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3 Important To-Do’s To Add To Your Year-End Checklist

Currently making a list and checking it twice? Add these three year-end planning to-do’s to your checklist to make sure you are maximizing your planning and financial goals and optimizing your tax savings.

Planning Tip 1

Review your Will to make sure it is up to date and, more importantly, still reflects your goals and wishes.
Consider the people incorporated in your estate documents.  Make sure you have named guardians for children under the age of 18.  You never want the state to have to make that decision for you.  Who are the beneficiaries of your estate?  Make sure your beneficiaries are up to date, not only in your Wills and trusts, but also look at your assigned beneficiaries on life insurance policies, retirement accounts and bank accounts.  Review the executor(s) and trustees.  Are those currently named still the individuals you wish to administer your estate and/or trusts?  Are they still capable of doing so or still willing to take on the responsibility?

Consider the assets or bequests you want to make to your beneficiaries.  Some more personal items you may want to single out in your Will.  Some items, such as a life insurance policy, can pass directly to named beneficiaries without going through the estate and probate process.

A wholistic estate plan will take into account your personal goals to care and provide for loved ones, support philanthropic causes, reduce administrative burdens, as well as try to maximize tax incentives.

  • A good rule of thumb, when you have a life changing event, read through your estate documents and have them updated as needed.
Speak with your trusted Withum and Summit Financial advisors today and let us help you achieve your year-end planning goals.

Planning Tip 2

Have you maximized contributions to your retirement accounts for 2020?
In 2020, taxpayers can:

  1. Contribute a maximum of $19,500 to a 401(k) Plan.
  2. Contribute $6,000 to a Traditional IRA and an additional $1,000 if over the age of 50.
  3. If you were impacted by COVID-19, you may be eligible to take a COVID-19 distribution from an eligible retirement plan. Under Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), you may withdraw up to an aggregate limit of $100,000 from all plans and IRA’s.  You will have to pay income tax on the COVID-19 related distribution, but the 10% penalty does not apply and the taxes can be paid over three tax years.  The deadline for taking such distribution is December 30, 2020.

Employers often utilize 401(k) matching as part of their compensation packages to employees.  Where an employer has matching 401(k) contributions, try to contribute at least the amount necessary to get the full employer match.  Also consider contributions to a Roth 401(k) plan if your employer allows.

Depending on earnings limitations you may be able to make a contribution to a Roth IRA instead of a traditional IRA.  Additionally, your ability to deduct an IRA contribution in part or in full depends on how much you earn, whether you or your spouse are currently contributing to another qualified retirement plans, and what type of IRA you have.

Speak with your advisor to determine if a Roth conversion is a good option for you.

If rates are expected to go up, and if you had a lower earnings year, 2020 may be a good year to consider a partial Roth conversion.  Keeping in mind however that the conversion amount will be taxed at ordinary income tax rates and may kick you into a higher tax bracket.

Planning Tip 3

Review your current portfolio’s and savings plan.
If you were lucky enough to have harvested capital gains in your taxable accounts, you may want to take losses to help offset any gains.  As we approach year-end now is a good time to review your capital gains and losses.
More importantly, ensure your accounts still meet your risk tolerance, preferences and asset allocation to help achieve your goals.
As we prepare to wrap up one year and set goals for the year to come, reviewing your emergency fund is always a great exercise.  Checking-in on your emergency fund is important especially when many may have been forced to use their savings in 2020 due to the pandemic.  It is recommended to have three to six months of expenses set aside in your emergency fund.  Additionally, having a “rainy day” fund makes dealing with the unexpected a little bit easier.

Authors: Rebecca Alicea, Tax Manager, WithumSmith+Brown, PC, ralicea@withum.com | Assunta “Susie” McLane, Vice President, Wealth Advisor, Summit Place Financial Advisors, LLC, assunta.mclane@summitplacefinancial.com


Podcast Spotlight: Important To-Do’s to Add to Your Year-End Planning Checklist

Currently making a list and checking it twice? Join Rebecca Alicea from Withum and Assunta “Susie” McLane from Summit Place Financial Advisors, LLC in this episode as they discuss three year-end planning to-do’s to add to your checklist to make sure you are maximizing your planning and financial goals and optimizing your tax savings.

Don’t miss out on new episodes from Withum’s Taxing Topics podcast! Listen and subscribe on Google Podcasts or Spotify.

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