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Your Year-End Financial Checklist

Can you believe 2021 is drawing to a close? Here’s a few financial items to consider before year-end.

Roth Conversions

If you’re in a low-income year or want to hedge against future tax rates, you might want to consider a Roth conversion. This is converting pre-tax IRA assets to a Roth IRA, essentially paying taxes up front to have tax-free income later. Read our recent Blog about Roth Conversions for more details.

Required Minimum Distributions

For those age 72 and older (or with certain inherited accounts), RMDs are annual withdrawals required by the IRS to be made from qualified retirement accounts. The good news is that if you have qualified accounts managed by us, we compute and withdraw those for you and provide confirmation.


Max out your 401(k) or employer retirement plan

The 2021 maximum for 401(k) and 403(b) plans is $19,500 (plus $6,500 if you’re over 50). If you haven’t reached that max, you may still be able to adjust your final payroll contributions to save as much as possible.


Newly Self-Employed Sole Proprietor?

The deadline to establish a Self Employed 401(k) (a.k.a. “Solo-K”) is December 31, although you can wait to fund the account until tax filing next year. Solo-K’s give you the ability to save $19,500 (plus $6,500 over 50 catch up) as an employee, plus employer deferrals (limits apply).


Fund your IRA / Roth IRA / SEP IRA

Although many people think IRA contribution deadlines are end of year, you actually have until April 15 or the day you file your 2021 taxes to contribute to your IRA, Roth IRA, or SEP IRA.


Make Charitable Contributions

With increased Standard Deductions, itemizing charitable contributions has become more difficult. But there’s a few ways to utilize tax benefits of charitable giving:

  • *2021 Only: Even if you don’t itemize, the CARES Act allows taxpayers a $300 ($600 for married filing jointly) above the line deduction for charitable donations in 2021. (IRS: Some caveats apply)
  • Making a Qualified Charitable Distribution (QCD) from an IRA – For those over 70 ½, you can transfer funds from your IRA to a charitable organization, which counts toward your RMD requirement, but also sends pre-tax dollars to a charity tax-free.
  • Donating appreciated stock to a charity, potentially avoiding the capital gains that would be due had you sold the stock first.
  • Clustering Charitable donations by making several years’ worth of donations in one tax year to qualify for itemized deductions. This is often accomplished through a Donor Advised Fund, where the funds can be deployed to the charity in subsequent years.


Save HSA, Spend FSA

HSAs are often an under-utilized benefit: Tax deferral on money you contribute, tax-free if used for healthcare expenses, and you can roll over your unused balance year to year. The 2021 maximums are $3,600 for an individual or $7,200 if your family is covered. On the flip side, FSAs (Flex Spending Accounts) are generally use-it-or-lose-it plans where unused balances do not carry forward to next year, so better to spend from these accounts for qualified expenses.


Make 529 Contributions

Don’t forget about your kids’ or grandkids’ education: 529 contribution deadlines are Dec 31 for most state tax deductions.


If you have any questions regarding any of these end-of-year checklist items, don’t hesitate to contact our office for assistance. 


Disclosures:  Content in this material is for general information only and not intended to provide specific investment, tax or legal advice or recommendations for any individual. Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC

Greg Dillard

Greg Dillard

Greg is a Certified Financial Planner™ professional and Co-Founder of BridgeQuest Wealth Strategies. He strives to ensure that clients gain clarity and focus in the financial planning process. Clients appreciate his ability to distill down his in-depth analysis into an understandable game plan.