Morgan Stanley
  • Wealth Management
  • Sep 13, 2019

Fall Planning for Your Finances

Know the moves to make before year end to start 2020 on the right path.

Fall means the return of school, cooler weather and the end of year approaching. The changing of the season often gives many of us the desire to tackle new ambitions for next year while also making a final push on goals for the current one. For your finances, there are a number of moves you can make in the last months of 2019 to help finish the year strong and set yourself up for a productive and successful 2020.

Revisit Your Asset Allocation

Year end is a good time to revisit your investment strategy and asset allocation, to help ensure your portfolio is still apportioned among stocks, fixed income, cash and other asset classes in a way that fits your goals and risk tolerance. Given the long-running bull market for stocks, a greater share of your money may be invested in and overweight in equities than what you might have traditionally allocated for in the past, says Financial Advisor, Family Wealth Director and Senior Vice President Lori Sackler. And, given the recent market volatility and upward movement in particular assets, tactically repositioning your portfolio may make sense, given bonds have actually provided positive returns over the past 12 months when the S&P is nearly flat.

“We sit down with our clients to gauge their risk tolerance and make sure their investment choices are still what they want them to be. You may decide you don’t want so much equity exposure, or need to consider hedging your positions with other investments and instruments,” said Sackler, who was named to Forbes’ Top Women Wealth Advisors list in 2017 and 2018.1 She is also the author of The M Word: The Money Talk Every Family Needs to Have About Wealth and Their Financial Future and The M Word Journal: How to Have the Money Talk.

Sackler is advising some of her clients to consider alternative investments such as hedge funds and real estate, which generate returns and income with lower correlation to the performance of the stock market. Investors may also want to have funds set aside to purchase securities if there is a drop in price, Sackler says. “You may want to take advantage of dips in the market. If there is a downturn are you ready with cash on the sideline?”

Plan for Your Tax Return

Under the tax reform passed in late 2017, many living in high-tax states have seen their overall tax bill increase due to caps on how much real estate, state, and local taxes can be deducted from their federal returns. 

This has generated heightened interest in investments that also have tax benefits. Investors in high tax states might want to consider moves in their portfolio to limit their current taxes by investing in tax-deferred or tax-exempt instruments.

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If you’re not already, also consider fully funding your employer-sponsored retirement plan, such as a 401(k), since your contributions can be made on a pretax basis. In 2019, you can save up to $19,000 through your 401(k) plan, with up to $6,000 in additional contributions for those over 50.

Estate Planning

Sackler encourages her clients to periodically update their wills and other estate planning documents. Year-end, she says, is a good time to review the changes the past year brought to your family, as well as your overall estate plan in order to ensure it still reflects your situation and objectives.

“Did you gain a new grandchild or daughter-in-law or is someone in the family experiencing serious health issues?,” said Sackler. “It’s important to update your estate plan as you would your wealth plan.” 

Those planning to give financial gifts to family members should keep in mind the annual gift tax exclusion limit of $15,000 for 2019 ($30,000 for couples) and look to make those gifts before year-end. Though the federal estate tax deduction rose to $11.4 million in 2019, Sackler advises her clients that individual states often have lower exemptions. Given that, you may want to share some of your estate with your family today to help them with their own finances. Setting up trusts and gifting to reduce your overall estate tax liability and providing for education expenses for family members through a 529 plan or direct gift to an institution are ideas you might want to consider.

Charitable and Holiday Giving

During the holidays, many feel the call to give back through charity. When making your gifting plans, you need to also decide whether you want to give cash, appreciated securities, or through a gift of your volunteer time. 

Another option for giving back is a donor-advised fund, which provides potential tax advantages while helping you support your favorite causes. If you’re more serious about creating a more substantial structure and commitment, you might want to consider a family foundation in which you engage your family members in the philanthropy as well 

“Sit down and determine your thresholds for how much you want to give,” said Sackler. “Don’t wait until December and then make last-minute decisions on giving that aren’t carefully considered.  You want to make sure your giving is in alignment with your vision and a strategy you have carefully crafted.”

Before buying gifts for everyone on your list or planning the family ski trip, Sackler suggests first setting a budget for planned year-end spending, also keeping in mind any service providers and special people in your life you’d like to give holiday bonuses to.

“What gifts do you need to make what is everything going to cost?” says Sackler. “Set some limits before you go overboard so you can be ready to face bills in January.”

Talk with your Morgan Stanley Financial Advisor (or find one here) to discuss your year-end plans for 2019.

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