Don’t Drop the Ball

The hard December 31st deadline and year-end financial priorities

It might feel like the leaves have only just started changing color, but the reality is that the end of the year is fast approaching. And while the holiday season is a time of rest and celebration for most, December 31st is a hard deadline that you cannot afford to overlook.

Here’s what you need to be thinking about well in advance of the new year:

Proactivity pays

The deadline for positive changes you can make in your portfolio is December 31st. Those changes require the kind of proactive analysis that can’t wait until there is snow on the ground. Whether it’s tax adjustments, setting up a retirement plan, or gifting assets to a charitable entity like a donor-advised fund, the time to have those conversations with your CPA is now (or certainly no later than the end of November).

Teamwork makes the dreamwork

When it comes year-end financial planning, embrace the team concept to make sure you cover your bases. Input from your financial advisor and CPA, and often an estate planning attorney, can help you analyze the estate tax cost-benefits of different actions (or inaction).

A bountiful harvest

Year-end loss harvesting is a great way to reduce your tax obligation on capital gains by taking advantage of unrealized losses in other areas. Offsetting your taxable gains is a smart way to keep your tax bill down—but it has to happen before December 31st

Tis the season

Is there a better way to celebrate the season of giving than by making a financial gift? But be smart about your gifting. Make sure your 529 contributions are done by the end of the year to avoid any issues. When making charitable contributions, talk to your advisor about how much to give, when and how to do so. Smart and strategic gifting can save you a great deal of money in the form of tax benefits. Corporations that may have extra cash on hand might be better off distributing funds now as a bonus, as part of a profit-sharing disbursement, or as a contribution to a retirement plan instead of holding on to those monies.

Hark the changes

Now is also the time to talk to your advisor about any personal or professional changes during the last year that might change your financial planning priorities or impact your tax obligation. Check with your CPA to see if you may have potentially withheld too much or too little over the course of the year.

Consider converting

Check with your advisor to see if a Roth IRA conversion might be the right move. If converting a portion of your traditional retirement accounts to a Roth makes sense, the deadline to do so is—you guessed it—December 31st. For many, this is the right time to consider a Roth conversion. Because you will only have to pay taxes on the value of the funds at the time you make the conversion, the current down market means you could save a great deal of money in reduced future tax obligation when the market recovers. 

The bottom line is that you never want to leave any opportunities on table. At a time of year when there are plenty of reasons to be distracted, plan ahead to make sure you address your financial priorities before the year-end deadline. That way you’ll have plenty of reasons to celebrate when you raise a glass on New Year’s Eve.


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