Year End Planning

Wow, I cannot believe it is November already. This means the winter holidays are approaching, cooler weather is coming and so is the end of the tax year. Following is a list of items to consider when wrapping up the year:

  • Backdoor ROTH IRA Contribution – at the time of this writing, it is proposed to ELIMINATE these backdoor ROTH IRA contributions. IF this proposal goes through as planned, the last day to make a backdoor contribution will be December 31st, 2021. That means the contribution has to be completed and it is sitting the ROTH IRA by December 31st. If you have questions about this, please reach out.
  • Required Minimum Distributions (RMD’s) – if you are 72 or older, make sure you have taken your RMD’s by the end of the year to avoid any penalties. The penalty for not taking your RMD is 50% of the amount of your RMD.
  • Capitals Gains and Losses – Review your taxable accounts to see if you have any realized gains that could be offset by realizing some losses.
  • Charitable Donations – if you are charitably inclined, and you expect to take the standard deduction, consider bunching charitable contributions every few years which could allow you to itemize deductions.
  • Maximize Retirement Plan Contributions – are you able to save more? The contribution limit for 401ks in 2021 is $19,500 (or $26,000 if you are age 50 or older).
  • Health Savings Account (HSA) limits – have you maximized what you are allowed to put in for your HSA?
  • Insurance Plan Deductible – did you meet your insurance plan’s deductible this year? If so, consider any other doctor and dentist appointments that you could incur this year before your insurance deductible resets on January 1.
  • Employee Benefits – make sure you confirm your benefits during open enrollment. It is my experience that Flex Spending Account contributions need to be set every year even if you are doing the same amount. If you miss this, then you could be out of luck for next year’s FSA.
  • Flex Spending Account Balances – Some companies offer a grace period after December 31 to finish using your contributions for the year. Double check your company’s policy and make sure you use your contributions so that you don’t lose them.
  • Medicare Drug Plans – if you or your parent is on Medicare, rebid your drug plan during open enrollment to make sure you are getting the best pricing available. These drug formularies change each year.
  • Gifts – do you need to make any more gifts this year? The annual exclusion of $15,000 per person is gift tax free.

These are some ideas to get you started with wrapping up the tax year. I like being efficient with money and do not like to leave money on the table. If you have any questions, schedule a free call to find out how Financial Journey LLC can help you.

Financial Journey LLC is a registered investment advisor offering advisory services in the state of Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice.

Financial Journey LLC is a registered investment advisor offering advisory services in the state of Virginia and in other jurisdictions where exempted. Information provided is for educational purposes only and not, in any way, to be considered investment or tax advice

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