As the end of the year approaches, it is important to take a moment to ensure you’re still on track toward your financial goals.
The last 10 months have brought a number of challenges for a variety of reasons, many which undoubtedly have impacted you.
With these challenges, you may be surprised to find a number of factors have changed in your life. This is why now is a great time to review your accounts and investments to align correctly with your goals.
- Analyze Your Portfolio and Investments
If you haven’t done so already, now is a great time to reassess your financial priorities and ensure your investments are aligned with your updated objectives.
Generally, we do not recommend selling long-term investments when markets are low. However, if an emergency or opportunity has emerged, it could be wise to consider selling growth-oriented positions.
Conversely, you may have chosen to delay a goal – e.g., buying a new home or delaying retirement.
If this is the case, you could be sitting on more cash than expected. Consider putting some of this to work, taking advantage of discounted values across many asset categories.
- Tax Planning
A key component of financial planning is tax planning.
- Tax Loss Harvesting: Tax-loss harvesting is a way to cut your tax bill by selling investments at a loss in order to deduct those losses on your taxes.
Contributions to pre-tax Retirement Accounts
Another important piece of your financial planning should include retirement contributions. If you are in the position to do so, it is wise to Maximum-fund your retirement accounts to take full advantage of their tax-deferral benefits.
- For the 2022 tax year, the maximum 401(k) contribution is $20,500 plus an additional $6,500 if you’re 50+.
- If you are an entrepreneur, now is a good time to contribute to a 401(k) or a more robust retirement plan consistent with your objectives – such as a SEP IRA, Pension, or Profit Sharing Plan.
Consult with a tax professional to help you implement the appropriate retirement plan.
Gifting
Consider whether you want to make annual exclusion gifts to family members or make charitable donations.
- Now could be a great time to donate shares of existing investments to a Donor Advised Fund. A DAF is a tax deductible charitable account that allows you to allocate funds now and distribute to charities on your own schedule.
- When gifting to relatives, the IRS allows you to give up to $16,000 per year to any number of people without triggering gift taxes. Higher contributions could be made to medical and/or educational organizations.
In Summary
We recommend starting now to take full advantage of all year-end opportunities available to you.
As always, consult with a trusted financial advisor or tax professional to strategize around your specific situation.
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.