5 Last-Minute Financial Tips For The End Of 2021

The year’s end is a great time to reflect on your financial status. How much did you save or invest? Are you one year closer to your retirement goal?

However, it’s an excellent time for looking ahead. Although you cannot make amends for past financial errors, you can still take steps to improve in the New Year.

But you do not have much time, so you will need to act fast.

These are the financial moves you should make in the last ten days of 2021. We asked financial professionals for their top end-of-year financial tips. Here’s what they had to say.

Financial activities at the end of the year are in full swing.

Profit from 0% Long-Term Capital GainsTaylor Schulte, a financial advisor, hosts the Stay Wise Retirement Podcast. She suggests that some investors sell investments they’ve held in a taxable account longer than one year. This strategy is called tax-gain harvesting and can allow you to pay a 0% rate on long-term capital gains – that is, if your earnings are low enough.

Schulte says, “If you are married, filing jointly, and your taxable income was less than $80,800 in 2021,” and that you have no tax on long-term capital gains. If you’re single, the income limit drops to 40,400.

The advisor says that capital gains are not losses. You can sell or part of security to realize capital gains at zero percent up to the taxable annual income limit and immediately repurchase it without worrying about the wash-sale rule.

This means that you don’t need to alter your investments or asset allocation to benefit from this strategy.

Link to Your Student Loan Servicer Account

Kevin Mahoney, a financial planner for millennials, says that individuals with federal student debt should get ready for the end of federal student loan relief on January 31. Are you able to remember your login information for student loans? Are you sure the details in your online account are correct? Are you aware of any requirements that must be met to qualify for benefits, such as loan forgiveness?

These are questions that you have to answer before the payments of federal student loans begin on February 1, 2022.

Mahoney states that while the end of each year can be hectic for nearly everyone, this simple step could help many millennials to make a solid financial beginning in 2022.

Spend less on your FSA Balance

Eric Nelson, a financial advisor from Independence wealth, suggests that individuals with a Flexible Spending Account should act immediately to avoid losing any remaining balances. Also, your FSA funds should be spent on eligible expenses as you still have time until December 31.

But there is a caveat. Nelson states that some employers have adopted COVID-era rules, which allow employees to carry over FSA payments from 2021 to 2022. However, this could reduce their ability to contribute in the next year.

In any case, now is the time to ask your employer questions about your FSA account.

The Roth Conversion:

According to Danny G. Michael, a financial advisor at Satori Wealth Management, the deadline for Roth conversions is December 31. When your income is lower than average, moving money from a traditional IRA can be a smart move. Michael says that this can happen if you make a career shift, lose your job, or retire within the past year. If you are in these situations, your tax rate should not be higher.

While you will have to pay taxes now on the converted funds, the trade-off is tax-free growth and no income taxes on withdrawals later.

Elliot Appel from Kindness Financial Planning explains that this move may also be more profitable due to the low tax rates. Also, current tax rates are set for sunset in 2026.

“If they do, the tax rates will be adjusted for inflation to 2017 tax rate, which was higher and narrower,” he said. “For example, people currently in the 22% and 24 percent tax brackets may end up in the 25 and 28 tax brackets in the future.”

Give your RMD to Charity for Year-End Tax Planning

For those who are already enjoying retirement, here’s one tip.

Michael Mezheritskiy, President of Milestone Asset Management Group, says that required minimum distributions, or RMDs, can cause you to be in a significant tax bracket depending upon their size and other income. If your taxable income has increased, they can increase your tax bill.

According to him, if you don’t need the income, your RMD can be donated to charity.

Mezheritskiy states that Qualified Charitable Distribution (QCD) allows IRA owners up to $100,000 to be transferred directly to charity each fiscal year. Depending on how much income you have, you can use a QCD to satisfy your RMD in part or whole.

Mezheritskiy mentions that the IRS considers the initial dollars taken out of an IRA as your RMD until the entire requirement is met.

“Therefore, if QCDs are part of your year-end tax planning, make sure you make the QCD before you make any withdrawals from your accounts,” he states.

The Bottom Line

These are only a few examples of end-of-year money moves you may want. But there are many ways to improve your finances. You can track your spending at the end of each year to determine where it went in the past 12 months. Also, you can create a plan for paying down any unsecured debts.

You can’t blame yourself for the financial problems that you have faced in 2021, no matter what. Although you can’t change the past or make any changes, you can prepare yourself for a better financial year in 2022.

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Robert Scoble
Robert is the assistant managing editor for HC News, overseeing coverage of markets, companies, strategy and business leaders. Originally from Boston, Scoble began his journalism career in 1997 & now resides outside New York.

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