UW Extension specialist recommends year-end personal finance review

Photograph of man in suit and tie
Personal finance management specialist Cole Ehmke

There are a number of year-end planning issues that may need attention as 2021 comes to a close, said Cole Ehmke, University of Wyoming Extension specialist.

“We’re ending 2021 with the prospect of higher inflation, potential changes in tax and retirement rules and other issues,” said Ehmke. “The end of the year is a good time to make sure your finances are where you want them to be.”

For tax planning, now is a good time to review charitable donations and decide which year to make some deductible expenditures, he said. As part of the 2020 COVID legislation, charitable contributions made with cash can be deducted up to 100 percent of adjusted gross income, and the IRS allows a limited deduction of $600 for 2021 cash contributions for those who don’t itemize.

“If you can itemize, you might consider making several years’ worth of contributions this year to take full advantage of the opportunity,” said Ehmke. “Another tactic is to gift appreciated securities like stocks and mutual funds that might have large unrealized capital gains in taxable accounts – in addition to the tax deduction, you wouldn’t have to pay capital gains tax on the appreciated shares.”

For managing a portfolio of investments, the end of the year is a good time to rebalance the mix to make sure you’re match the level of returns you’re trying to achieve and the amount of risk you’re comfortable taking, Ehmke said.

“The stock market has grown tremendously, so the asset allocation in IRAs and other accounts should definitely be reviewed,” he said.

For estate planning, Ehmke said to make sure all estate planning documents reflect anything that changed in the year, especially beneficiary designations for insurance policies, a will, trusts and so on.

“Think about any changes such as from marriage, divorce, death, birth/adoption,” he said.

Ehmke noted that tax and estate planning issues before Congress and the president may develop next year, so be sure to track what is happening, including developments on federal estate tax.

“Finally, don’t forget to make contributions to 401(k) and other retirement plans to reach the maximum amount,” Ehmke said. And remember that contributions for 2022 for 401(k) plans have been raised to $20,500 with an additional $6,500 catch-up contribution for those over 50, so increase the contributions from each paycheck next year.

On the flip side, many retirement plans have a required minimum distribution (RMD) that older clients must take, or they could face steep penalties, he said.

Ehmke said that these are some of the issues that might significantly affect a person this year.

“Be sure to set aside some time to get everything ship shape as we head into 2022,” he said.


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