End of Year Financial Planning

As we officially enter the month of November, it is hard to believe that Thanksgiving is just three weeks away.  Hopefully, this year brings back the celebration of holiday traditions and family gatherings.  However, before the sugarplums start dancing, we need to stay diligent and focus on year-end planning to ensure we are making sound financial decisions.  For many, 2020 and 2021 have run together in people’s mental accounting, so double-checking the below items may be warranted in most circumstances.



This year is not the year to procrastinate on year-end tasks.  We have all likely noticed that staffing is an issue right now across nearly all industries.  The same challenge is true at investment companies, such as TD Ameritrade, Fidelity, Schwab, etc.  Currently, we are being encouraged to complete the calendar year 2021 time-sensitive requests prior to Thanksgiving.  Please be aware that this is significantly earlier than most typical years and help us to plan accordingly.


Tax Changes 2022

Currently, there is significant dialogue within the Democratic party discussing changes to taxes starting in 2022.  The proposed laws may include some or all of the following: reduced estate tax exemption, termination of Grantor Trusts, increased income taxes above $400,000, increased capital gains taxes, extending wash sale rules, Roth conversions, etc.  We are closely watching this debate and recognize this could require 11th-hour planning for some clients.


Roth Conversions

Roth conversions need to be completed by the end of the calendar year for 2021.  Additionally, there have been discussions within Congress of ending Roth conversions for those whose income exceeds $450,000 (married couple) and/or ending conversions of non-deductible IRA balances.  If enacted, both would create a long-term planning opportunity for 2021.


RMD – Required Minimum Distributions

This year brings the return of RMDs for anyone above age 72 or anyone who has inherited an IRA before 2020.  All clients have been contacted at least once already; however, if you still have not taken your 2021 RMD yet, please contact our office.


Qualified Charitable Distributions

Donating RMDs may be one of the most impactful uses of RMD funds, as we have discussed in several other commentaries. If you are charitably inclined and have an RMD to take, we recommend familiarizing yourself with this strategy.


Tax Harvesting

As we alluded to in an earlier commentary (Tax Management in Bull Markets), this year we will likely experience higher than normal capital gains in taxable accounts.  We believe in a proactive tax management philosophy, along with tax harvesting to avoid undesirable gains.  However, as markets continue to have favorable progress, tax liabilities will naturally build and will occur over time.  Please do not hesitate to contact us to discuss potential capital gains taken for 2021; as always, we believe a best practice is to share these annual expectations with accountants prior to year-end.


Employee Retirement Plan Contributions

Employees have until the end of the calendar year to max out their retirement plans.  For those under 50 years old, this is $19,500 and for those over 50, this is $26,000.  Employees should check their paystubs to ensure that they are maxing out their retirement plan contributions if that is a goal of their financial situation.


Charitable Giving – Bunching

Bunching simply means combining two or more years’ worth of donations into a single calendar year for tax purposes.  As most know, the standard deduction is greater than $25,000 for a married couple.  With such a high standard deduction, most couples do not donate enough in a single year to receive a meaningful deduction for tax purposes.  If your annual donations combined over two or three years exceed $25,000, this is a strategy that should be strongly considered.


Tax Projecting

As always, meeting with your accountant prior to the end of the year is always advantageous.  Once the calendar year ends, there is not much that can be done about a tax liability.  However, during the calendar year, the tools at our disposal are greater.  We always recommend projecting a tax liability around this time of year and welcome being involved in these conversations.


Flexible Spending Account Balances

FSA balances do not roll over, in most cases, and are use-it or lose-it accounts.  Be sure to zero out FSA balances before the funds go back to the employer.


Open Enrollment

Typically, open enrollment occurs in November or December if you are employed.  This is a great time to reevaluate the benefits you are utilizing and whether they still meet your needs.



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