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Year End Financial To-Do List

Updated: Dec 6, 2021

Your Year-End Financial Planning Checklist

Before the holiday season heats up, here's some things you should check off your financial to-do list so you can keep more of what you make and have more in the future. Good financial planning isn’t just about the right investments, it’s about strategic planning around taxes and thinking through the long-term implications of the moves you can make now. That sounds like a lot to tackle with the holidays on the agenda, so I put it into bite-size pieces.

Hors d’oeuvre, anyone?

401(k) Accounts

The maximum you can put into a 401(k) account in 2021 is $19,500 if you’re under 50 and an additional $6,500 for those 50 and above. With just a few pay periods left in the year, it may be worth it to step up your contributions and put in as much as you can afford. You’ll pay less in taxes this year, and you’ll have another year of growth of the plan. If you haven’t contributed at least enough into your plan to get the company match, please do that. Otherwise, you’re leaving free money on the table that could come in very handy in your retirement.

Health Savings Accounts (HSAs)

HSAs were created to be used alongside High Deductible Health Plans (HDHPs). (For 2021, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family).

It allows you to save and invest money to be used for medical expenses, including deductibles, co-insurance, prescriptions, vision expenses, and dental care. Unused balances are carried over to the following year, funds never expire, and they can be passed on to a surviving beneficiary. And how about this: HSAs are “triple tax-advantaged”, meaning that they are funded with pre-tax dollars, they grow tax-free, and withdrawals are not taxed if they are spent on qualified medical expenses. For 2021, individuals can contribute $3,600 and families can contribute $7,200.

Education Savings Plans

529 plans are tax-advantaged savings plans designed to help parents pay for their child’s education (although, they can be used by more than just parents). 529 plans are not just for college anymore, but now include tax-free withdrawals up to $10,000 per year in tuition expenses for K-12 schools. State tax treatment of K-12 withdrawals vary.

While contributions are not deductible at the federal level, the earnings grow federal tax-free and there is no federal tax on withdrawals to pay for qualified withdrawals. Depending on your state, you may be able to deduct contributions from your state taxes. You can contribute up to $15,000 per year per individual, or you can put in up to five years’ worth of contributions all at once and really get things going and (hopefully) growing.

Tax-Loss Harvesting

Combing through your investment statement looking for losses to sell - with a positive frame of mind - may seem odd. But in a year with big market gains, any realized losses can offset your realized capital gains in your after tax portfolio.

Charitable Giving

The increase in asset values this year not only makes charitable giving more attractive, if you do it by gifting an appreciated stock directly from your account, you won’t have to pay capital gains but you will get the full market value of the gift as a tax deduction.

If you are over age 72, you can use a qualified charitable distribution (QCD) strategy to donate up to $100,000 directly to a qualified charity from an IRA.The QCD counts towards your required minimum distributions (RMDs). This can help reduce taxes because you avoid taking income, which might prevent you from going into a higher tax bracket. It could also lower the amount of future RMDs.

The Bottom Line

Before the holiday shopping and planning goes full swing, you may want to check these things off your financial to do list. It might help you feel better about spending money on gifts knowing you saved on taxes.

Cheers! John Piershale, CFP®, AEP®

John Piershale Wealth Management, LLC is an Investment Adviser registered with the State of IL and in other jurisdictions where exempt from registration. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned.

The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events.The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation. This work is powered by Seven Group under the Terms of Service and may be a derivative original. More information can be found here.


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