December is here, and that means the New Year is just around the corner. The end of the year is certainly a busy time with shopping, traveling and holiday gatherings with friends and family. However, it’s important to set aside just a bit of time to review your year-end tax checklist, so that when it’s time to pull together information for your tax return, you’ll be ready to go.
Business Planning. The end of the year is a great time to focus on how the previous 12 months went for your business. As you pull together one last quarter of profit-and-loss statements and year-end reports, take time to review your company retirement plan and key employee retention goals. Those two things aren’t necessarily mutually exclusive. The comprehensive benefit package you offer to your employees can be a reason they stay or go. Furthermore, take a look at your succession plan. What is the timeframe? What is the valuation of your business? If you don’t have answers to these questions, set a goal to work on your succession plan in 2024 (or, reach out to us and let us help you develop one).
Tax-Focused Investment Strategies. At Strojny Financial Services, we approach wealth management with a tax-intelligent lens, so for those of you who are comprehensive financial planning clients of ours, we take care of a lot of this for you. However, if you’ve yet to take us up on our offer to do a complimentary, no obligation review of your investments and retirement accounts, be sure to practice tax loss harvesting by reviewing portfolio gains and losses for tax-savings opportunities. Conduct a review of your rebalancing and asset allocation and consider making changes to your strategic allocation. Be mindful of your stock options and think about how vesting, exercising and/or selling may impact your next tax return.
Retirement Planning and Withdrawals. If you plan to retire within the next five years, you need to be actively planning for retirement. And, we can help. There’s a lot that goes into retirement planning and how strategic withdrawals will maximize your assets. The ‘next year withdrawal strategy’ may increase after tax income by intelligently drawing from specific accounts. A ‘Roth conversion’ repositions your assets so that they won’t be taxed when withdrawn, potentially allowing you to better manage your tax brackets. Similarly, strategically choosing when to start drawing on Social Security will increase your benefit amount. There are many strategies centered around retirement planning and withdrawals. If you are unfamiliar with any of these, schedule extra time with us during your tax appointment. We’re here to help.
Family Risk Management. It’s important to carry enough insurance to cover your loved ones during times of loss, and that goes for life, disability, property and casualty coverage. It’s equally important to annually review the amount of coverage you have and to make changes to your policies and beneficiaries following major life events, such as birth, death, marriage, divorce, etc., while reviewing every 3-5 years your cash value policy and your annuities. Once you reach age 50-60, it’s helpful to consider long term care insurance and how to set your family up to help pay for your basic needs toward the end of your life. Insurance is a difficult topic to think about, and even moreso to talk about, but it’s a necessary plan to have in place and an important conversation to have with your family and your financial advisor.
Legacy Planning. Similar to family risk management, legacy planning can be a difficult topic of conversation for many people. However, if you want your wishes to be carried out after you’ve passed, you need to have them written down and shared with your loved ones. Take time this year to review any wills, trusts, titling, powers of attorney and estate plans that you may have already written. If you don’t have any in place, now is a good time to start thinking about, and talking through, what you want your wishes to be. Beyond what you want to leave your family and friends, think about how charitable giving and gifting fit into your plans. Furthermore, consider how any health changes, conditions or expenses might change the goals you have in mind. Be sure to review your wishes each year and make adjustments for any external forces that change your goals.
Education Planning. With the end of the fall semester, comes the start of the spring semester. If you have children currently in, or heading to, college or another postsecondary institution, use this time to review any 529 accounts you may have established. Look to see who the owner of the account is, how the funds are allocated and who the beneficiary is. It’s possible to make changes to those items, depending on the circumstances. If your older child does not use all of the 529 funds allocated for him, you may change the beneficiary to your younger child. Review education goals and how much you plan to pay for your children’s education, while also looking over education spending and savings. If you haven’t started 529 plans for your children or if you need help making adjustments, please contact us for help.
Cash Flow Management. This time of year can be quite expensive for our clients, but to avoid going “in the hole” around the holidays, get ahead of your budgeting with a focus on cash flow management. Look back over the entire year, review your monthly expenses and debt, and plan for next year—month by month. Forecast for large upcoming purchases and sales, including real estate, and account for employment changes and projected income changes. Avoid ‘lifestyle creep’ by not living beyond your means and pay down debt as soon as possible to avoid added interest charges. Adjust your savings or allocations to account for large purchases or employment changes, so that you’re not surprised by cash flow changes.
We realize this is a lengthy list, and we’ve already acknowledged how busy this time of year is for you. As you gather and organize your tax documents early next year, let us know if you’d like to request extra time during your tax appointment for a preliminary discussion to evaluate additional services of ours you aren’t currently using. However, if you do come across something you need to address before year-end, please reach out to us.
Asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment losses. Retirement plan withdrawals may be subject to taxation and penalties when withdrawn early.