While primarily the time to be with family and friends and celebrate the past year, year-end is also the time to think about certain seasonal financial planning opportunities, especially those with deadlines on December 31. As your wealth manager, here are just a few of the ways I lend a hand this time of year:
Year-End Planning Activities
- I update myself on the big tax changes for this year and next (such as increases in standard deductions and tax brackets) and any recently passed or proposed legislation that might impact your financial situation.
- I work on getting tax changes, law changes, and any changes in planning assumptions reflected in your financial plan.
- I may check your saving/spending plan for the next year and update your charitable/giving plans if you have any.
- If needed, I’ll prepare a rough projection or work with your tax professional to decide whether you can or should make any additional retirement plan or IRA contributions (and what type) for the current year.
- That same projection can be used to assess whether a Roth IRA conversion might be advantageous (2022 being a big down year for most portfolios can make them even more attractive).
- If you’ve received a windfall this year—whether a big raise, a bonus, equity compensation, an outsized capital gain, or an inheritance—I will help you review your tax withholding so you don’t face any tax penalties or neglect estimated tax payments if you should be making them.
- If you’re 72 or older, I help you check that you’ve made your Required Minimum Distributions and have a plan for what to do with the funds.
Once the New Year arrives, notify me as soon as you face a life event or you think you need to review your cash flow plans, approaching milestones, goals, planning assumptions, investment plan, or anything else in your financial world. I’m only an email, call, or calendar appointment click away.
For Investment Management Clients
If I’m also managing your investment portfolio, you might also see me do the following:
- As part of tax-smart management, all through the year I look to offset any investment gains realized (if possible) by harvesting investment losses elsewhere in your portfolio. But I’m especially attuned to these activities at year-end because this is my last chance to add value in this way. In some cases, it can make sense for me to actually accelerate gains such as when you’re still in the zero capital gains tax bracket.
- If I find a way, I’ll try to realize up to a net $3,000 investment loss (that is, over and above any realized capital gains) that you can use to offset ordinary income too.
- With updated tax bracket and yield information, I’ll be confirming whether your asset location still makes sense (the art of placing certain assets in certain types of accounts to be more tax efficient) and whether we should select taxable or tax-exempt bonds in your taxable accounts.
- If we’re reducing a concentrated position over time—for example, accumulated employer stock—I’ll look for individual share lots for you that will generate a loss or minimal capital gain. I’ll also look to sell additional lots if I can offset any taxable gains or if the benefit of reducing exposure exceeds any tax ramifications.
- Investment funds usually make their capital gains distributions (if any are due) in the November/December timeframe. I track these closely. I try to avoid placing tax-inefficient funds in your taxable accounts, but when it’s unavoidable, I at least evaluate whether it would be beneficial to sell funds before their distributions or defer buying more shares of them until after they pay out. Even when you hold a fund making a distribution in a tax-deferred or tax-exempt account, a large distribution can reduce your exposure to a particular asset class below what’s desired and leave uninvested cash in your accounts earning little. I won’t let this pass me by. I review accounts for rebalancing every quarter, but the year-end review can be more important for these reasons.
More Than an Investment Advisor, More than a Planner
These are not exhaustive lists, but I think they shed light on how much a wealth manager goes beyond simply an “investment picker” or even a “financial planner”. There are seasons with their special activities. I must keep my eye on many opportunities across a range of domains (budgetary, tax, legal, estate, etc.) throughout the year to level up your financial situation and get you closer to achieving the future described in your Dream Statement. If any of these ideas seem relevant to your situation and we haven’t spoken yet, use the link below to set up a call with me.
To all my clients, Happy Holidays and Happy New Year!
All content presented in this article is for informational purposes only. Materials presented should not be interpreted as a solicitation or offer to buy or sell a security or the rendering of personalized investment advice, which can only be provided through one-on-one communication with a financial advisor. The content reflects the opinions of Hesperian Wealth LLC (HW), except where cited, which are subject to change at any time without notice. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. All information or ideas provided should be discussed in detail with a financial, tax, or legal advisor prior to implementation.
Investing involves substantial risk, including the potential loss of principal. HW makes no guarantee of financial performance nor any promise of any results that may be obtained from relying on the information presented. HW may analyze past performance, but past performance may not be indicative of future performance.