Ask Dana! A Column Where Personal Finance and Life Intersect

Ask Dana! A Column Where Personal Finance and Life Intersect

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The clock is ticking! With the end of the year approaching, here are some important financial planning and tax reminders to consider before 2021 is in the rearview mirror.

Eight Important Reminders for 2021

1. Your income in 2021. Now is the time to assess what your expected 2021 taxable income will be. One major consideration that makes tax planning crucial this year are the policy proposals on the table that could increase taxes and capital gains, among other tax code changes. Also, similar to what we saw in 2020, many jobs and income levels changed this year due to the economic recovery, people moving, or going back to work. Depending on your personal circumstances, either consider tax planning strategies that can reduce taxable income now or, if it may help you in the future, increase your taxable income now at lower potential rates. You could consider Roth conversions, funding pre-tax or Roth retirement plans, creative profit sharing moves for business owners, tax bracket management, gifting, and so much more.

2. Investment gains and losses. If you are an investor with taxable, non-retirement accounts, you may have experienced tremendous growth in your investments over the last several years. Now is the time for assessing realized capital gains and tax loss harvesting. Although we are mindful of this for our clients’ investment accounts all year long, the fourth quarter 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 determine if you want to sell to take any gains or losses in 2021. And remember—this is even more important if the increased capital gains tax is placed into effect.

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./b>

3. Are you saving enough through your employer retirement plans? Take a moment now to check your paystub details and see how much you have saved this year. December 31 is the last day for elective contributions through your employer 401(k)/403(b) plans. For 2021, the maximum contributions are typically $19,500 if you are under 50, with $6,500 catch up if over 50.

4. 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 December 31, 2021. Ask your personal advisor or tax professional what the best plan is for your business. 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! Are you positioned for the current market risks we are seeing today, such as COVID, inflation, higher taxes, political concerns, international risks, and so on? Remember to review your allocation and see if you are where you want to be, or simply review your accounts with a qualified advisor.

6. Feeling charitable? For those who make larger contributions, consider the following for the most bang for your buck:

  • Qualified Charitable Deductions from IRAs (for those over 72)
  • Donating appreciated stock from taxable accounts
  • Clustering annual donations with donor-advised funds

This is a huge area of interest right now, especially for higher-income clients facing large tax bills. Please see our website or contact TrinityPoint Wealth for more information.

7. How about your estate plan? At TrinityPoint, we ask our clients, “What would you like to have happen with your money if something happens to you?” It is so important to make sure beneficiary designations and estate documents are up to date and correct. And 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 as soon as possible.

8. What makes you happiest? 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!”

Please pause and take a moment to consider the important reminders above. I think you will find yourself feeling grateful you did. And please 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.
   ~ Dana

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.