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Expert Tips for End-of-Year Financial Planning

1                 Review Cash Flow

Review your monthly expenditures and see where you might be spending unnecessary money. Make a plan to cut out those unnecessary expenses and allocate that money to savings. This is a fairly painless way to increase your savings.

2                 Check Your Asset Allocation

An asset allocation strategy is designed to have balance in your portfolio by apportioning the portfolio’s assets according to your goals, risk tolerance and investment time horizon. Often after a long period of growth, as we have seen the last 10 years, your portfolio can get out of the allocation balance you are comfortable with. Take time to rebalance your portfolio accordingly.

3                 Maximize Your IRA Contributions

IRA contribution limits for 2019 are $6,000 per year if you are below age 50 ,$7,000 if you are age 50 or over. For a couple, adding that extra $2,000 a year to their IRAs over 15 years could add more than $73,000* to their balances in retirement.

*based on investing in Growth Fund of America (GFFFX) which averaged 10.68% over the last 15 years

4                 Harvest Tax Losses

Tax-loss harvesting is when you sell investments at a loss to reduce your tax liability. You can harvest losses to offset gains, as well as up to $3,000 in non-investment income. According to the wash-sale rule, when you harvest losses, you cannot repurchase substantially identical investments for 30 days. However, you could buy back the same investment after 31 days and still record the loss.

5             Manage Mutual Fund Capital Gains

Each year, generally in November and December, mutual fund shareholders face the possibility of receiving capital gains distributions from their mutual funds. These capital gains distributions are the result of the management selling shares of one or more of the fund's holdings during the taxable year. Mutual fund capital gains distributions are taxable events resulting from the fund’s manager selling shares of securities held within the fund. Taxes from capital gains distributions can catch you off guard if you're not familiar with what they are and how they work. Consider taking the capital gains in cash rather than reinvesting and then diversify your portfolio by investing in other areas.

Mark Johnson is a financial adviser with Heartland Wealth Management, 3351 W. Rock Creek Road, Suite 130, Norman. He can be reached at 561.7051 or via email at 

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