Ask Dana: 8 Essential Year-End Personal Finance Planning Tips

By Dana R. Mascalo CFP® , RLP® , AAMS® , C(k)P®

Hi Dana: Is there anything I need to be paying attention to before the end of the year? (Other than holiday shopping, of course!)


hank you for your most timely question! Here are several year-end planning considerations to put on

your radar:

1. Your Income in 2020. Now is the time to assess what your expected 2020 taxable income will be. Many jobs and income levels changed this year due to the economic shutdown, with income higher or lower for 2020 depending on the industry impacts. We may be look- ing at higher tax rates in future tax years. Depending on your personal circum- stances, consider tax planning strategies that can reduce taxable income now or increase your taxable income now at lower potential rates if it may help you in the future. You could consider Roth conversions, funding Pre-tax or Roth retirement plans, creative profit sharing moves for business owners, tax bracket management, accelerating or delaying the 2020 RMD (even though 2020 RMD is not mandatory), and so much more.

2. Investment Gains and Losses. If you’ve been in the market the last several years, you are probably looking at more green than red on your statements. Tis’ the season for tax loss harvesting! Even though we are mindful of this for our cli- ent’s investment accounts all year long, the 4th quarter of the year is…the most wonderful time of the year…to manage the gains and losses in taxable invest- ment accounts. Use this time to see how you have done with your investments and figure out if you want to sell to take any gains or losses in 2020.

3. Saving Through Your Employer Retire- ment Plans. Check your paystub details and see how much you have saved this year. December 31st is the last day for elective contributions through your employer 401k/403b plans. For 2020, the maximum contributions are typi- cally $19,500 if you are under 50, with $6500 catch up if over 50.

4. Small Business Owners. Are you a small business owner without a retire- ment plan? If the answer is yes, there is still time to set up certain plan types by 12/31/2020. Ask your advisor or tax professional what the best plan is for your business, and if you don’t have an

advisor, give our team a shout and we will be your guide (with bells on)!

5. Investment Allocation Review Time. 2020 has been an unusual year in so many ways. This includes your investment allocations. Take this as a reminder to review your accounts with your advisor.

6. Charitable Deductions. For 2020 only, there is a new $300 deduction available from the CARES Act. This one is avail- able EVEN to those who use the stan- dard deduction and don’t itemize. For those who make larger contributions, consider the following for the most bang for your buck: Qualified Charitable De- ductions from IRAs (for those over 70.5), donating appreciated stock from taxable accounts, or clustering annual donations with donor-advised funds.

7. Estate Planning. At TrinityPoint, we ask our clients, what would happen if some- thing happened to you yesterday? It is so important to make sure beneficiary des- ignations and estate documents are up to date and correct. Worth noting again, possible higher tax rates down the road are especially relevant for estate taxes. It is advisable for higher net worth indi- viduals to review their plans. 15

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