At Withum Wealth, we believe that a large part of long-term financial success is planning ahead. Now is a good time to review some valuable year-end planning strategies to ensure that you end the current year and start the next year feeling well informed and prepared for what’s ahead.

Review and Assess Your Goals and Priorities

  • Break them down by short-term (0-2 years), intermediate-term (3-5years) and long-term (more than 5 years).
  • How did you do with the goals you set out for 2021? Evaluate how you did and set realistic goals for the next year.
  • If you do not have a plan already, consider putting that on your to do list.
  • Evaluate any major events that you might have coming up in 2022 (includes family, job, marriage, big purchases) and have a strategy for dealing with it.

Review Your 2021 Budget

  • As we near the end of the year, it may a good time to review your budget, compare it to actual expenses incurred during the year, and modify (if necessary) for the year ahead
  • If you have yet to create a budget, year-end is a great time to do so. Some helpful rules of thumb when it comes to spending include the following:
    • Housing expenses (mortgage/rent, property taxes, homeowner’s insurance) should be less than 30% of your gross income (unless you live in NYC)
    • Savings should ideally be 5-8% of gross income
    • Cash on hand should be equal to 3-6 months of expenses
      • 3 months if two sources of income (i.e., both spouses working)
      • 6 months if one source of income (i.e., single earner)
    • Are you spending less?
      • Consider paying down debt. Pay down debt with the highest interest rate first
      • Increase your charitable contributions
        • Donate appreciated stock and avoid paying tax on capital gains
        • If you have a Donor Advised Fund, you can combine a few years’ worth of donations into a single year to maximize the benefit
      • If you have not completed 2021 gifting, take advantage of your annual gift exclusion. In 2021, you can gift up to $15,000 per individual or $30,000 as a couple in federal tax-free gifts (and more through contributions to a 529 college savings plan)
      • With rates at historically low levels, it might make sense to refinance mortgage and/or student debt
      • Reevaluate your emergency fund

Investment Planning

  • Review your asset allocation and compare it to targets
    • Has your risk tolerance or your situation changed warranting a change to targets?
    • Does your current allocation still align with your goals?
    • Do you need to rebalance?
    • Review your diversification strategy
  • What is your capital gain situation for this year?
    • Do you have losses that can offset gains?
      • Have trading strategies in place to avoid the wash safe loss limitations
      • If you are doubling up on a position to avoid the wash safe rule, November 30th is the last day to do so
    • Does it make sense to accelerate gains into this year given the uncertain tax picture?
    • Do you have any carry forward losses?
    • Do you hold mutual funds in your portfolio? Be mindful of capital gain distributions – evaluate if you should delay purchasing mutual funds until next year

Expect Higher Taxes Next Year?

  • Take 2021 Required Minimum Distributions (RMDs). In 2020 the CARES Act granted investors the opportunity to pause RMDs. RMDs are resuming for 2021 and the RMD age has changed from 70½ to 72 years old. Deadline for RMDs is December 31, 2021.
  • Consider a 2020 Roth conversion
  • Manage income and deductions – does it make sense to accelerate or defer income and expenses
  • Consider a contribution to a 529 college savings plan
  • Review your health insurance and consider opening a Health Savings Account (HSA). Maximum contribution is $3,550 for individual coverage and $7,100 for family coverage
  • Review your tax withholding and make changes if needed
  • Bunch itemized medical expenses in the same year to meet threshold percentage of AGI
  • Max out retirement contributions, including catch-up contributions if applicable (see table below with 2021 limits)
  • Plan for 2022 retirement contributions (see table below with 2022 limits)


Personal Success

  • Make 2022 employer benefit elections. Medical open enrollment is typically in November or December of the current year. Make sure you make any necessary changes during this time and consider taking advantage of all available options.
  • Review flexible spending & dependent care balances – those are typically “use it or lose it”
  • Conduct a cyber check
    • Change passwords
    • Consider a monitoring service
    • Review your credit report

Estate Planning

  • Review your estate plan
    • Review Wills, Trusts, Power of Attorney and other documents designed to transfer or protect your assets
    • Check that beneficiaries are up to date in all accounts and insurance policies.

No action should be taken without advice from a Withum professionals because tax law changes frequently, which can have a significant impact on this guide and your specific planning possibilities. Reach out to discuss your individual situation as year-end approaches.

Withum Wealth Management

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