With only a few months left in 2021, it is time to consider some important year-end tips to help put you in a stronger financial position as we near 2022!
Contribute!
Now is the time of year to make certain timely contributions. In some states you receive a tax deduction for contributing certain amounts into a 529 plan for college. People who participate in Health Savings Accounts are used to only putting a set amount per pay period into an HSA plan – but did you know you can contribute to an HSA by directly sending funds at any time throughout the year? If you are below this year’s limit adding to an HSA plan is a great way to get a current year tax deduction and also benefit from tax-free withdrawals for qualified medical expenses in the future.
Consider a Roth Conversion
While you have until tax time to contribute to an IRA, you have only until the end of the year to do a Roth conversion. By converting some of your traditional IRA to Roth, or making a non-deductible IRA contribution and then converting that – you may be in a position to seriously build up future tax-free retirement dollars. This strategy is very much case by case – so ask your advisor and do your homework as to if this conversation strategy is right for you.
Take Care of Large Medical Expenses
Get that medical expense taken care of NOW! If you already had an expensive medical event this year such as having a baby or a major surgery and you are near or past your annual limits on your health plan, get that additional procedure, test or specialist follow-up scheduled for this year. It could save you a lot of money vs. kicking the can into 2022.
Rebalance
Many people target the end of the year to review the current asset allocation of their investment portfolios. Over the course of a year, the market value of each security you hold earns a different return, often causing the weighting of each asset class to change. You want to make sure that your portfolio stays on or close to the asset allocation strategy that best aligns with your goals, time horizon, and tolerance for risk. This is true for IRAs, 401(k)s, and non-qualified investment accounts. A financial professional can help you look at your entire picture to determine if any changes should be made.
Any discussion of taxes is for general informational purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax or accounting advice. Clients should confer with their qualified legal, tax and accounting advisors as appropriate.
Chris Kampitsis is a registered representative of and offer securities, investment advisory services through MML Investors Services, LLC. Member SIPC. www.SIPC.org 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000 CRN202212-275834