As we approach the heart of the holiday season, our thoughts turn to turkey, football games and festive holiday meals with family members. Many of our clients are thinking about the gifts they’ll give the ones they love, if they haven’t yet decided on a gift.

This may not seem like the optimal time to think about taxes and investments, but at Whitnell, that’s exactly what we are doing these days. In fact, we are making our lists and checking them twice, to ensure that our clients optimize their financial situation for the year-end. While this may not be as tasty as cranberry sauce and pumpkin pie, it might just make your holiday season a little brighter and prepare you for the year to come.

As you approach the end of 2014, I’d like to offer a few strategies to keep in mind.

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"I enjoy working with young professionals and helping them chart their course toward their financial future. I also enjoy working with my colleagues on the Investment Committee to create solutions for our clients."


Strategies for retirees

For those who are retired, year-end is a great time to analyze your cash-flow needs for 2015. This is also a time when many people choose to re-balance their portfolio to accommodate their cash-flow needs for the year to come. I recommend that you look closely at those investments that have done well. Consider harvesting your cash-flow needs from top performers.

If you’re age 70 and a half or older and have to take a required minimum distribution from your retirement accounts, you need to do so before year end to avoid any late penalties. If you just turned 70 and a half this year, you have until April 1, 2015. However, if you wait until next year you will have two distributions in the same year. This may bump you up to a higher marginal tax bracket, so make sure you plan appropriately when making that decision.


Strategies for working families

For those who are still working, make sure to take advantage of your employer-matched investment contributions, if these are available to you. The employee contribution limit for 2014 is $17,500. But we believe it is wise to put into these accounts whatever your employer matches at a minimum. This is essentially free money that you do not want to miss out on.

If you are rebalancing your overall investment portfolio, I encourage you to make the most of your tax advantaged accounts, like 401k and IRA, first. This is preferable to making changes to non tax advantaged accounts where you may be triggering capital gains tax.

And speaking of taxes and investments, you may consider harvesting losses from investments you have lost conviction in to help offset capital gains realized year to date. This is especially valuable for higher-income earners whose tax bracket predisposes them to higher capital gains tax rates.

If you are over 50 years of age and haven’t yet heard of catch-up contributions, I have great news for you. Many years ago the Federal government established catch-up contributions as a means for those who are closer to retirement to catch up with their peers who may have been investing in retirement accounts for many years. For those who are 50 or older, 2014 Federal limits for retirement accounts allow you to contribute an additional $5,500 as a catch-up contribution. If your financial situation merits, this is a great option to consider. This is in addition to the $17,500 already allowed.

If this is not a great option for you in 2014, or if you are not quite 50, do not worry. In 2015, contribution limits will jump to $18,000 for 401k, 403b and 457b accounts. Catch-up contribution limits will increase to $6,000 for those who are 50 or older.


Strategies for gifting

Many of our clients view year-end as the time for making gifts. Sometimes these gifts are given to family members, sometimes the gifts are for charities, but some of our clients will give to both loved ones and charities. While your intentions are certainly altruistic in nature, this does not mean you shouldn’t receive tax benefits or keep an eye on tax implications for your giving.

If you are considering a year-end gift for a loved one, please bear in mind that the annual exclusionary gift amount is $14,000. You can give this amount to any individual. In fact, if you and your spouse are planning to give, you can each contribute $14,000. This means you could give a child $28,000 without violating the annual exclusionary gift amount.

Many people give to charities at year-end. But more often than not, we see people going to their checkbook to make a contribution. As an alternative, you might consider giving appreciated stock. Why?

This applies only to appreciated stock that you have held for 12 months or longer. If the value of your stock has increased by, say, 250%, you can give this entire amount to the charity of your choice. Because you give it to a qualified charity, you avoid paying capital gains tax on the stock like you would if you were to sell instead. Better still, you can claim the entire value of the appreciated stock on your taxes.

Best of all, your charity would get a nice gift. And isn’t that what the holiday season is really all about?


What’s right for you and your family?

These are a few ideas. But please bear in mind that everyone’s situation is unique. Some of the strategies I’ve outlined here may benefit you and your family. But the best way to determine what’s right for you is through an analysis of your personal financial situation. If you have some decisions to make as we come to the end of 2014 and you’re not sure what’s best, let’s have a conversation.


The information contained in this article is provided for informational purposes only. No illustration or content in it should be construed as a substitute for informed professional tax, legal, and/or financial advice.