Year-End Financial Planning Checklist

Matt LaRocca |

As year-end quickly approaches, we thought it would be helpful to communicate some year-end considerations for your wealth planning.  While we are monitoring and taking care of some of the items below as they are implicated in your RDM portfolio, it is important to also be mindful of these considerations for your other assets.  Any tax specific decisions should be made in consultation with your accountant or tax preparer.  Last, if it has been some time since your last wealth planning review, it is a good idea to conduct a review at least annually to make sure your plan is on track and still suitable for your current goals and objectives.

  • Required Minimum Distributions

In response to the Covid-19 pandemic, required minimum distributions from retirement accounts that normally apply to those age 72 and older were waived for 2020 to alleviate the associated tax burden for many Americans.  However, required minimum distributions are back in force for 2021, so if you have not met your RMD for 2021 yet, there is still time to do so.  Please keep in mind that you do not need to take any amount for 2020, as it was waived, not suspended.  Last, please also keep in mind that your required minimum distribution for any IRA accounts can be aggregated and taken all together from one IRA.  RMDs from 401(k) and similar employer-sponsored plans must be taken separately.

  • Tax Loss Harvesting

As a standard practice, RDM conducts a realized capital gain review of taxable investment accounts towards the end of each year to ensure that clients do not receive a surprise at tax time from capital gains in their RDM portfolios.  However, to the extent that you may have realized capital gains from other investments, you still have time to realize capital losses to offset some of those gains so long as you are not hampering your overall investment plan.  Any proceeds from such loss sales can be re-invested in other securities to maintain your proper asset or sector allocation while avoiding wash sale disallowance.

  • Retirement Plan Contributions

Participants in employer-sponsored retirement plans should review contribution amounts during the year to maximize allowable contributions to the extent possible.  For 401(k) plan participants under age 50, $19,500 can be contributed for 2021.  A $6,500 catch-up contribution is allowed for participants age 50 and older.  While investors can continue to contribute to IRA accounts until the following year’s tax deadline, the IRS requires 401(k) investors to make their annual contribution prior to year-end.

  • Charitable Contributions

If a charitable objective is part of your wealth plan, you have until the end of the month to complete any charitable contributions.  Importantly, for 2021, taxpayers who itemize their deductions can take advantage of one change to the law regarding charitable contributions as part of the pandemic stimulus.  For cash donations to public charities, taxpayers can deduct up to 100% of their adjusted gross income for 2021, up from 60%.  For those people with long-term charitable contribution goals, a donor advised fund is worth consideration.  These funds allow taxpayers to build a fund of charitable contributions taking advantage of the deduction each year with or without a designated charity beneficiary.  The donor maintains control of the contributed amount through investment of the donated funds and may grant funds to charitable organizations in the future.

  • Beneficiary Designations

Investors with retirement accounts and life insurance policies or annuities should periodically review their beneficiary designations to be sure that the beneficiaries listed are still the parties intended to receive the funds when the account holder passes.