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Don’t Miss These Year-End Financial Planning Strategies

This week, we enter November. The summer activities are being packed up in the shed; the skis, snowboards, snowmachines, ice skates and snowshoes are coming out. With only two short months left until the new year, it is important to consider your year-end financial planning activities.

Here is a short list of important planning reminders to consider. There may be more items that apply to your situation, so be sure to check in with your advisory team on your plan.

  • Harvest Gains/Losses: After a volatile 2022 for both stocks and bonds, there may potentially be opportunities in portfolios to harvest losses to capture tax benefit from a challenging year in market. As you look at harvesting losses, it is important to maintain your target investment allocation, while simultaneously adhering to specific tax loss harvesting rules.
  • Manage Tax and Medicare Brackets: If you are on the edge of being pushed into a higher bracket for your taxes or Medicare premiums, it might be advantageous to consider options to reduce your income through year-end.
  • Maximize Qualified Accounts: Do you have a 401(k), 403(b), 457, or SIMPLE IRA you haven’t maxed out for 2023? Consider upping your contribution amount to take advantage of your limited annual contributions to these tax efficient accounts. You have until the tax filing deadline in April for your SEP IRA, Traditional IRA, and Roth IRA, but start planning for how you will fund the accounts before the deadline.
  • Maximize Health Savings Accounts: The wonderful triple tax advantaged Health Savings Account is a powerful savings tool. Consider completing the maximum contribution for 2023. Learn more about HSAs here: The “Triple Threat” Savings Vehicle.
  • Evaluate Roth Conversions: Roth conversions can be a powerful way to save on taxes over your lifetime if you are able to convert from IRA to Roth in lower tax brackets. An added benefit of moving money into Roth is providing tax-free legacy to your heirs.
  • Mega-Backdoor Roth: Do you have an after-tax account in your employer sponsored plan for your excess benefits? End of year is the best time to check on the accumulation of these contributions and consider next steps.
  • Restricted Stock Units: Check your vesting schedule and be prepared with a plan for your vesting positions.
  • Annual Gift Exclusion: If your legacy plan includes a goal of gifting to family or friends while you are still living, consider taking advantage of the annual gifting exclusion before the end of the year.
  • 529 Plan Funding: Have you taken full advantage of the annual exclusion for funding 529 accounts for your children or grandchildren’s education? 529 plans are better than ever with recent changes to the flexibility of these accounts. Remember, the benefit is in the growth, so the sooner contributions are made the better.
  • Donor Advised Fund Gifting: If you are staring down a big income/capital gains year for 2023, bunching a donation of cash or highly appreciated stock to a Donor Advised Fund before year-end can be a great strategy. These plans allow a deduction in the year you contribute, but allow you to spread out gifts to qualified charities of your choosing over time. Check with your CPA on your limits for charitable gift deductions and if this fits with your tax planning.
  • Qualified Charitable Distributions: Remember Qualified Charitable Distribution checks must be cashed by the charities before year end to count towards your Required Minimum Distributions! Write those checks now to give the charities plenty of time to cash the checks on time. Not sure what a QCD is? Check out this video: https://www.youtube.com/watch?v=DpQ83C9Hh0s
  • Required Minimum Distributions: Be sure to get those Required Minimum Distributions from your qualified plans distributed prior to the end of the year to avoid a big penalty. If you plan to do Roth conversions, don’t forget to get your RMD out first. If you inherited an IRA this year, remember to take the year of death RMD. Turned 72 this year? Well lucky you, the SECURE Act 2.0 delayed your Required Beginning Date to next year when you turned 73.
  • Inherited IRA Distributions: The SECURE act eliminated the stretch rules for distributing from your IRA for many individuals who inherited IRAs in 2020 or later. If you are distributing under the 10 year rule, or 5 year rule, now is the time to consider if a distribution this year to take advantage of lower tax brackets makes sense for you.
  • Health Insurance Review: If you have met your deductible for the year, you may benefit from getting some of those medical procedures or examinations done before the end of the year. Open enrollment is in season for Medicare.gov and Healthcare.gov if you need to enroll in a plan before the end of the year, or update your plan.

The year-end financial planning strategies for one individual are different from the next. Be sure to speak with your advisory team, CPA, and attorney before making any changes to your plan. This is just the tip of the iceberg when it comes to planning strategies throughout the year. Schedule a meeting with our team to review your plan or put a plan in place.

Stay warm, and think snow!


Connor Michael, CFP®
Financial Advisor

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