Year-End Financial Considerations


Whether you’re ready or not, the end of the year is quickly approaching.  Now is the perfect time for investors to review their portfolios to take care of any year end items and align investment goals with any upcoming life changes. 

The first thing you want to take a look at is to make sure that you have maximized contributions to your 401(k), IRA, Roth IRA, or other retirement plans. Even if you regularly contribute to your retirement plan, check to see if you will reach the maximum allowable amount by December 31st. Retirement plan contributions to tax-deferred accounts, help to reduce your taxable income. 

If you have a health savings account (HSA), make sure you are contributing the maximum allowable amount. HSAs offer three tax benefits. First, contributions are made pretax, so your taxable income is reduced. Secondly, earnings and withdrawals for qualified medical expenses are free of federal tax. Finally, funds in an HSA can be invested to help pay for future expenses.

You may want to also consider charitable giving. Donations benefit the causes that matter to you and can also offer tax advantages. An increasingly popular approach to giving involves donating stock that has appreciated in value, for a tax deduction equal to the whole donation and not just the stock’s gains. Taxpayers age 70½ and older can make qualified charitable donations (QCD) from their IRAs, effectively lowering adjusted gross income and meeting required minimum distribution. Be sure to record your donations to charities in all forms.

You should also determine if there are any adjustments that should be made to your investments that would provide a tax benefit. Tax loss harvesting—selling losing positions to realize losses for tax purposes—in taxable accounts is a good place to look at for a year-end review. Selling stocks, bonds, and funds that have lost value - and no longer make sense for your portfolio - helps to offset realized capital gains with realized capital losses.

The advisors at River Wealth are happy to meet with you to review your portfolio and make sure that your investments will serve you well in the new year.