5 Things to do Before Year-End

It’s never too late to take a final look at your finances and make sure you are in good shape going into the new year. Below are 5 year-end actions to consider as 2021 comes to an end and 2022 begins.

Enjoy! And as always, if you have any questions or if something strikes you that you’d like more information on, please let me know. 

1. Take your Required Minimum Distribution (RMD):

If you have reached 70 ½ years-old, or 72 years old if your 70th birthday is July 1, 2019 or later the IRS requires you to start taking withdrawals from your retirement accounts, with the RMD calculated based on all established retirement accounts.  Without this distribution, you risk being taxed at a 50% penalty rate!

Once RMDs are withdrawn, they will also impact your tax bracket based on your total earnings for the year.  It is necessary to pay attention to how much is withdrawn and what type of tax implications this could have.

As you may remember, RMDs were suspended for 2020 with the CARES act, but are required again in 2021.  Make sure that your distribution was re-established for 2021 and that you’ve taken it before the year ends.

2. Convert IRA assets into a Roth IRA:

The conversion of an IRA to a Roth IRA needs to be done before year-end.  Contributions to an IRA, whether

The conversion of an IRA to a Roth IRA needs to be done before year-end.  Contributions to an IRA, whether Traditional IRA or Roth, can wait until April 15th of the next year.

Converting some of your assets to a Roth IRA will help you work towards having a tax-free retirement. Whatever amount you choose to convert may be treated as a taxable distribution from your traditional IRA for 2021.

3. Make 529 Plan Contributions:

This is a great time of year to fund a 529 Plan for your children, grandchildren, nieces and nephews.  College is expensive, and what better way to help a loved one out than to give them the gift of helping with their education.  Contributions can be made in any amount, however, are restricted to the $15,000 limit for gift tax filing. 

This is also a way that you can improve your tax situation for 2021.  Contributions made prior to December 31, 2021 up to $5,000 for a single filer and $10,000 for a married couple filing jointly into a NYS 529 Plan can be claimed on your NYS 2021 tax return and will count as a NYS tax deduction.  

If you aren’t a NYS resident, make sure to take a look at your specific state’s requirements and let me know if you have any questions.

4. Give a Gift:

During 2021 you can gift up to $15,000 to as many people as you’d like without having to file a gift tax return for the year, which doubles to $30,000 if you are married.  This has been increased to $16,000 for 2022. 

These gifts can take many forms, such as through cash or check, but can also be through an investment in securities. 

5. Max out your Retirement Savings Contribution:

Maxing out your employer-sponsored retirement savings contribution can be a great way to reduce your taxes!  The more you contribute to your employer-sponsored retirement account, the lower your taxable income will be.  This can help lower your tax bill come April!  (And of course, help you work towards a great retirement life!)

For 2021 and 2022, the maximum allowable contribution into a retirement account is $19,500 and $20,500, respectively, with an additional catch-up contribution of $6,500 allowed each year if you are over the age of 50.

IRAs are another way to put money away for retirement, with a $6,000 contribution limit in 2021 and 2022.  Both years, a catch-up contribution is also allowed of $1,000 of you are over 50 years-old.

If you have any questions or want assistance with taking action before year-end, please let me know!