It’s the fourth quarter and time for some portfolio maintenance

The fourth quarter of the year is upon us, and it’s a good time to perform some regular maintenance on your investment accounts. Here are four practical things you can do to help ensure things are on track and maybe even save some taxes.

Rebalance. Most people have a target allocation for their portfolios, such as 70% stocks and 30% bonds. You may also have target allocations among the different stocks, mutual funds or ETFS (exchange-traded funds) that you own within each of those broad stock and bond asset classes. As investment values change throughout a year, your allocation may shift. Thus, at least once a year, it’s good to check on your positions and rebalance those that are out of whack.

If you have money in a retirement plan (like a 401(k) or IRA), the rebalance is pretty painless. You simply rebalance to your target weightings, and there are no tax consequences. But for money in taxable accounts (like an individual, joint or trust account), there is a tradeoff between rebalancing and recognizing gains.

Generally, in taxable accounts, a 5% band is a pretty good benchmark for a rebalance when you are talking about the big asset classes like stocks vs. bonds. For instance, if you want 70% in stocks and now you are at 75%, you should consider rebalancing to 70%. You’d basically be selling stocks that are up and using the gains to buy bonds.

You may also have targets for the individual stocks, mutual funds or ETFS within your stock and bond categories. These can also require a rebalance, but you generally have more flexibility. Movements within these “sub categories” are often not as critical to adjust as your overall risk profile of stocks vs. bonds. But, at times they do require a rebalance.

A good rule of thumb is that if you have multiple funds or ETFS, and one of them has moved by more than 25% off your target, you may want to consider a rebalance. For example, if you have a target of 10% for a specific stock ETF, and it is now at 13% of your portfolio (30% more than your target), you may want to bring it back in line.

Tax Loss Harvesting. In addition to considering a rebalance, you can look through your taxable accounts and see if you have any investments that have decreased in value since you bought them. In that case, you have a paper loss that you may be able to “recognize” and use on your taxes to offset other gains. But the IRS has a specific rule about recognizing losses called the “wash sale rule.”

In general, this rule says that if you sell a security for a loss you cannot have purchased it (or a substantially identical security) in your accounts during the 30day period before or after the sale. If you follow the rules, then the loss may be available to use to offset capital gains or you can also offset your ordinary income by up to $3,000.

The wash sale rules are technical, so if you aren’t confident about the rules, check with your accountant first. Here is a good summary of the wash sale rule on Investopedia: investopedia.com/ terms /w / wash sale rule.asp.

Required Minimum Distributions. If you are over age 70.5 and you have an IRA, or if you own an inherited IRA regardless of your age, you are subject to what are called the “required minimum distribution” rules (RMD). These rules say that each year you must distribute a certain amount from your IRA or face additional penalty taxes. For regular IRAS, often your brokerage firm will alert you to the RMD amount. But with inherited traditional or Roth IRAS, you often will not get a notice from your brokerage firm. It’s up to you to remember you need to take it and to calculate the amount.

It’s a good idea at the start of the fourth quarter to check and ensure you are on track to take the minimum by December 31st. If you fail to take your RMD, you may owe an additional penalty tax of 50%, so the costs of an error are high.

Here is a link to the IRS worksheet on RMDS: irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets.

Benef iciary Designations. If you have a retirement plan (IRA, 401(k) etc.), you have the ability to identify a beneficiary of that account. As time goes by and your life circumstances change, your estate planning objectives may change. Thus, it’s good to check on your beneficiary designation forms each year to confirm they reflect your current objectives. I’ve seen people with ex-spouses or partners still on accounts that they forgot to change.

Another common error is people may visit their attorney to update their estate planning, but fail to update their beneficiary forms. It’s important to note that your will and trust do not control the distribution of assets in retirement accounts. It’s the beneficiary designation form that does. It’s important to ensure that the form reflects the updated planning you have done.

Charlie Farrell is a CEO of Northstar Investment Advisors LLC. This article is for information and education purposes only. Past performance is no guarantee of future returns, and all investing involves the permanent risk of loss. Consult your individual financial adviser for guidance specific to your circumstances.