10 Financial Planning Tips from the AICPA to Start 2019 off Right

CPA Financial Planning Experts Available to Assist Media

January 9, 2019

NEW YORK (January 9, 2019) – The first few weeks of the new year are a perfect time for Americans to ensure their financial house is in good order and set themselves up to achieve their monetary goals. To help Americans best position themselves for the year ahead, members of the American Institute of CPAs (AICPA) share the following planning tips so the new year can bring a ‘new financial you.’

1. New Year, New Plan
Quote: “One of my favorite tips is to begin the year with a fresh plan. First you have to update your balance sheet, so you know your starting point. Then set goals - reduce debt or increase investments or something else - and attach a dollar amount. Then, create the plan that will achieve the goals. It’s that simple, but you have to know where you are now in order to determine where you want to be.” - Lisa Featherngill, CPA/PFS member of the AICPA PFP Executive Committee

2. Review 2018 Spending in Conjunction with 2019 Budgeting
Quote: “Early January provides an ideal window for reviewing prior year expenses and developing a reasonable budget for the current year. Be sure to strip out one-time nonrecurring expenses (i.e. emergency room visit or housing repairs) and plot a course for 2019 spending that includes a buffer for future unforeseen expenses.” - Michael Landsberg, CPA/PFS member of the AICPA PFP Executive Committee

3. Review Automatic Payment Subscriptions and Renewals
Quote: “The start of the new year is the perfect time to review all the various automatic payments and subscriptions set up in the past. Some expenses, such as entertainment streaming services, a gym membership or an old magazine subscription may no longer fit into your budget, lifestyle, or new year priorities. It’s easy for money to slip away by losing track of all the small payments scheduled through automatic payment methods. A review of these payments can be part of your general new year clean-up which feels so good and refreshing!” – Brooke Salvini, CPA/PFS member of the AICPA PFP Executive Committee

4. Update Your Form W-4 for Withholding
Quote: “2018 saw major changes to individual taxes. The IRS substantially revised the withholding tables in early 2018. Now that 2019 has begun, make sure you have checked your withholding to see if you need more or less withheld in 2019.  Use Form W-4 and the related instructions to estimate how much withholding you need. Also, you can use the IRS’s withholding calculator at https://www.irs.gov/payments/tax-withholding or contact your CPA or financial advisor for guidance.” – Julie Welch, CPA/PFS member of the AICPA PFP Executive Committee

5. Make an Early Calculation of Your 2018 Taxes
Quote: “The new tax bill has likely made significant changes to your tax opportunities. Don’t wait until April to understand what those opportunities are for you. You may need to adjust your withholding, change your charitable giving strategy, take advantage of new tax brackets or depreciation rules among many other strategies. The sooner you know your opportunities, the more impact they will have on your finances.” – David Stolz, CPA/PFS member of the AICPA PFS Credential Committee

6. Revisit Workplace Retirement Plan Contributions
Quote: “The beginning of the year is a great time to review your workplace retirement plan contributions.  Employees should strive to increase their retirement plan contribution percentage from 2018. Pairing the deferral increase with a salary raise is a painless way to boost retirement savings. For example, if you received a 4% raise in salary and increased your contribution rate by 2% your net paycheck and savings will both be higher.” - Robert Westley, CPA/PFS member of the AICPA PFS Credential Committee

7. Make a 2018 IRA and HSA Contribution (if you haven't already)
Quote: “You have until April 15, 2019 to make eligible IRA and HSA contributions for 2018. The combined traditional and Roth IRA contribution limit is the lesser of $5,500 or your taxable compensation. If you're filing a joint return but don't have any taxable compensation of your own, you may still be able to contribute under the Spousal IRA provisions. For an HSA, the contribution limit is $6,900 if you have a family high deductible health plan (HDHP) or $3,450 for self-only HDHP coverage.” – David Oransky, CPA/PFS member of the AICPA PFP Executive Committee

8. Don’t Wait, Contribute to Your IRA Now
Quote: “For married couples with Modified Adjusted Gross Income over $203,000, you cannot make direct ROTH contributions. However, there are no income limitations on doing a ROTH conversion or nondeductible IRA contribution. So, you can make a nondeductible IRA contribution and immediately roll it over into a ROTH. I just got back from my local investment management branch and made my wife’s and my $6,000 IRA contributions (up from $5,500 last year). As soon as the check clears, I will roll the funds into our ROTH IRAs (called a “backdoor ROTH contribution”). The reason why you roll it over immediately is if there are no earnings in the IRA before it is rolled into a ROTH, there is no income to pick up on the conversion. This doesn’t work if you have other traditional IRAs that have untaxed earnings (whether it be from unrealized gains or prior deductible IRA contributions), because you have to aggregate all of the IRAs when determining the amount of the taxable conversion.” – David Desmarais, CPA/PFS member of the AICPA PFP Executive Committee

9. Take a Look at Your Current Allocation
Quote: “With increased market volatility during 2018, your various asset classes may have drifted out of balance. Use the beginning of January to analyze any material shifts that may have occurred due to 2018 performance. Diversification is important for managing portfolio risk, so rebalancing may be necessary.” - Michael Landsberg, CPA/PFS member of the AICPA PFP Executive Committee

10. Make Annual Exclusion Gifts to Heirs Now
Quote: “Consider making gifts to beneficiaries at the beginning of the year.  For those looking to reduce their estate tax exposure, individuals can give up to $15,000 to an unlimited number of beneficiaries per year without utilizing their lifetime estate tax exclusion amount or paying a gift tax.  Completing these gifts at the beginning of the year allows your beneficiaries to receive a few additional months of potential appreciation.” - Robert Westley, CPA/PFS member of the AICPA PFS Credential Committee

These tips can help Americans improve their financial situation, support the lives they want to live and ensure their loved ones are provided for. To speak to a CPA financial planner for stories to help Americans make positive financial moves in 2019, members of the media may contact Jon Lynch jonathan.lynch@aicpa-cima.com (212) 596-6033.