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Your Year-End Financial Planning Checklist Thumbnail

Your Year-End Financial Planning Checklist

Right now is a great time to review your year-end financial planning strategies. It's imperative to get things in order and identify areas you'd like to discuss with your financial professional. That way, you will be ready for 2022 and beyond.

So, here's a quick checklist to make sure you're on track...

1. Are Your Roth IRA Conversions Done For 2021? 

A Roth IRA conversion is the process of transferring retirement funds from a traditional IRA, SEP, or 401(k) into a Roth account. 

Since a traditional IRA is tax-deferred, and a Roth is tax-exempt, the deferred income taxes due need to be paid on the funds at the time of conversion. 

Roth conversions make sense if you believe that the tax liability for your traditional accounts will be higher in the coming years. For those who can, it may be better to pay those taxes now rather than later. 

With the new tax bills working their way through Congress, it's almost certain that taxes will be going up. Depending on your individual situation, doing a Roth conversion now could help reduce your tax liability during retirement.


2.  Have You Taken Your Required Minimum Distributions (RMDs)? 

RMDs are the amount of money that must be withdrawn from a retirement account beginning April 1 following the year an account holder turns age 72. 

They may also apply to anyone having a beneficiary IRA. Each subsequent year, a distribution is required, with the amount based on the current RMD calculation. 

In 2020, RMDs were not required due to the COVID-19 pandemic. They resumed in 2021, and failure to take them out may result in a penalty.

3. Have You Reviewed Opportunities For Charitable Giving?

If you are 70½ or older, you can donate all or a portion of your RMD directly to charity. This is called a Qualified Charitable Distribution, or QCD.  QCDs are limited to a $100,000 maximum annually per taxpayer. 

4.  Are Your Beneficiaries Up to Date?

Do you want to change beneficiaries because your family dynamics have changed? Did a beneficiary on your account pass away? 

Be sure to update your financial professional. You will also want to let your insurance professional and estate planning attorney know about the changes so they can review and update your policies, will, power of attorney, health care proxy, and other estate planning documents. 

5. Have You Reviewed Your Portfolio's Allocation and Rebalanced?

The market has been very busy this year. You want to make sure to review your mix of stocks, bonds, alternative investments, and cash to determine if it's performing the way you need it to. If your situation has changed, it can impact your portfolio.

Is your portfolio at an appropriate level of risk? How much cash do you have sitting around? Are there any big expenses coming up that you will need to fund? 

If you're not sure about the answers to those questions, it's in your best interest to discuss them with your advisor so you can create an appropriate investment strategy for the upcoming year.

Please remember that this checklist is just a sample of some items that may apply to your individual situation. 

The important thing is to schedule a time to meet with your advisor to go through this checklist and discuss any other issues that are top of mind.

Going through this process will help prepare you financially for the coming year.