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2020 Year-End Financial Planning Considerations

The end of the year always seems to sneak up on us, but I think it’s safe to say most of us are  more than ready to be leaving 2020 behind. As we brace ourselves for the new year, it’s a good  idea to check back in with your personal finances and make sure you have everything in order. Below we discuss some of the most important year-end financial considerations you should  make before the ball drops.  

Max Out Your Retirement Contributions 

If you’re not already taking full advantage of your employer’s match to your retirement account,  now’s the time to consider increasing your contribution. If your employer doesn’t offer one, or if  you’ve already maxed out your match, you might want to consider increasing contributions to an IRA which has tax advantages. As of January 1, 2020, the SECURE Act repealed the maximum age for contributions to a traditional IRA meaning you can contribute to a traditional IRA after  the age 70 ½ so long as you’ve earned income in 2020. You may also be able to deduct the  contribution depending on your modified adjusted gross income (MAGI).  

Consider a Roth Conversion  

If you don’t qualify to make contributions to a Roth IRA, you might benefit from contributing to a Traditional IRA and then converting the funds to a Roth IRA. A Roth IRA can be an appealing  option for some because it does not include a required minimum distribution age. This means  that you can continue to save and grow tax-free dollars for the remainder of your life. While a  Roth conversion could be a great option for some, it could be a costly mistake for others. In a previous blog about what you need to know about Roth conversions, we’ve outlined important  considerations to make before converting your traditional IRA into a Roth account.

Check Your Flexible Spending Account Balance  

Typically, with a Flexible Spending Account, any unused balance is lost by the end of the year.  But this year the IRS has relaxed this policy due to the pandemic. Employers are now able to  modify plans until the end of the year, allowing employees to “spend down” unused funds in the account on any qualified health expenses that were incurred in 2020, and also allow you to carry over $550 to the 2021 plan year.  

If you don’t already have an FSA, you may want to consider establishing an account in 2021. A  Health Savings Account (HSA) is another great option. For clarification between these two  accounts, and help determining which is right for you, check out our blog: FSA vs. HSA: Which Is Right for You? 

Review Your Estate Plan  

In light of the current pandemic, many people are taking the time to update their estate plan.  Two of the most important documents to have up-to-date and on-hand are your medical and financial powers of attorney. For instance, if you’re quarantined in your home, admitted to the  hospital or become incapacitated, you’ll need someone to handle your finances or make  medical decisions on your behalf. You can read our blog on estate planning considerations  during COVID-19 to aid you as you review your estate plan.  

Review your Goals 

Financial plans are created to keep us on track to achieve our long-term financial goals  through  all the market’s ups and downs. But sometimes, our goals need to be reassessed. Think back the  goals you established at the beginning of the year and evaluate your progress. If you’re off track,  a financial professional can help you establish SMART goals based on your personal financial  situation.  

Tax-Loss Harvesting  

Nobody wants to see their investments decline in value, but there’s a way to offset your losses in taxable accounts. This strategy is called tax-loss harvesting, which involves replacing an investment that has lost its value with a similar investment, and then using the investment sold at a loss to offset realized gains. The end result is minimizing your long-term tax implications while  still staying fully invested. To realize the loss in 2020, these transactions would need to be made by December 31, 2020. 

Speak with a Financial Professional 

Perhaps one of the best financial decisions you can make as we approach the new year is  speaking with a financial professional to ensure you have everything in order.  

Investment adviser representative and registered representative of, and securities and investment advisory services  offered through Voya Financial Advisors, Inc. (member SIPC). Archstone Financial is not a subsidiary of nor controlled by Voya Financial Advisors.