End-of-year planning and a look ahead to 2017

The end of the year is fast approaching. Now is the perfect time to review a few items as you get set to enter 2017.

Investment and financial planning

1. Is it time to rebalance your portfolio? Changes in the market can cause your asset allocation to shift. As we head into the homestretch, we will be looking at your allocations and considering whether any adjustments might be made. We will also look at where it would be wise to take some profits, with the tax implications in mind.

2. Review your income or portfolio strategy. Are you reaching a milestone in your life, such as retirement? Have your circumstances changed? Has your tolerance for taking risk changed? If so, this may be a good time to evaluate your approach.

3. Take stock of changes in your life and review insurance and beneficiaries. Let’s be sure you are adequately covered and update beneficiaries if the need has arisen.

Tax planning

4. Tax reform. Talk of tax reform is in the air for 2017. What shape it will take and how it may affect the wide array of investments and tax-deferred accounts is an unknown. In other areas, Republicans have long wanted to kill the estate tax. And Donald Trump has said he would like to repeal the gift tax. Until Congress passes any legislation in these areas, estate and tax planning in general should stay the course.

5. Tax loss deadline. We have until December 31, 2016 to harvest any tax losses and/or offset any capital gains.

6. Take Required Minimum Distributions. RMDs generally are minimum amounts that a retirement plan account owner must withdraw annually, starting with the year he or she reaches 70½ years of age (or if later, the year in which he or she retires). The first payment can be delayed until April 1 of the year following the year in which you turn 70½. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of the year. The RMD rules also apply to 401(k), profit-sharing, 403(b), 457(b) or other defined contribution plan as well as SEP IRAs and Simple IRAs.

Missing the deadline could mean steep penalties. We can help you coordinate your distributions.

7. Contribute to an IRA. A Roth IRA gives you the potential to earn tax-free growth (not just deferred tax-free growth) and allows for federal-tax free withdrawals if certain requirements are met. There are income limits, but if you qualify, you may contribute $5,500 or $6,500 if you are 50 or older. You can make contributions to your Roth IRA after you reach age 70½ and there are no requirements to take mandatory distributions.

A contribution to a traditional IRA may be fully or partially deductible, depending on your circumstances. The same contribution limit that applies to a Roth IRA also applies to traditional IRAs. Total contributions for both accounts cannot exceed the $5,000 or $6,500 limit. You can make 2016 IRA contributions until April 17, 2017. (Note that statewide holidays can impact final date.)

8. Consider converting a traditional IRA to a Roth IRA. There are a number of items you may want to consider, including current and future tax rates as well as the potential for tax reform next year, but if the situation is right, it can be advantageous to convert to a Roth IRA. We can help you evaluate whether this is a good move for you.

9. College savings. Explore the advantages of a 529 college savings plan for your child or a grandchild. Earnings are not subject to federal tax and generally not subject to state tax when used for qualified education expenses for the designated beneficiary. Contributions are not deductible. The state of Illinois, however, gives you a break on your state taxes.

10. Charitable giving. Whether it is cash, stocks, or bonds, you can donate to your favorite charity by December 31 and potentially offset income. Did you know that you may qualify for what’s called a “qualified charitable distribution?” A QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity (“Rules to Do an IRA Qualified Charitable Distribution,” Kitces.com). The IRA owner must be at least 70½ when the distribution is made. Some specific conditions must be met, and we can help guide you through those.

You might also consider a donor-advised fund. Once the donation is made, you can realize immediate tax benefits, but it is up to the donor when the distribution to a qualified charity is made.

Market check-in: The Trump-et sounds

A Trump win was supposed to shake markets, given all the uncertainty surrounding his policy proposals. But while stocks crumbled in overnight trading as the vote count signaled a Trump win, by Wednesday’s market close, stocks ended sharply higher. And since then, the major indexes have been hitting new highs.

Markets quickly turned to the fundamentals and prospects that a Republican Congress and Republican president would enact pro-business and pro-growth measures. Talk of higher infrastructure spending, a cut in the corporate tax rate, and cuts in individual tax rates were viewed as positives.

However, the prospect of higher deficit spending, and with it, the possibility that inflation could tick higher, have taken a big toll on Treasuries and investment grade bonds.

How a Trump presidency will unfold is up for debate. But the unexpected reaction in stocks is a good example of how even the savviest market-timing strategies don’t always play out as expected.

Key Index Returns	MTD %	YTD %	3-year* %
Dow Jones Industrial Average	+5.4	+9.7	+5.9
NASDAQ Composite	+2.6	+6.3	+9.5
S&P 500 Index	+3.4	+7.6	+6.8
Russell 2000 Index	+11.0	+16.4	+5.0
MSCI World ex-USA**	-1.8	-3.2	-4.7
MSCI Emerging Markets**	-4.7	+8.7	-5.4