The Journey: 6 Holiday Gifts For Your Future Self

By Janet Kidd Stewart
Tribune News Service

WWR Article Summary (tl;dr) Janet Kidd Stewart urges readers to consider five low-impact financial moves in the weeks ahead. As Stewart says, “As gifts to ourselves, these are more like stocking stuffers than grand gestures under the tree, but they can make a real difference in your pocket down the road.”

Tribune News Service

In a few weeks the holidays – and the tax year – will be over. With so much tax uncertainty in Washington, it’s tempting to make some pre-emptive moves this month to set yourself up for future savings.

Resist the urge, said Mari Adam, a veteran financial planner and president of Adam Financial Inc. in retiree haven Boca Raton, Florida.

“What gets people into a lot of trouble is making big financial decisions based on what they think will happen,” Adam said.

Instead, consider these five low-impact financial moves in the weeks ahead. As gifts to ourselves, these are more like stocking stuffers than grand gestures under the tree, but they can make a real difference in your pocket down the road:

–– Open a Roth IRA. Whatever the tax landscape looks like in the future, it’s always smart to contribute to a Roth IRA if you qualify, Adam said. If your modified adjusted gross income for 2017 is under $118,000, you can sock away $5,500 ($6,500 for those over 50) in a Roth. Taxpayers don’t get a deduction for the contribution, but the money grows tax-free and is generally withdrawn tax free in retirement. Importantly, particularly for young savers starting out, account holders can withdraw their contributions (but not earnings) penalty-free if funds are needed.

–– Undo an earlier decision. The House of Representatives’ version of the tax bill would do away with so-called Roth re-characterizations, where taxpayers could reverse their conversions from traditional IRAs to Roth IRAs. This is often done after a big market decline, helping taxpayers avoid a big bill for conversion even though their investments fell. So, if you converted funds this year and think you might want to change your mind, consider re-characterizing this month, said Mark Luscombe, principal federal tax analyst with Wolters Kluwer Tax & Accounting.

–– Care for your future health by opening a health savings account. Assuming your best health insurance plan is also a qualified high deductible health plan, opening these accounts and letting the contributions grow instead of using them for health expenses right away is a triple-tax score for the future because contributions get a deduction, they grow tax-free and are withdrawn tax-free if used for medical expenses. Look for a provider with no or low fees and an easy online account maintenance system.

-Live a little. A new study of retiree spending by Blackrock Retirement Institute and the Employee Benefit Research Institute found that nearly two decades into retirement, most retirees have at least 80 percent of their pre-retirement savings. There were some caveats, including a warning that many of the retirees are from a pension-rich generation of workers who didn’t need to dip too heavily into principal for extra cash. That scenario could be very different with today’s retirees. That said, there are some retirees who are just too fearful to spend, advisers say.

“Try to indulge in moderation,” Adam said. Some clients have overspent in the past and now may be overcompensating, she said. After advising one of her retired clients to stop subsidizing her adult children, she did allow the client recently to take her family on a $15,000 cruise, an amount that didn’t break her bank but that gave her great pleasure and gave the kids a sense of one last “hurrah” from mom, she said.

–– Accelerate deductions. It’s generally advisable to accelerate deductions and postpone income, to the extent we can, and so it is this year with the prospect of a higher standard deduction next year, which is in congressional tax proposals, Luscombe said. If you’ve pledged a multiyear charitable gift and might take the standard deduction next year, consider moving next year’s pledge into this year-end, he said.

–– Explore a new housing option. Until Jan. 5, Roommates4Boomers ( is offering its matching service for 50-plus women free. Housing can eat up a big chunk of any retiree’s budget, so exploring a way to cut costs by finding a roommate in 2018 can make a lot of sense. Users can offer their own homes to share or connect with others to find places to rent.

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