While financial planning is a year-round activity, there is always a rush to get things done at year's end. Maybe it has to do with tax planning or perhaps the rest of the year has been busy. 

While many of the year-end financial planning tasks stay constant year after year, each one presents some different opportunities and priorities. Here are a few pieces of financial planning advice that might be applicable to your clients. (For related reading, see: How Top Advisors Innovate to Stay Ahead.)

Max Out Retirement Plans

The last quarter of the year is a good time to suggest to clients that they review how much they have contributed to their 401(k) plan. If they are not on track to contribute the maximum — $18,000 for folks under 50 years old and $24,000 for those over 50 — there is still time to bump up their salary deferral if they can afford it.

For those older than 50 years old, catch-up contributions can still be made even if their contributions would be otherwise capped due to their company’s failure to pass non-discrimination testing. 

Choosing Charity

If your clients make year-end donations to charity, encourage them to consider making their donations with shares of appreciated stocks, mutual funds or ETFs. The nice thing here is that they get the full credit for the market value of the donated investment on the date of the donation and they do not have to pay any capital gains taxes on the investment gains.

Many charitable organizations can easily accommodate donations made in this fashion, but it is always a good idea to check with them first. (For related reading, see: How to Better Connect with Your Clients.)

Take all RMDs

For clients who are required to take minimum distributions from retirement accounts, such as IRAs and 401(k)s, you must make sure these are taken by Dec. 31. The penalty for any amount not taken is steep on top of the income taxes that are still due. This also includes clients who may be the recipients of inherited IRAs as well. Not all custodians remind clients about RMDs from inherited IRAs, so it is important that you do.

Wait to See if Charitable RMDs Donations Are Reinstated

In several of the past years, Congress has passed legislation allowing RMDs to be donated to a charity either in total or in part. This option is available only for those who are aged 70.5 years or older, so it excludes younger beneficiaries of inherited IRAs. 

The nice feature here is that the amount of the RMD donated to charity does not hit your client’s income and may put them in a better position the following year on what they can collect from Social Security and Medicare based upon their lower income this year.

So far, there is no word on this for 2015; we may not hear about it until well into December. (For related reading, see: Top Tips to Reduce Required Minimum Distributions.)

Use Flex Spending Accounts

Financial advisors should be providing advice to clients on the selection of employee benefits during fall open enrollment. They should also make a point of reminding clients who choose the flexible spending account (FSA) through their employer that they need to spend these dollars by year-end or lose them.

Consider Tax-Loss Harvesting

The recent market declines may have moved some investment positions to a loss. This might be a good time to sell some of these holdings to realize these losses. The losses, in turn, can be used to offset gains from mutual fund and ETF distributions and against gains generated from the sale of appreciated holdings.

It is important to remind clients of the wash-sale rules connected with purchasing the same or similar holdings that were sold within a set timeframe. Tax-loss harvesting can be an excellent tactic to use in the course of normal portfolio rebalancing.

If recognized capital losses exceed your recognized gains, you can deduct up to $3,000 per year. Additional losses can be carried over to subsequent years. 

Be Cautious When Buying Mutual Funds in Taxable Accounts

Many mutual funds declare distributions near year's end. You want to wait until after the date of record to buy into a fund in your taxable account in order to avoid receiving a taxable distribution based on a few days of fund ownership. Even with the recent weakness in the stock market, many equity mutual funds still have capital gains which will need to be distributed to shareholders this year.

The better strategy is to wait to buy the fund after the distribution has been made. This is not an issue, of course, in a tax-deferred account such as an IRA.

The Bottom Line

Year-end financial moves should be part of the discussion advisors have with their clients well before the fourth quarter. There are significant benefits to coming up with an actionable to-do list of financial planning points that clients can check off as they sail on toward the new year. (For related reading, see: 7 Year-End Tax Planning Strategies.)

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