Ask Dana: 8 Essential Year-End Personal Finance Planning Tips
Hi Dana: Is there anything I need to be paying attention to before the end of the year? (Other than holiday shopping, of course!)
Thank you for your most timely question! Here are several year-end planning considerations to put on your radar:
1. Your Income in 2020. Now is the time to assess what your expected 2020 taxable income will be. Many jobs and income levels changed this year due to the economic shutdown, with income higher or lower for 2020 depending on the industry impacts. We may be looking at higher tax rates in future tax years. Depending on your personal circumstances, consider tax planning strategies that can reduce taxable income now or increase your taxable income now at lower potential rates if it may help you in the future. You could consider Roth conversions, funding Pre-tax or Roth retirement plans, creative profit sharing moves for business owners, tax bracket management, accelerating or delaying the 2020 RMD (even though 2020 RMD is not mandatory), and so much more.
2. Investment Gains and Losses. If you’ve been in the market the last several years, you are probably looking at more green than red on your statements. Tis’ the season for tax loss harvesting! Even though we are mindful of this for our client’s investment accounts all year long, the 4th quarter of the year is…the most wonderful time of the year…to manage the gains and losses in taxable investment accounts. Use this time to see how you have done with your investments and figure out if you want to sell to take any gains or losses in 2020.
3. Saving Through Your Employer Retirement Plans. Check your paystub details and see how much you have saved this year. December 31st is the last day for elective contributions through your employer 401k/403b plans. For 2020, the maximum contributions are typically $19,500 if you are under 50, with $6500 catch up if over 50.
4. Small Business Owners. Are you a small business owner without a retirement plan? If the answer is yes, there is still time to set up certain plan types by 12/31/2020. Ask your advisor or tax professional what the best plan is for your business, and if you don’t have an advisor, give our team a shout and we will be your guide (with bells on)!
5. Investment Allocation Review Time. 2020 has been an unusual year in so many ways. This includes your investment allocations. Take this as a reminder to review your accounts with your advisor.
6. Charitable Deductions. For 2020 only, there is a new $300 deduction available from the CARES Act. This one is available EVEN to those who use the standard deduction and don’t itemize. For those who make larger contributions, consider the following for the most bang for your buck: Qualified Charitable Deductions from IRAs (for those over 70.5), donating appreciated stock from taxable accounts, or clustering annual donations with donor-advised funds.
7. Estate Planning. At TrinityPoint, we ask our clients, what would happen if something happened to you yesterday? It is so important to make sure beneficiary designations and estate documents are up to date and correct. Worth noting again, possible higher tax rates down the road are especially relevant for estate taxes. It is advisable for higher net worth individuals to review their plans.
8. Happiness Factor. As one of our partners, Michael Smiley, says in his year-end planning with clients, “What makes you happiest? Set a goal to do more of that, whatever it is, over the coming weeks, months, and year ahead!”
Take some moments out of this busy time of year for yourself to consider the important reminders above. I think you will find yourself feeling grateful you did. Remember, seeking outside advice from professionals when you need it for tax, legal, or financial advice can make the overall process easier and less stressful for you. If you don’t know where to turn, don’t hesitate to contact us. Wishing you peace and universal support in the days ahead, one day at a time.
Securities offered through Purshe Kaplan Sterling Investments, Member FINRA/SIPC, Headquartered at 80 State Street, Albany, NY 12207. Purshe Kaplan Sterling Investments and TrinityPoint Wealth, LLC are not affiliated companies.
Dana R. Mascalo CFP®, RLP®, AAMS®, C(k)P® is a Managing Partner with TrinityPoint Wealth, an independent SEC Registered Investment Advisory firm in Milford, CT and Charlotte, NC. Dana advises high net worth clients with complex needs and is sought after by individuals, families, business owners and executives all over CT and the United States. Acting as their personal CFO, Dana looks at a client’s entire financial life with a visionary lens, advising on investment portfolios, retirement planning, stock options, life transitions, exit planning for business owners, customized advanced cash-flow planning and multi-generational wealth transfer strategies.
This material presented is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. TrinityPoint Wealth, nor its investment advisory representatives are permitted to provide legal or tax advice, and nothing contained in these materials should be taken as legal or tax advice.