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9 Financial Moves to Make Before 2021 Ends

As we head into the holiday season and start looking ahead to next year it’s a good time to review your financial situation and make sure you don’t miss any tax or contribution deadlines. Here are some financial moves to consider and deadlines to keep in mind before you ring in the new year: 

  1. Maximize your 401K contributions and consider making IRA or Roth IRA contributions. Note that you have until April 15th of 2022 to make IRA and Roth IRA contributions for 2021.
  1. Take your required minimum distribution (RMD) from qualified accounts if you reached age 72 or older during 2021. Those with inherited IRAs should also ensure they have taken any RMDs as well
    1. The penalty for missing a RMD is 50% of the amount that should have been withdrawn, making it one of the costliest IRS penalties. 
  1. If you’re over age 70 ½ and normally give to charity, think about making a qualified charitable distribution (QCD) from your IRA to help lower your tax bill. 
  1. Ensure any planned Roth conversions, including backdoor Roth contributions, are completed before 12/31. 
  1. Spend any unused Flexible Savings Account (FSA) balances. With these tax advantaged funds you either ‘use it or lose it’ so make sure you’re not forfeiting money. Many employers give you a grace period until mid-March of the following year. If you have a Health Savings Account (HSA) make sure you get your contributions for the year in. 
  1. If gifting is part of your estate plan, make sure you take advantage of giving up to the 2021 gift tax exclusion amount of $15K per person. 
  1. Review investments and tax loss harvest where appropriate. By selling positions held at a loss you can offset capital gains and up to $3K of ordinary income once if you’ve offset all your capital gains. This may also be a good time to review all your investment accounts and rebalance your allocations so your investment portfolio is aligned with your goals and plan.
  1. If you utilize any Coverdell Education Savings Accounts (ESAs) for college savings you may want to make your contribution for 2021 now. Note that you have until April 15, 2022 to make your ‘21 contribution. 
  1. If you have conservative money that you want to receive better returns than CDs and savings accounts currently offer, open an account with Treasury Direct and fund up to the annual limit of $10K into Series I Savings bonds.
    1. These inflation linked bonds issued by the Treasury Department and backed by the US Government currently yield over 7% annualized. 

Ensuring you don’t miss any deadlines this year and reviewing your financial situation can help you start 2022 off on the right financial foot. 

Scott Caufield, CFA, CPA