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Year-End Tax and Financial Planning Ideas



Prepared by Michael Menninger, CFP

In many cases, individuals make unintended financial mistakes and don’t realize until it’s too late, or never at all. In this article, I present five financial issues to consider before year-end. If you have any questions about year-end tax planning strategies and financial planning ideas, please call the Menninger & Associates Certified Financial Planners.

(610) 422-3773

Roth IRA Conversions 

I detailed the use of Roth IRA conversions as a long-term tax planning opportunity. By utilizing Roth IRA conversions, you will be taking advantage of historically low tax rates and ensuring that your retirement assets will grow and be distributed tax-free in retirement, when your tax rate may be surprisingly higher than today.

Watch Year-End Tax Planning with a CPA

Maximizing Retirement Plan Contributions

The current limit for contributing to your 401(k) or 403(b) is $19,500, plus an additional $6,500 catch-up at age 50 (note that other retirement plans may have different limits). If you wish to maximize your contribution, you should look at your pay stubs and see if you will reach your limit by year-end. 

Watch Part 2 of Year End Tax Planning - Financial Planning Explained

Foregoing Matching Contributions

Most companies will match your 401(k) contributions, but I have seen many folks unknowingly lose some of their company match. This may have been because the employee already reached their contribution limit before year end, because the company doesn’t match catch-up contributions, or because the employee simply isn’t contributing enough. Thus, it is important to fully understand your company’s matching program. After all, you don’t want to miss out on free money! 

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Tax Loss Harvesting

Many people have investments in taxable accounts that are taxed on interest, dividends, and capital gains. Tax loss harvesting is a technique that investors often use, as they will intentionally sell investments in order to capture a capital loss, which can then be used to offset capital gains, or simply written off as a loss against income, (limited to $3,000 per year, but additional losses can be carried over to future years, so they are not lost). This is a technique that is often reviewed near the end of the year to help offset capital gains to reduce taxes. It is important to note that if you sell an investment for a loss, you cannot buy that investment back within 30 days, or the loss becomes disqualified, known as a “wash sale”.

 Withholding Enough Taxes

The government withholds taxes from each paycheck because it wants to collect income throughout the year. However, in the case where a taxpayer has additional taxable income from other sources (rental properties, IRA distributions, capital gains, business income, etc.), they may not be withholding enough for the IRS. In short, the IRS expects you to withhold enough taxes, or else they may assess a penalty AND interest. Thus, individuals and couples should ensure that they are withholding enough for taxes, which isn’t a very difficult calculation. If you are not withholding enough, then increase your Federal taxes withheld from your paycheck, or send money to the government in the form of quarterly estimated tax payments. Besides, nobody likes a surprise in April when they have to write a check to the IRS. We hope these ideas are helpful, and if you have any questions, please feel free to contact the Certified Financial Planners of Menninger & Associates.

Please note that neither Cetera Advisor Networks LLC nor any of its agents or representatives give legal or tax advice. For complete details, consult with your tax advisor or attorney. In many cases, individuals make unintended financial mistakes and don’t realize until it’s too late, or never at all. In this article, I present five financial issues to consider before year-end.

Certified Financial Planning: Year-End Tax Strategists

Michael Menninger, CFPAbout the Author: Michael Menninger, CFP®️

Michael Menninger is the founder and president of Menninger & Associates Financial Planning. With 20+ years of financial planning experience, Michael helps his clients pursue their financial goals through a hardworking, common-sense and detail-oriented approach to financial planning. He provides personalized service, builds lasting relationships, and maintains a disciplined, long-term outlook. He uses his experience and wide-ranging business and educational background as a basis for creating financial plans unique to each client's goals and aspirations.

(610) 422-3773