Weekly Observations for 12/29/2017

No shortage of items this week as the year winds down with a last-minute new tax law. Glad it’s Friday! Most of this is tax-related, plus some important risk information about your “target-date” retirement fund.

–  I’ve fielded a lot of questions about pre-paying property taxes this week — something I recommended in the 12/8 Weekly Observations. Here is a nice flowchart to help decide if it makes sense. If in doubt, I think it’s more likely you’ll have a tax advantage by pre-paying rather than waiting until next year when the deduction for state income and property taxes becomes very limited. The IRS issued some guidance, but it leaves a lot of open questions and is likely to be challenged.

–  The loss of charitable deductions in the tax bill is getting a lot of attention. The deduction is still there, but only an estimated 5% of the wealthiest taxpayers will be able to take advantage of it in the future.

–  If you’re over 70.5, though, don’t write a check for a gift! There is a little-known way to directly exclude charitable gifts from your taxable income, and we’ll be processing a lot of these “Qualified Charitable Distribution” gifts for clients next year, and other strategies for younger clients — so be sure to check with me before making charitable gifts as there are things we can do to maximize the tax benefit even under the new tax law.

–  If you are planning to retire within the next 10 years and are using a “target-date” fund inside your retirement plan, be careful! These funds are often much more aggressive than they should be for someone that close to retirement — unless you’re okay losing 1/3 of your assets. If that’s not okay, then…

–   You need to know the equity allocation and glide-path of your target-date fund and make sure it’s appropriate for your financial plan. Not sure? Just email me the name of your fund and we’ll let you know the risks. (No need if you’re a client — we check this at every review meeting.)

–  Want to know how the new tax law will impact you in 2018? We have all the tax tables, limits, and updated tax planning software ready to go. Just schedule a review meeting and send me your last return, W-2/paystub, and similar tax-related information.

Here’s to a wonderful New Year!