Broker Check

7 Things to Consider Before the End of the Year

November 13, 2020

As we head into the end of the year, there are many things to consider regarding your investments and financial plans.  Now is a great time to think about these seven items:

Maximize Contributions – If you are able, try to maximize your contributions to your retirement plans to save for retirement and lower your taxable income.  For 2020, the maximum contribution to a 401K is $19,500.  If your employer has a matching program, at a minimum you should contribute up to what your employer is willing to match.  Along with employer retirement plans you can contribute up to $6,000 ($7,000 if older than 50) to individual retirement plans.  There are income limits that will determine how much of a contribution to a traditional IRA you can deduct from your income.  Lastly, if you participate in a high deductible health plan (HDHP), you should consider contributing to a Health Savings Account (HSA).  The maximum contribution allowed to an HSA is $3,550 for individuals and $7,100 for a family (you can add another $1,000 if older than 55).

ROTH Conversions – A ROTH IRA is a retirement plan that is funded with after-tax dollars.  The benefit of a ROTH is that the distributions are not taxed if the ROTH has been established for at least 5 years and you are 59 ½ years old.  There are income limits that may preclude you from contributing to a ROTH IRA. If that is your situation, you can convert assets in a traditional IRA to a ROTH IRA.  You will need to pay income tax on the amount that you convert from your traditional IRA.  Speak to your tax accountant about doing a conversion.  If you believe that you will be in a higher tax bracket in future years, it might be worth converting some IRA assets while you are in a lower tax bracket.

Flexible Spending – Understand the rules of your Flex spending account.  In many cases, if you do not deplete the funds that you contributed to the plan by the end of the year, you may lose that money.  However, your employer may offer a 2 ½ month grace period OR the ability to roll over up to $500 to the next tax year.  Check with your employer to make sure you understand the guidelines.

Re-Balance Portfolios – This has been a very volatile year in the financial markets.  It is likely that your allocation between stocks and bonds has gotten off track due to the market moves.  Check your portfolio to make sure that your asset allocation is still in alignment with your risk tolerance.

Tax-Loss Harvesting – 2020 has been unique year with big moves, up and down, in the market.  This may have caused an increase in trading activity in your account and possibly some realized capital gains. Look at your existing positions and consider selling stocks where you have a loss to offset some of the realized capital gains.  Keep in mind the 30-day wash-sale rule which disallows the loss if you buy the stock back within 30 days.  Also, if you have more losses than gains, you can carry forward $3,000 in losses to offset against taxable income.

FAFSA – The Free Application for Federal Student Aid opened on October 1, 2020 for the 2021-2020 school year.  If you have a child going off or returning to college, make sure you fill out the FAFSA.  The FAFSA is not just for people who need or want federal student loans, it is also used to determining scholarships and grants.  Also, some private scholarships require a FAFSA as part of their application process.

Estate Planning – Each year people say, “this is the year that I do my will….”  Make sure you follow through.  The best place to start is with a will, power of attorney and a healthcare directive.  Also, if your children are over 18 years old, they should at least have a health care directive so that someone can make healthcare decisions in the event they are incapacitated and are unable to speak for themselves.

If you would like to talk about year-end investment and financial planning reach out to us at Chatham Wealth Management for a complimentary portfolio and plan overview.  We will also work with your tax and legal professionals to make sure are optimizing your financial plan.  Contact us at the number below, email us at or view our most recent video at