facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Financial To-Dos: End-Of-2021 Checklist Thumbnail

Financial To-Dos: End-Of-2021 Checklist


As we approach the end of another year, it's important to look at your finances and make sure you're on track to get the New Year – and your eventual retirement – off to a great start. Here is a checklist of 5 Financial To-Dos to wrap up before year-end.

1. It's the Season of Giving: Make a tax-deductible gift.

How about donating to a charity? Non-profit organizations and qualified charities provide some great seasonal giving opportunities, and they make good use of your contributions. Your donation may qualify as a tax deduction (although you may be required to itemize your deductions).

Charity is about generosity, but make sure you maximize your donations effectively so that you can make the most impact and increase your tax savings. For instance, the CARES Act (Coronavirus Aid, Relief and Economic Security) offers significant tax incentives for charitable giving

Under CARES, you can deduct up to 100% of your Adjusted Gross Income (previously this was only 60%) for cash contributed directly to operating charities. Additionally, taxpayers filing individually (and taking the standard deduction) can claim an additional "above the line" deduction of up to $300 for cash contributions, whereas couples filing jointly can claim up to $600.

Clearly, 2021 is a great time to donate and make a difference to a qualified charity that aligns with your personal values, while simultaneously getting the most of your tax savings. For more information on making the most of your charitable giving, please consult with your advisor.   (Note: cash contributions to donor-advised funds, supporting organizations, or private foundations are not eligible for CARES Act tax incentives).



2. Turn investment losses into tax breaks with tax-loss harvesting – even crypto currency investments.

Is there anything in your portfolio that is losing money? Tax-loss harvesting is a great way to take capital losses on the chin while still looking after your gains. It involves selling underperforming securities for less than you originally paid. You should consult a trusted Fee-Only financial advisor to assist you with this action.

Up to $3,000 of capital losses in excess of capital gains can be deducted from your regular income in order to minimize tax. Any remaining capital losses can also be carried forward to offset future gains.

However, it is important to note that if you sell a security for a loss, you are not permitted to repurchase similar or identical security for 30 days. Otherwise, you run afoul of the wash-sale rule, and the IRS can eliminate any tax benefit you received.

There is a wrinkle when it comes to crypto currency. You have until January 1, 2022 to sell any losses any immediately buy back the position and the wash rule doesn’t apply. In the Build Back Better tax revisions, the wash sale rule will be coming into effect for crypto currency as well as normal securities – so act fast!

3. Considering itemizing deductions? Start gathering the paperwork.

For people with high incomes and who have a lot of qualifying expenses, itemizing can make sense. You could benefit from itemizing if you: 

  • made sizable charitable contributions during the year, 
  • had significant medical and dental expenses, or 
  • paid mortgage interest or real property taxes on your house.

For the 2021 tax year, the standard deduction increased to $12,550 for single taxpayers and $25,100 for married couples which make it rare for people to itemize. However, if your deductions will exceed this threshold, you may be able to reduce your taxes by itemizing (you'll also need to itemize if your spouse has itemized their deductions). The end of the year can be a good reminder to check receipts and make sure they are accurately recorded.

4. Review and adjust your beneficiary designations.

The end of the year can be a melancholy reminder that none of us lives forever. Make sure your estate plan is up-to-date and includes beneficiaries for your retirement plans and insurance policies in the event that you pass away. December is a good time to review your will and trust documents. Ask yourself what has changed in the past year. Have you had any major changes in your life (births, deaths, marriages, divorces, illnesses, or retirement) in 2021? And do you need to adjust your estate strategy? 



5. 401(k) and IRA contributions – there's still time to make them!

One of the best things about the end of the year is that it's not too late to make some last-minute tax-saving contributions to your 401(k) or IRA. In fact, you have until April 15th 2022 to make contributions for the 2021 tax year for some accounts. However, tax deductions are typically taken from your annual pay, and therefore usually only apply to the calendar year in which they are withheld. 

Your 401(k) plan can be a major source of income in retirement, so it is essential to make the most of contributions. You may be eligible for a matching contribution from your employer as part of your employee benefits package. Don't walk away from free money! Contribute the maximum amount to your 401(k) to get the most out of your buck.

The maximum amount you can contribute to a 401(k) in 2021 is $19,500; people over 50 years old may make an extra catch-up payment of $6,500 (in 2022 this contribution limit increases to $20,500; the catch-up amount stays the same, to a total of $27,000). The combined contribution limit for traditional IRAs (Individual Retirement Accounts) and Roth IRAs is $6,000, with a catch-up for the over-50s of $1,000 (this remains the same in 2022).

Your company may have thresholds to be eligible for employer-matching contributions, so make sure to factor those in when you're deciding how much to contribute. Where possible, try to increase your contributions to cover at least the amount your employer will match.  

Remember, while employer contributions don't count toward your individual contributions limit, there is still a combined limit for employee and employer contributions. In 2021 this is the lesser amount of 100% of your salary, or $57,000 (or $63,500, incl. catch-up contributions if you are over 50 years).


Start the New Year on the Right Foot

Give yourself a gift this holiday season by planning your retirement. While you're hanging stockings by the chimney with care, spare a thought for financing your "December years." If you want to retire in comfort, start planning. It will make all the difference. Make a list – and check it twice.

The end of the year is a good opportunity for taking stock. Take time to review your finances, make some last-minute contributions, and update your beneficiary designations. Consider making a charitable donation.   The tasks we've listed in this article should help you plan with confidence. Follow these steps, and you'll be on track for a Happy New (financial) Year! And remember, we're here every year to answer any retirement questions you have and help ensure you enjoy a prosperous future. Merry Christmas and Happy New Year!