Financial Advice

| APTOS LIFE DECEMBER 2021 14

Year-End Checklist

It’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.

Portfolio Review:

Markets continued to rebound off March 2020 lows throughout the remainder of 2020 and through the first half of 2021. If you haven’t reviewed your portfolio in a while, now may be a good time. It’s possible that given the market’s current run-up, some positions may have grown and become overweight relative to what you may have set as a target weight. It may be time to consider a rebalance. A financial professional can help you examine your portfolio, as well as help you determine if rebalancing may make sense given your individual situation. They can also discuss potential tax implications that you may incur by rebalancing. Also, given some of the choppiness in the market this year, you may be able to take advantage of a strategy called tax-loss harvesting (taking a tax loss to potentially offset realized tax gains) in taxable investment accounts. Again, be sure to work with a qualified advisor who can help review your portfolio and educate you on the rules surrounding tax loss harvesting (they must be followed; otherwise, a tax loss may be disallowed by the IRS).

Review Retirement Plan

Contributions: Make sure you are maximizing contributions 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.

Review Tax Withholding and

Employer Benefits: December is often open enrollment time for employerprovided benefits. It’s worthwhile to take a little extra time to review and understand what is being offered and what the pros and cons are. Reviewing your tax withholding is also important to start off 2022.

Take Your Required Minimum

Distributions: I cannot stress this enough! Last year in 2020, Congress provided a break for those who normally would have been required to take distributions from their various retirement accounts by allowing them to forgo the distribution(s) if they wanted to. However, that break was for 2020 only, and Required Minimum Distributions (“RMDs”) are back in 2021. Be sure you are taking out your Required Minimum Distributions from various retirement accounts as needed. The potential tax penalty is steep for forgetting to do this. Keep in mind that waiting until the last minute can put you at risk of the custodian that holds your account not processing 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 Soren E. Croxall to be carried forward, or they

Financial Advice 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.

Given some of the choppiness in the market this year, you may be able to take advantage of a strategy called tax-loss harvesting.

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.