FINANCIAL FOCUS
KRISTI TREVINO Financial Advisor Edward Jones
Consider These Year-end Financial Moves
We ’ re nearing the end of 2020 – and for
many of us , it will be a relief to turn the calendar page on this challenging year . However , we ’ ve still got a few weeks left , which means you have time to make some year-end financial moves that may work in your favor . Here are a few suggestions :
• Add to your IRA . For the 2020 tax year , you can put in up to $ 6,000 to your traditional or Roth IRA , or $ 7,000 if you ’ re 50 or older . If you haven ’ t reached this limit , consider adding some money . You actually have until April 15 , 2021 , to contribute to your IRA for 2020 , but the sooner you put the money in , the quicker it can go to work for you . Plus , if you have to pay taxes in April , you ’ ll be less likely to contribute to your IRA then .
• Make an extra 401 ( k ) payment . If it ’ s allowed by your employer , put in a little extra to your 401 ( k ) or similar retirement plan . And if your salary goes up next year , increase your regular contributions .
• See your tax advisor . It ’ s possible that you could improve your tax situation by making some investment-related moves . For example , if you sold some investments whose value has increased , you could incur capital gains taxes . To offset these gains , you could sell other investments that have lost value , assuming these investments are no longer essential to your financial strategy . Your tax advisor can evaluate this type of move , along with others , to determine those that may be appropriate for your situation .
• Review your investment mix . As you consider your portfolio , think about the events of these past 12 months and how you responded to them . When COVID-19 hit early in the year , and the financial markets plunged , did you find yourself worrying constantly about the losses you were taking , even though they were just on “ paper ” at that point ? Did you even sell investments to “ cut your losses ” without waiting for a market recovery ? If so , you might want to consult with a financial professional to determine if your investment mix is still appropriate for your goals and risk tolerance , or if you need to make some changes .
• Evaluate your need for retirement plan withdrawals . If you are 72 or older , you must start
taking withdrawals – technically called required minimum distributions , or RMDs – from your traditional IRA and your 401 ( k ) or similar retirement plan . Typically , you must take these RMDs by December 31 every year . However , the Coronavirus Aid , Relief , and Economic Stimulus ( CARES ) Act suspended , or waived , all RMDs due in 2020 . If you ’ re in this age group , but you don ’ t need the money , you can let your retirement accounts continue growing on a tax-deferred basis .
• Think about the future . Are you saving enough for your children ’ s college education ? Are you still on track toward the retirement lifestyle you ’ ve envisioned ? Or have your retirement plans changed as a result of the pandemic ? All of these issues can affect your investment strategies , so you ’ ll want to think carefully about what decisions you may need to make . Looking back – and ahead – can help you make the moves to end 2020 on a positive note and start 2021 on the right foot .
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