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Year-End Planning Checklist for Your Wealth Management

The end of year always seems to sneak up on us, and as we finish off this unprecedented year, it is important to reassess your financial wellness. Now is an ideal time to consider year-end strategies that may benefit you and plan for the year ahead.

Reassess Your Goals and Priorities

  • Break them down by short-term (0-2 years), intermediate-term (2-5years) and long-term (more than 5 years). Evaluate progress and adjust as needed.

Review Your 2021 Budget

  • Review your actual 2020 spending and projected spending for 2021.
  • If you experienced certain adverse consequences as a result of COVID-19, then you may be eligible to take up to a $100,000 aggregate distribution from your eligible retirement plans before December 30, 2020 and avoid the 10% penalty. You can pay the funds back over a 3-year period, without having to recognize the distribution as income, or you can pay the taxes over three years.
  • Are you spending less?
    • Consider paying down debt. Pay down debt with highest interest first.
    • Increase your charitable donations
      • Due to COVID, cash donations to charity can be deducted up to 100% of AGI (but not donations to Donar Advised Funds)
      • Donate appreciated stock and avoid paying tax on the capital gain
      • If you have a Donor Advised Fund, you can combine a few years’ worth of donations into a single year
    • If you have not completed 2020 gifting, you can still gift up to $15,000 per person or $30,000 per married couple if combining gifts.
    • With interest rates at historical lows, it might make sense to refinance mortgage or student debt
    • Reevaluate your emergency fund, and add to it as necessary
    • Review flexible spending and dependent care balances – those are typically “use it or lose it” (unlike a health saving account)
    • Skip your 2020 Minimum Required Distribution (RMD) if you don’t need the money for current expenses

Investment Planning

  • Review your asset allocation and compare it to targets
    • Has your risk tolerance changed?
    • 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 rules
      • If you are doubling up on a position to avoid the wash safe rules, November 30th is the last day to double up
    • Does it make sense to accelerate gains into this year given the uncertain tax picture?
    • Do you have any carryover tax 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?

  • Consider a 2020 Roth conversion in 2020
  • Manage income and deductions – does it make sense to accelerate or defer income and expenses
  • Consider a contribution to a 529 plan, particularly if your state allows a deduction
  • 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, but you must be enrolled in a high deductible health plan.
  • Max out retirement contributions, including catch-up contributions if applicable (see table below with 2020 limits)

  • Review your tax withholding amounts and make changes if needed (no need to make an interest-free loan to the taxing authorities)
  • Bunch itemized medical expenses in the same yar to meet the threshold percentage for AGI

Review Your Estate Plan

  • Review Wills, Trusts, Powers of Attorney and other documents designed to transfer or protect your assets
  • Check that beneficiary designations are up to date in all accounts and insurance policies because these designations usually take precedence over other statements

Conduct a Cyber Review

  • Change passwords
  • Consider monitoring services
  • Review your credit report
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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