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How to create year-end wealth

As the year comes to an end, there are some things that you can do to reduce taxes, and other strategies that can create wealth:

  • Retirement: If you are self-employed (even part-time), consider opening a retirement plan and defer income from taxes. If you don’t have employees and depending on your salary and age, you could contribute $54,000 this year into a Solo 401(k). If you’re over 50, you can contribute $60,000. If you are employed with a company that has a 401(k), the caps are $18,000 or $24,000 for those 50 or older.

  • Investments: Replace the mutual funds in your taxable account with index funds. Equity mutual funds distribute internal capital gains to you, the shareholder, around this time of year. You can expect a higher tax bill as equity markets soared this year (the S&P 500 is up 17% year-to-date) and mutual fund managers are looking to rebalance their positions and shave off gains. As Darla Mercado of CNBC put it, “Estimated distributions for some funds exceed 30 percent of their net asset value.” ^1 You will likely have to pay a capital gain when you sell the mutual fund, but doing this before realizing the distribution will free you from paying the tax twice.

  • Health care insurance: If you’re healthy and don’t frequent the doctor’s office much, consider enrolling in a high deductible health care plan that’s also Health Savings Account (“HSA”) eligible. This would allow you to contribute to an HSA account of $3,450 for an individual plan or $6,900 for a family plan in 2018. The dollars you contribute are both tax-deductible and tax-free if spent on medical expenses, but I’d recommend that you invest your contributions and use the gains tax-free during retirement. Open enrollment on the Health Insurance Marketplace runs through December 15, although your employer may have different dates.

  • Charitable contributions: Consider gifting stock or mutual funds with a low cost basis to your charity of choice. This is better than cash contributions as you won’t have to pay the capital gains tax from selling the fund, and you still could get the associated deduction. Alternatively, if you’d rather give to family or friends, you can give $14,000 per spouse in 2017, increasing to $15,000 per spouse in 2018. You don’t get a charitable deduction for gifts but you can remove a stock with high gains from your estate.

At Eureka Wealth Management I not only offer personal advice like the above, but also help you implement the advice. Services also include advice on your insurances (health, life, disability, and long-term care), estate & tax strategies, and investments. Call me at (760) 537-0791 or contact me online at or on Facebook.

Happy Thanksgiving!

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