Your Fall Financial and Tax Planning Checklist

By: Stacey Nickens

For me, Fall is a time to reflect on my year thus far, honor my accomplishments, and make changes to finish the year on a high note. I like to think about a few questions. What were my goals at the beginning of the year? What have I done to accomplish those goals? What do I have left to do? I also like to think about the way my life has changed and new goals that may be more appropriate for my current circumstances.

If you would like to join me in this reflection, there are a few financial planning items you can add to your to-do list. These items will help you clean up your finances before the end of the year and start 2021 with a healthy checkbook, so to speak.

Review your tax-loss harvesting strategy. Tax-loss harvesting involves taking capital losses on investments in order to reduce capital gains. You sell securities that are valued less than what you bought them for and thus take a loss on the investment. Up to $3,000 of capital losses in excess of capital gains can be deduced from your taxable income. Remaining capital losses can also be carried over to manage capital gains in future years. I encourage you to set up an appointment with me so we can review your capital gains and associated tax strategies.

Decide if you are going to itemize your deductions. You may plan to take the standard deduction of $12,400 for single filers or $24,800 for joint filers. However, it could be helpful to sit down with me and review the itemized deductions you could take. If your itemized deduction would exceed your standard deduction, begin collecting the necessary receipts and paperwork for a standardized deduction in the Spring.

Determine if you plan to make gifts or donations at the end of this year. These donations may also qualify as a tax deduction and doing so may require you to itemize your deductions. Thus, it will be helpful to complete this step in tandem with Step 2.

Consider increasing your retirement plan contributions. Contributing to your retirement plans reduces your taxable income while also helping you better prepare for retirement. For the former, reducing your income may allow you to claim other tax credits or breaks available to those at lower income brackets. For the latter, the Fall is an excellent time to review your retirement savings needs. Consider your current monthly spending habits and be honest with yourself. I would over estimate how much you spend on average, and consider the fact that most people do not reduce their spending in retirement. Once you know what your monthly spending needs are, review what stable sources of income you will receive in retirement. Stable sources of income could include a pension or Social Security. You can then subtract your spending needs from your stable retirement income to see how much you will need to withdraw from your retirement accounts. During retirement, you shouldn’t withdraw more than 4% of your retirement accounts’ total value each year in order to give your accounts time to recover. Knowing this and knowing your asset withdrawal needs, you can better determine how much you should be contributing to your accounts now in order to meet your needs later.

Review your estate plan. If you own a house with your partner, you may consider putting your house in a family trust. Putting your house and other assets in a family trust can help your partner, and later your children, easily access your assets upon your passing. Moreover, review your beneficiary designations on your accounts as you complete this step. Finally, make sure you have an up-to-date and valid will in place.

Check your tax withholdings. Withholding too little on your W-4 can lead to a large tax bill. If you increase your withholdings now, you can spread out these payments instead of taking the hit all at once.

Overall, as you take time to clean up your finances before the New Year, consider contacting ELM3 to make an appointment. We can help you review your investment, savings, and tax strategies so that you can ring in the New Year with financial confidence. Remember that October is Financial Planning Month and thus a great opportunity to check that your current plan meets your changing needs. I hope we hear from you soon, and I wish you success on your ever-evolving financial journey.

Sources: Marketing.pro

Disclosures: There is no guarantee that these investment strategies will work under all market conditions or that they are are suitable for all investors. This material has been distributed solely for informational purposes and should not be considered as individual investment advice or recommendation. Individuals should consult their investment professional prior to making an investment decision.