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End of Year Planning Checklist

| December 02, 2020

It’s that time of year again for our annual blog post on end of year financial tasks to complete. To say that 2020 has been an unprecedented year would be an understatement.  As we look toward 2021, below are a few end of year items to consider in-between holiday festivities.

  • Portfolio Review – As we rung in the New Year, markets were sitting at all-time highs. However, the first quarter of the year tested even the most aggressive investor with how volatile markets became. Even though markets recovered throughout the second and third quarter of the year, we stress that if you haven’t reviewed your overall portfolio asset allocation in a while, now would be good time. Reassess your tolerance for risk. How did you feel in the first quarter of 2020? Were you nervous about the volatility? Do your current portfolio holdings align with your time horizon, tolerance for risk, and overall goals? Also, given the ups and downs in the markets this year, you may be able to take advantage of a strategy called tax loss harvesting (taking a tax loss to potentially offset realized tax gains) in taxable investment accounts. Be sure to work with a qualified advisor who can help review your portfolio as well as educate you on the rules surrounding tax loss harvesting (they must be followed otherwise a tax loss may be disallowed by the IRS).
  • Review Retirement Plan Contributions – Given what has happened this year, if you have had to cut back (or completely stop) contributing to a workplace retirement plan (401k, 403b, etc.) in order to free up cash flow for shorter term needs, you aren’t alone. Use this time to decide if you can begin contributing again and at what level. If you are still facing some uncertainty, consider making it a quarterly goal to reassess how much you are contributing each paycheck and make adjustments when you feel comfortable doing so.
  • Review Tax Withholding and Employer Benefits – December is often open enrollment time for employer provided benefits. It’s worthwhile to take a little extra time to review and understand what is being offered and what the pros and cons are. Reviewing your tax withholding is also important to start off 2021.
  • Review Your Budget and Debt Repayment Goals – Utilize December to review your annual budget and actual spending. Was your actual spending more or less than what you were budgeting for? Are there areas you could cut back or cut out completely? Also, do you have a payoff plan in place for consumer debts like credit cards? After reviewing your budget, decide if there is room to potentially start paying down higher interest consumer debt more aggressively.
  • Review Credit Reports and Social Security Statement – At least once a year, it is good to review your credit report in detail and look for any mistakes or fraudulent accounts or activity. You are entitled to a free copy of your credit report from each of the three credit reporting companies once every 12 months. Also, if you are under age 60, you no longer receive a Social Security statement in the mail. In order to view your statement, you will need to create an online account with the Social Security Administration. It’s good to check your statement once a year to make sure your earnings are being reported correctly and to identify and correct any mistakes.
  • Check Estate Planning Documents – Double check beneficiary designations on accounts to make sure they are up to date. Also, if it has been a while since you’ve had your estate planning documents reviewed or you haven’t gotten around to creating an estate plan, consider setting up an appointment with a qualified estate planning attorney.
  • Charitable Giving – The CARES Act passed by Congress in March had a provision that allows taxpayers who don’t itemize deductions the ability to potentially deduct up to $300 in charitable contributions “above the line.” In order to potentially qualify, the gift must be made in cash (no donating old clothes or housewares) to a qualified 501(c)(3) public charity (not to private foundations, Donor Advised Funds, etc.) by the end of 2020. Be sure to keep a written record documenting cash contributions including a receipt from the qualified charity.

We wish everyone a healthy and happy holiday season and a prosperous 2021.

Securities and Advisory Services offered through LPL Financial, member FINRA/SIPC, a Registered Investment Advisor. LPL Financial and Croxall Capital Planning do not provide tax or legal advice.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.