End of the Year Financial Planning: 5 Financial Moves to Make Before the New Year

End of the Year Financial Planning: 5 Financial Moves to Make Before the New Year

December 28, 2022

1) Rebalance your portfolio

The end of the year is a good time to review your investment options and asset allocation against your current allocation. Periodic rebalancing helps maintain your target asset allocation as some asset classes will outperform others. For some investments, that might mean selling assets that have risen in value and buying assets that have declined in value.

Partner with Winchester financial planner John Clawson to look at December’s monthly market indicator for tips on what is happening in the U.S. markets and around the world. 

For those who are still saving for retirement, it might mean increasing how much you are contributing toward some assets (those that have decreased in value) and decreasing how much you contribute to other assets (those that have increased in value). If you are already in retirement, it might mean withdrawing more money from those assets that have risen in value and less from the assets that have fallen in value.

2) Consider a Roth IRA conversion

It is a good time to consider converting all or some of your traditional IRA into a Roth IRA. This can eliminate required minimum distributions that sometimes push retirees into a higher tax bracket and even could push retirees into higher rates for Medicare.

However, before making a conversion like this, speaking with an experienced financial advisor like John Clawson, in the Winchester Virginia area, can help you make an informed decision on how much you may want to convert. Because the distribution from a traditional IRA is taxed as ordinary income, you want to consider whether converting a given amount could put yourself in a higher tax bracket.

3) Review your debt

Partnering with a financial consultant can help you review any debt you have—such as credit card, mortgage, or home equity—that has high interest, and consider consolidating those higher debt obligations into a lower-rate fixed program to benefit from today’s low rates. 

Due to COVID-19, unemployment or reduction in income can be an issue for paying off debt. Consider speaking with your lenders and seeing if they are offering short-term disaster relief assistance. If you qualify, it could result in deferring payments for 6 to 12 months, or qualifying for a loan modification.

4) Make charitable contributions now to receive 2022 tax deductions

It is never too late to make charitable contributions, and it is not too late to make charitable contributions for 2022 tax deductions. Donations must be submitted before December 31st. Stock donations to charities and tangible gifts must also be completed by then. Make sure to keep a detailed list of what was donated as gifts. Also, if you think you may be in a lower tax bracket next year, you may want to consider accelerating your charitable contributions to this year to get more money from deductions.

5) Schedule a consultation with an experienced financial advisor

The end of the year can be joyous and hectic, especially during such a difficult year as we have had in 2022. Knowing how challenging it can be to complete routine financial tasks throughout the year, it can bring peace of mind to seek the advice of experienced financial planner. To schedule a complimentary, no obligation, financial review and discuss your end-of-the-year options, as well as the coming tax season, contact John Clawson today.

This is meant for educational purposes only.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. Keep in mind that rebalancing may have tax consequences and transaction costs associated with this strategy. Please consult with your tax advisor regarding your personal situation.  (12/20)