By John Drachman
What better time could there be to assess your retirement strategy and prepare for the days ahead than at the start of a new decade? Here are the key dates to know to get your 2020 planning off to a good start. Also, as you scan this checklist, consider whether you should add a professional to your preparations for reducing tax liabilities, crafting a retirement income action plan – or just getting your financial ducks in a row.
- January 22: Getting Organized. Start pulling together the documents you’ll need for filing your 2019 tax return. Feeling ambitious? Also think about moves to trim your 2020 tax bill. One idea: Max out on your 401(k) in 2020 – which is $500 more than last year.
- March 31: Try a Little Tax Loss Harvesting. The Medicare general enrollment period that kicked off in January ends on this day. Shift your focus to whether you’ll have to pay capital gains taxes on any 2019 investment sales. If you sold other assets at a loss, you can apply those losses to lowering your gains. If you have more losses than gains, those extra losses can be applied to $3,000 of other taxable income – even traditional IRA distributions.
- April 1. Get Ready for RMDs. If you turned 70½ in 2019, you must start taking your first required minimum distribution (RMD) from tax-deferred retirement accounts on this date. Thanks to the passage of last year’s SECURE Act in 2020 the mandatory RMD age jumped to 72.
- April 15. Make Final IRA Contributions for 2019. You can contribute up to $7,000 if you are 50 and older. This is also the deadline for 2020s first estimated tax payment. Also, see if you qualify for deductions related to long term care (LTC) insurance and charitable deductions. In 2020, LTC deductions max out at $5,430. Also, try to give multiple years’ of charitable gifts in a single year to increase the value of your deductions beyond the single year cap.
- June 15. Pay Your Estimated Second-Quarter Tax for 2020.
- July 1. Take Your Tax Temperature. Midyear is a good time for monitoring progress on your 2020 tax bill to avoid underpayment penalties.
- September 15. Pay Your Estimated Third-Quarter Tax for 2020. If you’re lagging behind in your estimated tax payments, consider tax withholding from your RMD.
- September 30. Check Your Mailbox. You should have received the “annual notice of change” from Medicare Advantage or Part D prescription-drug plan by this date. Review all changes for 2021.
- October 15. 2019 Extensions End; File Your Return. Also, 2021 Medicare open enrollment starts on this date. Up until December 7, determine whether to switch between traditional Medicare and Medicare Advantage, or choose new Advantage and Part D plans for 2021 coverage.
- November 1. ACA Open Enrollment Starts.
- December 7. Open Medicare Enrollment Ends.
- December 15. ACA Open Enrollment Period Ends.
- December 31. Complete RMDs by Year-End. For RMDS that fund a qualified charitable distribution, take action earlier in the month to make sure the charity receives the gift before year-end.
Even with this simple checklist, retirement planning for taxes and medical insurance expenditures can get complicated – especially if you’re taking RMDs for the first time. Consider working with a financial professional for retirement-related tax and insurance planning. Not only can an advisor ensure you’ll receive favorable tax treatment, you can also deduct their tax preparation fee from your return in 2021 – and give yourself still another tax break.
John Drachman is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.