FINANCIAL ADVICE
Year-End Checklist
I
DECEMBER 2021 | APTOS LIFE
t’s that time of year again for our annual article on end-of-year financial tasks to complete. While 2021 was a little less volatile than 2020, there was still plenty of uncertainty. As we look toward 2022, below are a few end of year items to consider in-between holiday festivities.
14
to your employer-sponsored retirement accounts. “Maximizing contributions” may mean different things to different people. It may mean contributing the annual maximum contribution allowed under current IRS guidelines for some. It may mean contributing enough to take full advantage of an employer match for others. Everyone’s situation is different, and you should target saving what your budget will allow for.
Portfolio Review: Markets continued to rebound off March 2020 lows throughout the remainder of 2020 and Soren E. Croxall through the first half Financial Advice Review Tax of 2021. If you haven’t Withholding and reviewed your portfolio Employer Benefits: in a while, now may be December is often open a good time. It’s possible that enrollment time for employergiven the market’s current run-up, provided benefits. It’s worthwhile some positions may have grown to take a little extra time to and become overweight relative review and understand what to what you may have set as a is being offered and what the target weight. It may be time to pros and cons are. Reviewing consider a rebalance. A financial your tax withholding is also professional can help you examine important to start off 2022. your portfolio, as well as help you determine if rebalancing may Take Your Required Minimum make sense given your individual Distributions: I cannot stress situation. They can also discuss this enough! Last year in 2020, potential tax implications that you Congress provided a break for may incur by rebalancing. Also, those who normally would have given some of the choppiness in been required to take distributions the market this year, you may from their various retirement be able to take advantage of a accounts by allowing them to strategy called tax-loss harvesting forgo the distribution(s) if they (taking a tax loss to potentially wanted to. However, that break offset realized tax gains) in taxable was for 2020 only, and Required investment accounts. Again, be Minimum Distributions (“RMDs”) sure to work with a qualified are back in 2021. Be sure you advisor who can help review are taking out your Required your portfolio and educate you Minimum Distributions from on the rules surrounding tax various retirement accounts as loss harvesting (they must be needed. The potential tax penalty followed; otherwise, a tax loss is steep for forgetting to do this. may be disallowed by the IRS). Keep in mind that waiting until Review Retirement Plan the last minute can put you at Contributions: Make sure you risk of the custodian that holds are maximizing contributions your account not processing
Given some of the choppiness in the market this year, you may be able to take advantage of a strategy called tax-loss harvesting. your distribution request by the required deadline. Also, consider a Qualified Charitable Distribution (QCD) if you don’t need the money from your Required Minimum Distributions for living expenses, and you’re charitably inclined. A financial professional can explain how a QCD works and how to qualify. Review Debt Repayment Goals: Utilize December to review your annual budget and actual spending. Was your actual spending more or less than what you were budgeting for? Are there areas you could cut back or cut out completely? Also, do you have a payoff plan in place for consumer debts like credit cards? After reviewing your budget, decide if there is room to potentially start paying down consumer debt more aggressively. Use Up FSA Money: Do you need a new pair of glasses or box of contacts? If you have money that you’ve been putting into an FSA (Flexible Spending Account), consider using up the account before year-end with qualifying expenses. Be sure to check with your benefits department first; however, FSA dollars typically don’t carry forward into the new year (some companies have an
exception and allow up to $550 to be carried forward, or they have a small grace period of 2.5 months generally). It’s important to pay attention to deadlines with FSA accounts because they are typically “use it or lose it” accounts. Check Estate Planning Documents: Double-check beneficiary designations on accounts to ensure they are up to date. Also, if it has been a while since you’ve had your estate planning documents reviewed, or you haven’t gotten around to creating an estate plan, consider setting up an appointment with a qualified attorney. Wishing everyone a happy holiday season and a prosperous 2022. Soren Croxall, CFA, CFP® is a registered representative of LPL. Financial Securities and Advisory Services offered through LPL Financial, member FINRA/SIPC, a Registered Investment Advisor. LPL Financial and Croxall Capital Planning do not provide tax or legal advice. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
