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Set Up Your Year-End Financial Review

By November 17, 2022No Comments

With the end of 2022 just around the corner, it’s a good time to meet with your wealth advisor to review your financial picture. That review includes reviewing your investment portfolio, tax position and charitable contributions to ensure you’re on track to achieve your financial goals.

Maximizing 401(k) and Catch-Up Contributions

Maximizing annual contributions to your tax-advantaged retirement plans helps you build wealth and reduce your taxable income. Dec. 31 is the last day to make 2022 tax-year contributions for traditional, employer-sponsored Roth 401(k) plans, as well as similar plans such as 403(b)s. The contribution limit for these plans this year is $20,500.1 Investors who are age 50 or older can add a catch-up contribution of up to $6,500.2

You can make contributions to IRAs until the tax deadline of April 18, 2023, for the 2022 tax-year. The contribution limit for traditional IRAs in 2022 is $6,000, plus a $1,000 catch-up contribution for those age 50 and older.3

Doing Well by Doing Good

To qualify for charitable deductions on 2022 tax returns, the contributions you make must be postmarked by December 31. If you’re retired, one strategy you should consider is making qualified charitable deductions (QCD). Starting at age 72, you must take required minimum distributions (RMDs) from 401(k)s, traditional IRAs and other retirement accounts. Using the QCD strategy, you can route part or all of your RMD directly to one or more qualified charities. This allows you to reduce taxable income and the size of your taxable estate while supporting causes you care about.

You can direct as much as $100,000 a year ($200,000 for married filing jointly) from traditional IRAs to charities.4 Donor-advised funds provide another way to minimize taxes while giving you time to identify eligible charities to which you would like to contribute.

Thanks a Bunch

If you itemize deductions on you returns, you might come out ahead by combining, or bunching, two years’ worth of charitable contributions into the 2022 tax year. This strategy can be effective in years when itemized deductions fall below the standard deduction level (for 2022, that’s $25,900 for married couples filing jointly).5 By pulling 2023 giving into 2022 and combining the deductions for the current tax year and then claiming the standard deduction on your 2023 tax return, you may garner a greater total deduction than if you itemized deductions in 2022 and then again in 2023. The wisdom of this strategy depends on your specific situation, so be sure to seek the advice of your tax professional.

Tax-Loss Harvesting

This year’s bear market has been painful to endure, but one consolation is that losses may be “harvested” to trim your tax bill. With tax-loss harvesting, investors sell stocks or other assets that have declined in value enabling them to use these realized losses to offset capital gains from other investments or even gains from the sale of a secondary home or business.

Losses exceeding gains can be applied against taxable income, up to $3,000. And losses greater than $3,000 can be carried forward to offset future capital gains throughout your lifetime. Tax-loss harvesting can really payoff. A study from George Mason University found that when the S&P 500 has had losing years, the amount of taxes saved through tax-loss harvesting was 3.21% for investors subject to a 25% capital gains tax rate.6

Review Your Investments

Investing properly is a critical element of achieving your most important objectives. When meeting with your wealth advisor for an end-of-year portfolio review, it’s important to take a long-term view. Returns will vary. What really matters is whether you’re on track to fund the long-term goals laid out in your financial plan. The year-end review is also an opportunity to make any adjustments you feel are warranted. For example, you may have learned during this tumultuous year for stocks that you have less (or more) tolerance for volatility than you’d previously thought.

Set Up Time With Your Advisor

It’s easy to let tasks like these slip as we plan travel, organize get-togethers and shop for holiday gifts. Think about tending to your year-end financial checklist as a gift to yourself and those you care about. Don’t hesitate to contact your wealth advisor to set up a meeting.


1 IRS announced changes to retirement plans for 2022”

2 401(k) limit increases to $22,500 for 2023, IRA limit rises to $6,500”

3 Retirement Topics – IRA Contribution Limits”

4 “Two Tax-Smart Tips For Charitable Giving With an IRA”

5 “IRS provides tax inflation adjustments for tax year 2022”

6 “Got Crushed in the Market? Harvest Your Losses”

The S&P 500 Index is a market-value weighted index provided by Standard & Poor’s and is comprised of 500 companies chosen for market size and industry group representation.

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