139,000 and joint filers with MAGI above $206,000 cannot make 2020 Roth contributions. (1)

Before making any changes, remember that withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½.

Make a charitable gift.

You can claim the deduction on your tax return, provided you itemize your deductions with Schedule A. The paper trail is important here. If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the Internal Revenue Service (I.R.S.) does not equate a pledge with a donation. If you pledge $2,000 to a charity this year, but only end up gifting $500, you can only deduct $500. (2)

These are hypothetical examples and are not a replacement for real-life advice. Make certain to consult your tax, legal, or accounting professional before modifying your strategy.

See if you can take a home office deduction for your small business.

If you are a small-business owner, you may want to investigate this. You may be able to legitimately write off expenses linked to the portion of your home used to exclusively conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with home-based businesses. (3)

Open an HSA.

A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,550 contribution for 2020, if you are single; $7,100, if you have a spouse or family. Those limits jump by a $1,000 “catch-up” limit for each person in the household over age 55. (4)

If you spend your HSA funds for non-medical expenses before age 65, you may be required to pay ordinary income tax as well as a 20% penalty. After age 65, you may be required to pay ordinary income taxes on HSA funds used for nonmedical expenses. HSA contributions are exempt from federal income tax; however, they are not exempt from state taxes in certain states.

Pay attention to asset location.

Tax-efficient asset location is an ignored fundamental of investing. Broadly speaking, your least tax-efficient securities should go in pretax accounts, and your most tax-efficient securities should be held in taxable accounts. Asset allocation is an approach to help manage investment risk.

Asset allocation does not guarantee against investment loss. Before adjusting your asset allocation, consider working with an investment professional who is familiar with tax rules and regulations.

Review your withholding status.

Should it be adjusted due to any of the following factors?

  • You tend to pay a great deal of income tax each year.

  • You tend to get a big federal tax refund each year.

  • You recently married or divorced.

  • A family member recently passed away.

  • You have a new job and you are earning much more than you previously did.

  • You started a business venture or became self-employed.

These are general guidelines and are not a replacement for real-life advice. So, make certain to speak with a professional who understands your situation before making any changes.

Are you marrying in 2020?

If so, why not review the beneficiaries of your retirement accounts and other assets? When considering your marriage, you may want to make changes to the relevant beneficiary forms. The same goes for your insurance coverage. If you will have a new last name in 2020, you will need a new Social Security card. Additionally, the two of you may have retirement accounts and investment strategies. Will they need to be revised or adjusted with marriage?


Are you coming home from active duty?

If so, go ahead and check the status of your credit and the state of any tax and legal proceedings that might have been preempted by your orders. Make sure any employee health insurance is still there and revoke any power of attorney you may have granted to another person.


Consider the tax impact of any upcoming transactions.

Are you planning to sell any real estate this year? Are you starting a business? Do you think you might exercise a stock option? Might any large commissions or bonuses come your way in 2020? Do you anticipate selling an investment that is held outside of a tax-deferred account?


If you are retired and older than 70½, remember your year-end RMD.

Retirees over age 70½ must begin taking Required Minimum Distributions from traditional IRAs and 401(k), 403(b), and profit-sharing plans by December 31 of each year. The I.R.S. penalty for failing to take an RMD can be as much as 50% of the RMD amount that is not withdrawn. (5)


Lastly, should you make 13 mortgage payments this year?

If your house is underwater, this makes no sense – and you could argue that those dollars might be better off invested or put in your emergency fund. Those factors aside, however, there may be some merit to making a January 2020 mortgage payment in December 2019. If you have a fixed-rate loan, a lump-sum payment can reduce the principal and the total interest paid on it by that much more.

If you’re considering making 13 payments, consider working with a tax, legal, or accounting professional who is familiar with your situation. (3)

Vow to focus on being healthy and wealthy in 2020. And don’t be afraid to ask for help from professionals who understand your individual situation.


Citations

1 - thefinancebuff.com/401k-403b-ira-contribution-limits.html [7/16/19]

2 - irs.gov/newsroom/charitable-contributions [6/28/19]

3 - nerdwallet.com/blog/taxes/home-office-tax-deductions-small-business/ [1/22/19]

4 - cnbc.com/2019/06/03/these-are-the-new-hsa-limits-for-2020.html [6/4/19]

5 - forbes.com/sites/leonlabrecque/2019/04/09/bigger-iras-proposed-new-tax-law-may-let-you-build-a-bigger-ira-in-retirement/ [4/9/19]

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 
 
 

Comments


Financial Plan | Personalized Report | Financial Advisor - Minneapolis

Barrington's Financial Blog

MRFC - PHOTOSHOP 151x104.png

About   |    Our Services   |    Financial Planning   |    Employer Retirement Plans   |    Contact

Litigation Support   |    Expert Witness   |    Pro Bono Services   |    Careers       

Barrington Capital Management, Inc.

3800 American Blvd West   |   Suite 1500

Bloomington, MN  55431

952-835-1000   |    800-741-0704   

Info@BarringtonCap.com

 

Barrington Capital Management, Inc. only conducts business in states and jurisdictions where it is registered or where an exemption from registration exists. This site and its contents do not constitute investment advice or a solicitation to sell securities. Past performance is not indicative of future results. This website is for informational purposes only and Barrington Capital Management, Inc. reserves the right to modify it at any time without notice. Copies of Barrington Capital Management Inc.’s Form ADV Part 2 are available upon request. Images and photographs are included for the sole purpose of visually enhancing the website. No photographs are of current or former clients and they should not be construed as an endorsement or testimonial from any of the persons in the photograph.

All materials used on this site, including all images, are copyrighted and are protected worldwide by copyright laws and treaty provisions. They may not be copied, reproduced, modified, published, uploaded, posted, transmitted, or distributed in any way, without Barrington Capital Management Inc.'s prior written permission.

Neither Barrington Capital Management, Inc., nor any of their Investment Adviser Representatives, provide tax or legal advice. Tax and legal advice should only be obtained from a qualified professional. All written content on this site is for informational purposes only. All information and ideas should be discussed in detail with an advisor prior to implementation. Examples from our news feeds, blogs or articles do not take into consideration commissions, investment management fees, miscellaneous transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. Investors should review transaction costs, margin requirements and tax considerations with their financial or tax advisor before entering into any investment or financial planning strategy. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness.

Investment Advisory services are offered by Barrington Capital Management, Inc., a Registered Investment Adviser in the state of Minnesota. Barrington Capital Management, Inc. may utilize the services of First Ascent Asset Management, LLC for certain investment portfolios. Insurance products and services are also offered through Barrington Capital Management, Inc., a licensed insurance agency. 

Disclosure: Barrington Capital Management, Inc. is not a law firm. Robert D. Lawson and his associates are not practicing attorneys. The scope of any activities performed by Robert D. Lawson, subcontractors or employees of Barrington Capital Management, Inc. is limited to litigation consulting and litigation support. 

By using this website, you agree to our Terms of Service and Privacy Policy. View our Business Continuity Plan.

Copyright © 2025 Barrington Capital Management, Inc.

A Registered Investment Adviser  |  All Rights Reserved

 

bottom of page