2016 Year End Checklist

It’s hard to believe but December is here, so let’s take this annual opportunity to review a quick checklist of year-end strategies and reminders.

If we’ve all been properly strategizing and implementing throughout the year, as the overwhelming majority of Relaxing Retirement members have, this year-end checklist will simply serve to confirm what we’ve already done.

However, I know how busy life can get, and I know that managing each minute detail in your financial life isn’t always at the top of your list you draw up each and every morning with your cup of coffee.

Given that, if you haven’t already, here are some strategies and reminders to be thinking about and acting on before December 31st:


  • Medicare: Open enrollment for Medicare, including Part D and Medicare Advantage, ends this coming Wednesday, December 7th. Don’t miss this opportunity to shop plans to best suit your health needs and your wallet. Check out the non-government Medicare.com website for great information and their Annual Election Period Checklist.
  • Age 70 ½ (and older) Annual Required Minimum Distribution (RMD): If you’re age 70 ½ or older, you must take a mandatory distribution from your IRA. The amount you must withdraw in calendar year 2016 is based on the combined value of all your qualified retirement plans as of December 31, 2015 (IRAs, SEPs, 401(k)s of ex-employers, etc.). Roth IRA values are not included, and the value of a 401(k) plan you are still contributing to is not included unless you are more than a 5% owner in the employer sponsoring the plan.
  • Negative Income: Take a close look at last year’s (2015) federal income tax return. Make sure that your “taxable” income on page 2 of your 1040 is a positive This may sound like any oxymoron, but it’s not.

As you’ve heard me mention numerous times in the past, I see this way too often with folks in their retirement years, i.e. itemized deductions and personal exemptions which are higher than your taxable income.

This can happen for anyone who doesn’t have a significant pension. A new Relaxing Retirement member this year had over $2.35 million in their Retirement Bucket™, yet they still fell into this “negative income” category in 2015.

If this is also true for you, what it indicates is that you have an opportunity to realize and show more taxable income and still pay no federal income taxes.

How? Withdraw more taxable funds from your IRA that otherwise would have been taxable, or “realize” capital gains on some of your non-IRA investments.

  • Roth IRA Conversion: Explore converting some of your IRA to a Roth IRA, especially if you have “negative” income (see previous bullet). It gives you an opportunity to convert some (or all) of your IRA to a Roth with no (or very little) federal income tax consequences. And, allow your money to continue to grow tax free for the rest of your life!

The key is to be aware of your marginal income tax brackets so you are not paying too much to convert. For example, if your IRA is worth $900,000, converting the entire IRA would subject the majority of the $900,000 to the highest federal income tax bracket. However, converting $40,000 may allow you to do so with no income taxes given your itemized deductions and personal exemptions.

  • Retirement Plans at Work: If you’re still earning money from work, even if that is part time, make sure you maximize contributions to your 401(k), 403(b), or 457 MA Deferred Compensation Plans if employed, or your Sep, Simple, Defined Benefit Plan, or IRA if you’re self-employed. Every dollar you contribute comes off the taxable income column on your tax return.
  • Capital Gains and Losses: In addition to your realized capital gains so far this year, both from sales and from capital gain distributions in your actively managed mutual funds held outside of IRAs, take a close look at your unrealized capital gain or loss positioning in your Non-IRA accounts right now.

Then, go back to Schedule D on your 2015 return and verify if you have any realized capital losses that you may have carried forward to 2016.

Armed with this all of this information, you can make informed decisions on buying and selling in order to free up cash for your upcoming spending needs.

  • Your Spending: So you can continue to spend with confidence, take a look at what you spent in 2016 vs. what you predicted you would spend in your Lifestyle Cost Estimator™. Is it more? Is it less?

Remember, your goal is NOT to restrict your spending or to “budget”. It’s simply to “account” for what you’ve spent and be confident with your numbers.

If I had to sum up one commonality amongst my most successful Relaxing Retirement Members, it’s that they all know their numbers and they can tell you exactly where they are.

The reason they’re so financially confident, and in turn successful, is they are in complete control of their finances vs. the masses who are completely out of control and in constant reaction each day.

They’re not locked up in a room studying investments and tax laws all day. Quite the opposite!

They’re actually the ones who travel the most and have the most fun without being concerned about money. And, the reason they’re not concerned is they have a clear handle on what it costs for them to live exactly the way they want.


If you have any questions as to where you personally stand in relation to any of these, please don’t hesitate to call us.