The holiday season is moving along fast and furiously for most of us, and it can be challenging to find time to wrap presents or enjoy a late-season football game, let alone reconcile your financial standings; this is where some help from the professionals comes in, and I’m here to provide you with some tips on how to feel good about closing out your fiscal year and starting the next one fresh perspective and strategy.
Let’s break down each to-do:
- Review Your Beneficiary Designations
Have you recently married or perhaps had a new child within the past year? Have you had a loved one pass away or gone through a divorce? Any significant life-altering event typically requires individuals or families to look at who their beneficiaries are and ensure that everything is up to date.
- Fill Your Tax Brackets
With my clients, I have been making some year-end projections to see if there is any room in their tax bracket to make some strategic Roth conversions. Anytime there is room in a tax bracket ending in “1,” I have been converting IRA assets to Roth IRAs.
See my video for more detail on this strategy.
Source – IRS.gov
- Sell Some Stocks
Now is the time to take stock (pun intended) of your investments. Review your income and consider if it is the right moment to strategically unwind some stocks that have earned capital gains. The 0% capital gains rate offered by the IRS is available only to individuals with incomes up to $41,675 and couples up to $83,350.
Wisely determining which stocks to unwind can help you remain below these thresholds while also helping you optimize your financial portfolio. Doing this before the year ends can significantly benefit your finances, so act now while there’s still time!
Source- IRS.gov
- Review Your Net Worth
It’s great to take a year’s-end holistic look at your net worth to gauge what the wins and losses were for the year. Many variables contribute to someone’s net worth, and those variables will likely fluctuate throughout the year. Reconcile on your property assessments, inheritances, real estate equity, and income fluctuations; give it all a thorough assessment and remember that it’s not a sprint; it’s a marathon.
I like to keep a record of our family’s net worth starting on January 1st of each year; this is a great way to see your progress over the long haul.
- Set Up An Organizational System
When you receive your year-end tax statements, pay stubs, investment statements, heck, even your Uber eats annual breakdown, it’s an opportunity to begin getting more organized. Whether you’d like to receive them physically or not, most federal and financial institutions will send out important documentation by mail, so it’s a prime opportunity to refresh your organization systems or even start a new one.
Secure document storage is critical, so start working towards a fully secure organization system if you have not already done so.
- Get Your 401k Situated
This doesn’t apply to everyone, but for employer-sponsored small business plans or solopreneurs, make sure your 401k contributions are in by Dec 31st. If you’d like to make contributions to your 401k or max out for 2022, the deadline is the last day of the year. There are tax breaks to be taken advantage of through RSA contributions, so make sure you don’t miss out.
Closing out the year can be mentally challenging, but understanding your situation is half the battle, and you can begin to put your best foot forward in the new year. As a family financial planner, I’m here to help guide you toward your current and future financial goals.
If you’d like more helpful tips, strategies, and financial insights, please click the link to sign up for my monthly newsletter!
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The opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
