The end of another calendar year is fast approaching, so it is a good time to make a few financial decisions to maximize your opportunities while there is still time.
Below is a checklist for you to use as a guide in making the end-of-year decisions.
- Review your employer retirement plan contributions to determine if you can reach the maximum of $19,500 by the end of 2020 then adjust the amount contributed from each paycheck as necessary to maximize the annual amount, even if you cannot reach the limit. If you are 50 years of age or older then you should review the catch-up contributions to determine if you can reach the maximum of $6,500 in contributions by the end of 2020 then adjust your period amounts as necessary. The contribution maximum limits remain the same for calendar year 2021, so set up your contributions now.
- If you can contribute to a traditional, or Roth IRA it is a good time to determine how much you can contribute to maximize the annual amount. You have until 4/15/2021 to make your contribution for 2020.
- Review your charitable contributions for the calendar year and consider what additional amounts you can give to maximize your financial benefit for the year as well as providing a benefit to your favorite charity. In addition, for 2020 there is a one-time above the line deduction of $300 for most taxpayers where you do not have to itemize your deductions to claim it.
- If you own a business, consider buying equipment, or paying discretionary expenses before the end of the year to reduce your taxable income.
- If you have taxable investment accounts where you hold stocks or stock mutual funds then you have likely experienced significant capital gains this year when you sold any shares, so it would be a good time to review your portfolio to identify any losing stock funds, or individual stocks. You should consider selling the investments that you have held more than one year to generate losses that can be used to offset some of your gains and up to $3,000 of your other income. If you need assistance deciding what investment sales will benefit you the most contact your investment advisor.
- Review your investment portfolio in both your taxable accounts and retirement accounts to ensure that the asset allocations are still aligned with your goals. If your investments are out of line with your goals, then reallocating the existing balances and future contributions may be necessary. Ask your financial advisor for help as needed.
- The end of the calendar year is a good time to review the beneficiaries of your life insurance, retirement accounts, bank accounts, taxable investment accounts, and other assets. If the beneficiaries need to be changed, do it now. You should consult your financial advisor or attorney if you need to make changes and you are not sure how to accomplish your goals.
- Review your Last Will and Testament as well as your other end of life decision documents to make sure the individuals named in the documents are still able and willing to fulfill your wishes. If the documents need updating contact an attorney to revise the documents.
- Adjust your income tax withholding, or determine if you need to make an estimated tax payment while there is still time to avoid a large tax bill, or penalties at the end of the year. Consult your tax advisor for details.
- Review your financial goals for the upcoming calendar year and begin planning to meet those goals by setting yourself up for success with adjustments in the current year. (i.e., anticipated significant income increase, or decrease in the upcoming year, large debt paid off freeing up additional funds for investment). Consult your financial advisor to plan as needed.
If you need assistance with any of the year-end actions, Lydford Financial PLLC is here to help. Please give us a call, or fill out the contact form available on our website.