“Bank of Dad” is a weekly column which seeks to answer questions about how to manage money when you have a family. Want to ask about college savings accounts, affordable date night ideas, or where to buy toys on the cheap? Submit a question to Bankofdad@fatherly.com. Want advice on what stocks are safe bets? Ask your broker. And then tell us. We’d love to know.
It’s bonus season and I’m sort of banking on one but I don’t know if my company is even doing that. They’ve avoided the conversation all together. How do I go about asking my boss about a holiday bonus? Is there a way to do so tactfully? — Colin S., Philadelphia
No one wants to end up like Clark Griswold in National Lampoon’s Christmas Vacation, angrily wondering what happened to the money that was supposed to help get you through the holiday season.
Unfortunately, more managers are beginning to look like Frank Shirley, Griswold’s stingy boss. The recruiting firm Spherion Staffing Services released a survey of employees this week in which nearly half the respondents said they don’t expect their company to dish out a holiday bonus this year. Of those that do, most expect to receive less than $500. So it helps to be sober about your expectations.
Bonuses are a form of discretionary spending for most companies, so they’re more likely to happen when the company has had a good year. But getting one isn’t just a matter of good luck, either. A certain level of assertiveness can go a long way.
A 2017 employer survey by the staffing firm Accounting Principals found that workers who actually asked for a monetary reward were more likely to get one. It certainly helps if you can point to concrete you’ve done that go above and beyond what’s expected.
For example, respondents to the Accounting Principals questionnaire said staying motivated and having a positive disposition were the two most important factors in getting a bonus. Forty-two percent cited a willingness to take on extra responsibilities as another determinant.
This is one time when tooting your own horn, at least a little bit, isn’t such a bad idea. Showing that you deserve a bonus is more powerful than simply telling your boss you want one.
Who knows? You may end up with something better than a membership to the Jelly of the Month Club.
It’s the end of the year and I’m doing some financial housekeeping. What steps I can take now to reduce my 2018 tax bill? — Charles P., St. Louis
You might be surprised at how much you can shrink your tax liability by making a few last-minute maneuvers. The more deductions you can rack up before the year comes to a close, the better.
Here are a few of the more common ones you might consider:
1. Mind you withholdings.
Because the TCJA lowered individual tax rates, a lot of workers saw a smaller federal withholding from their paycheck in 2018. Nice perk, right? The problem is that the government overshot the mark for some employees, putting them at risk of an under-payment penalty. So it’s worth using the IRS’s withholding calculator to see where you stand. If you haven’t had enough tax taken out during the year, you can make an estimated tax payment using IRS Form 1040-ES or ask your HR department to have more tax taken out of your last couple paychecks, says Kitty Bressington, a fee-only advisor with Linden Financial Consultants in Pittsford, New York
2. Maximize retirement account contributions.
Most people are nowhere near the annual $18,500 contribution limit for 401(k) and 403(b) retirement plans, much less the $24,500 limit for those over age 50. So if you’re well below that threshold, now’s the time to boost your tax-deductible contributions. “If you have the cash, go into HR and throw 100% of your last paycheck into a 401(k),” says Bressington.
3. Put more into your HSA.
Families who have a high-deductible health plan are eligible to use health savings accounts, which allow you to make tax-deductible contributions as well as tax-free withdrawals for qualified expenses. It’s the holy grail of savings vehicles. Yet a lot of folks don’t realize that you can kick in money of your own, on top of what your employer may put in each month, says Bressington. For those with a family health plan, the annual limit is $6,900 in 2018, so you might want to top off your contributions now.
4. Pay extra on student loans.
If you have an income-based repayment plan for your loans, you may want to make an extra payment before the end of December. The IRS offers a student loan tax deduction on the first $2,500 of interest you pay on eligible loans. If you haven’t maxed it out yet, now’s your chance.
5. Use stock losses to your advantage.
That the stock market has been relatively flat this year isn’t exactly great news. But it does give you the opportunity to “harvest” your capital losses. If you sell a poor-performing stock that you’re ready to let go of anyway, you can count the loss against your capital gains for the year, thus reducing your tax bill. And if you still like a stock that happens to be in a rut, you can sell it and harvest your losses as long as you wait 31 days to buy more shares, adds Bressington.
6. Strategize your charitable giving.
Fewer people will be itemizing their deductions this year since the standard deduction nearly doubled. In order to get a tax break on charitable deductions, it may be better for some people to combine two year’s worth of giving into a single year. That way, you’re making enough contributions in one calendar year to surpass the standard deduction. But it only makes sense if you have some extra money to work with. “Bunching can be a good strategy as long as you manage your cash flow,” says Bressington.