Last year, Americans spent more than $19 billion on Valentine’s Day gifts, according to the National Retail Federation, with the majority of this money going to flowers, candy, cards and an evening out. These gifts were thoughtful, of course, and no doubt appreciated, but they were also somewhat disposable, for want of a better word. On the other hand, some financial gifts can have a pretty long “shelf life.”
Beyond simply enclosing some money in a card, what sort of financial gifts can you give? The answer depends somewhat on the recipient. For example, if your sweetheart is also your spouse, some of the gifts suggested below may be redundant to the financial moves you make together. However, if you aren’t married, or if you and your spouse maintain separate finances, these ideas may make excellent Valentine’s Day presents:
• IRA contributions—Technically, you can’t contribute directly to someone else’s traditional or Roth IRA, but you can write a check to your loved one—although, of course, he or she is free to use the money for any purpose. Like most people, your valentine may not usually contribute the yearly maximum amount—which, in 2017, is $5,500, or $6,500 if you’re 50 or older—so your check should be quite welcome. A traditional IRA can grow on tax-deferred basis, and contributions may be tax-deductible. (Taxes are due upon withdrawal, and any withdrawals you make before you reach 591/2 may be subject to a 10-percent IRS penalty. A Roth IRA’s earnings are distributed tax-free, provided withdrawals aren’t taken until the account owner is 591/2 and has had the IRA for at least five years.
• Charitable gifts—Consider making a gift to a charitable organization supported by your loved one. When you send cash to a qualified charity, you can get a tax deduction, but you might gain even bigger benefits by donating appreciated securities you’ve held for more than one year. By doing so, you can generally deduct the value of the securities, based on their worth when you make the gift. Plus, neither you nor the charity will have to pay capital gains taxes on the donated investments.
• Contributions to an emergency fund—It’s a good idea for everyone to maintain an emergency fund to cover unanticipated expenses, such as a major car repair, a new furnace or out-of-pocket medical bills. If your valentine doesn’t have such a fund, consider helping him or her establish one, with the money going to a liquid, low-risk account.
• Gym membership—Although not actually a “financial” gift, a gym membership can nonetheless bring some positive economic results to your valentine. For one thing, the insurance industry is providing more incentives to encourage people to exercise and live healthier lifestyles. But even if a gym membership doesn’t give your loved one a break on insurance premiums, it can nonetheless result in better physical conditioning, which, in, turn, could ultimately result in lower medical costs.
On Valentine’s Day, you may still want to get your sweetheart something associated with the holiday. But if it’s within your means to do so, also consider one of the above suggestions for financial gifts. Your generosity will still be felt long after the chocolates are eaten and the flowers have faded.
Daniel Tanaka is a financial adviser for Edward Jones Investments, located at 332 Route 100, Suite 300, in Somers. He can be reached at 914-669-5329.