Year End-Planning Checklist

Jeff Witz, CFP®

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We are now in the final three months of what has been a difficult 2020 for many. Every year we like to present a list of year-end tasks everyone should cross off their checklist. This time of year presents the perfect opportunity to review and possibly adjust your financial planning strategies. You should update your accounts and check in on where you stand with many of the goals you set at the beginning of the year.

Check on the status of your emergency fund. Did you need to dip into it at all this year? Have your necessary expenses changed? The general rule of thumb for emergency funds is to have 3 months of necessary expenses if you are a dual income household and 6 months to a year if you are a single income household.

Max out your retirement accounts. You have until the tax filing date next spring to make a 2020 contribution to an individual retirement account (IRA), but 401(k) & 403(b) contributions are only deductible when made in the same calendar year. The 2020 contribution limit is $19,500 for 401(k)s & 403(b)s and $6,000 for IRAs. If you are over age 50, catch up contributions may be available as well.

Use the remaining money in your Flexible Spending Accounts (FSAs). If you still have money set aside in a flexible spending account for healthcare or dependent care expenses, it is important to try and use those funds before the end of the year or risk forfeiting the money.

Make contributions in your children’s 529 accounts. College costs continue to rise, and it is important to start saving early if you hope to reach your college funding goals. Additionally, some states offer a state income tax deduction if you are a resident of that state and contribute to their 529 plan. In some cases, the tax savings can be substantial.

Designate those individuals to whom you wish to gift assets. The annual gift tax exclusion is $15,000 for 2020 ($30,000 for married couples). You can gift this amount to as many individuals as you would like without having to pay gift tax or have it count against your lifetime gift and estate tax exemption.

Harvest investment losses. The markets have certainly fluctuated a lot this year. If you own stocks and other marketable securities that have lost money in taxable accounts like individual or joint accounts, consider selling those investments to capture the loss. The losses can be used to cancel out taxable gains elsewhere or potentially lower your 2020 tax bill. If your losses exceed your gains, you will have a net capital loss. You can deduct up to $3,000 of net capital loss (or $1,500 if you are married and file separately) against ordinary income, including your salary, self-employment income, and interest income. Any excess net capital loss is carried forward to future years and puts you in a position for tax savings in 2021 and beyond.

Update Beneficiaries. If there has been a major change in your personal life, such as a recent marriage or divorce, the birth or adoption of a child, or a death in the family, you may need to revise the beneficiaries on your retirement accounts and life insurance policies. You may also need to update your Will and Power of Attorney documents.

These are just a handful of financial issues to consider as we approach year end. Your financial and legal advisors can run through a more comprehensive checklist of planning options based on your personal circumstances.

Jeff Witz, CFP® welcomes readers’ questions. He can be reached at 800-883-8555 or at
200 North LaSalle Street – Suite 2300 – Chicago, Illinois 60601
312-419-3733 – Toll Free 800-883-8555 – Fax 312-332-4908 –
Investment advisory services offered through MEDIQUS Asset Advisors, Inc. Securities offered through Ausdal Financial Partners, Inc. Member FINRA/SIPC ∙ 5187 Utica Ridge Rd ∙ Davenport, IA 52807 ∙ 563-326-2064 ∙ MEDIQUS Asset Advisors and Ausdal Financial Partners, Inc. are independently owned and operated.

Effective June 21, 2005, newly issued Internal Revenue Service regulations require that certain types of written advice include a disclaimer. To the extent the preceding message contains written advice relating to a Federal tax issue, the written advice is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer, for the purposes of avoiding Federal tax penalties, and was not written to support the promotion or marketing of the transaction or matters discussed herein.
The information contained in this report is for informational purposes only. Any calculations have been made using techniques we consider reliable but are not guaranteed. Please contact your tax advisor to review this information and to consult with them regarding any questions you may have with respect to this communication.
MEDIQUS Asset Advisors, Inc. does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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