Now that the dog days of summer are winding down, there are many reasons why you should make financial planning a priority this fall. Start by revisiting your savings goals and getting your financial health in tiptop shape before the year's end.
As the seasons change and we get closer to the end of the year, it’s a great time to get a head start on end of year planning. When a calendar year ends, the window slowly closes on a set of financial opportunities.
Here are a few things to keep in mind to get your financial plan in shape as we enter the fall season.
Organize your Financial Records
As you work towards building your dream retirement this autumn, you should begin by getting a clear picture of where you are currently positioned. Work very deliberately on all of the data collection to give yourself the best 360 degree view as a base to make improvements.
Use this opportunity to organize where you keep all of your financial information. This includes but is not limited to:
- Bank investment statements.
- Insurance policies.
- Updated spreadsheets of monthly expenses.
- Copies of estate documents.
Once this data is collected, sit down with your financial advisor to analyze the year to date, and take a look at where your money’s been going and what you can cut back on. Using a tool like Agemy Financial Strategies' online calculators is a great resource – from tracking expenses to investments, they will tag your transactions, gains and losses and categorize them, so it’ll show you what areas you need to make improvements on.
Harvest Tax Strategies
As we enter the last quarter of the year, it's a good time to brainstorm tax planning strategies. Now is the time to conduct 2021 tax planning and think about 2022 tax planning as well. A proactive approach to tax planning now can help you make material changes while there is still time. Some ideas will help cut your tax bill for the current year; others may allow you to minimize future taxes.
Tax-loss harvesting is a strategy that can help investors minimize any taxes they may owe on capital gains or their regular income. It can also improve overall investment returns. As a strategy, tax-loss harvesting involves selling an investment that has lost value, replacing it with a reasonably similar investment, and then using the investment sold at a loss to offset any realized gains.
Tax-loss harvesting only applies to taxable investment accounts. Retirement accounts such as IRAs and 401(k) accounts grow tax-deferred so are not subject to capital gains taxes. This leads nicely into our next financial tip...
Autumn Investing
Changes happen all the time in the finance world, especially taxes and laws, and these tend to go into effect as the new year rolls in. If you’re looking ahead with your other investments, such as your stock portfolio, be proactive and well educated about your options and about what’s happening—and expected to happen—moving forward. The best course of action is to touch base with your financial advisor, who can steer you on the path that’s right for you.
At Agemy Financial Strategies, we offer principles and strategies that may enable you to put together an investment portfolio that reflects your risk tolerance, time horizon, and goals. Understanding these principles and strategies can help you avoid some of the pitfalls that snare some investors.
Reconsider your 401(k) Terms
Can you max out your contribution to your workplace retirement plan? Most employers sponsor a 401(k) or 403(b) plan, and you have until the end of December to boost your 2021 contribution.
Can you do the same with your IRA? You can withdraw contributions tax-free at any time, for any reason, from a Roth IRA. This year, the traditional and Roth IRA contribution limit is $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year. You can withdraw earnings from a Roth IRA, but it could trigger taxes and penalties depending on your age and that of the account. Due to the CARES Act, you can withdraw as much as $100,000 from a Roth or traditional IRA without paying a penalty for being under 59½, if you have been affected by COVID-19.
Start Planning for the Holidays
With Halloween, Thanksgiving, Hanukkah and Christmas on the horizon, the best part of fall financial planning is looking ahead to the holidays. But while it’s great fun to spend time with family and friends, it can also put a huge strain on your budget. Make sure to craft your holiday budget now and start planning for it. That way when the holiday craziness starts, you won’t be taken by surprise and there won’t be a big hole in your budget. If you’re planning on traveling over the holidays, don’t put it off until the last minute – start planning now. Air fare and hotel prices tend to skyrocket the closer it gets to the holidays, so the further out you can book the better.
Final Thoughts
The return of cool breezes, comforting foods, and pumpkins can be invigorating. It’s also a bookmark of sorts, especially for your finances—a perfect time to take stock of your spending after the summer’s over to see what lies ahead.
It's always important to meet with your Financial Advisor to get the facts from the source. Be sure to provide them with updates on your financial situation, including your expected retirement date, income needs, and any other family situations that may affect your financial plan.
Contact us today for more important information on financial planning throughout the rest of 2021 - and into 2022 and beyond.