2021: Year-End Considerations
As 2021 draws to a close, now is the time to tie up any loose ends and set yourself up for a successful 2022.
Much of the suggestions in this post are just that; ideas on how to put yourself in a better position. We strongly advise that you always consult your own financial advisor and other professional services provider before making any financial or legal decision.
If you haven’t done so already, it might be time to set up a time to review your financial plan and investments with your financial advisor. Current Infinium clients can click this link to schedule a time with our team:
Given the wild swings in the markets, especially since the COVID-19 pandemic hit us in the spring of 2020, a financial plan could look far different today than just a short 18 months ago. Let’s see where you stand on the path towards hitting all of your goals and never running out of money.
Even though the yearly limit on IRA contributions can be quite small, now is a good time to see if you have not made your 2021 contribution yet. I turned the glorious age of 50 this year, so I actually get to same more in my 401(k) and IRA. Bittersweet situation, I must admit! Again, a quick call or text message to our team can help answer this question.
It’s a good idea to consider checking in with your tax or legal professional before the year ends, especially if you have questions about an expense or deduction from this year. Also, it may be a good idea to review any sales of property as well as both realized and unrealized losses and gains. Look back at last year’s loss carryforwards. If you’ve sold securities, gather up cost-basis information. As always, bringing all this information to your financial professional is a smart move as it can help us help you.
Plan charitable contributions or contributions to education accounts and make any desired cash gifts to family members. The annual federal gift tax exclusion allows you to give away up to $15,000 in 2021, meaning you can gift as much as $15,000 to as many individuals as you like this year. Such gifts do not count against the lifetime estate tax exemption amount, as long as they stay beneath the annual federal gift tax exclusion threshold. Besides outright gifts, you can explore creating and funding trusts on behalf of your family. The end of the year is also a good time to review any trusts you have in place. Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.
As a regular part of our financial planning process at Infinium, we review and recommend insurance where the need exists. The beauty of having us look at your insurance – vs an insurance broker – is that we will always tell you exactly what your financial plan says you need, and no more. We don’t sell insurance for a reason. It is a necessary evil for many, and there are few sources in the marketplace who can give you a realistic opinion on how much insurance you should actually have. The problem we see in the personal financial services industry is that people get tied up in products and services they don’t really need. And all too often these don’t come cheap – they are expensive!
The end of the year is an excellent time to double-check that your policies and beneficiaries are up to date. Don’t forget to review premium costs and beneficiaries and think about whether your insurance needs have changed. Several factors could impact the cost and availability of life insurance, such as age, health, and the type of insurance purchased, as well as the amount purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, you may pay surrender charges, which could have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Finally, don’t forget that any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
Here are some questions to ask yourself when evaluating any large life changes in the last year: Did you happen to get married or divorced this year? Did you move or change jobs? Did you buy a home or business? Was there a new addition to your family this year? Did you receive an inheritance or a gift? All these circumstances can have a financial impact on your life as well as the way you invest and plan for retirement and wind down your career or business.
In every single one of these circumstances, we would highly recommend a refresh and update of your financial plan. That’s why we are here, frankly. It’s to help you understand your big picture and how changes in one area can have an impact on all of the others. So please, keep us posted and have a great 2022!
Mark is a +24 year financial advisor veteran and Certified Financial Planner™. He founded Infinium in 2009 to bring a more personal, and truly client-centric offering to investors.