7 Financial Planning Steps You Can Implement Today

Peter Hafner |

The end of the year is fast approaching. As the calendar days march toward 2021, let’s keep in mind that there are several ideas we should review as you work to get your year-end financial house in order.

While procrastination is tempting, remember how checking items off our ‘to-do’ list always gives us a sense of accomplishment.

Before we get started, the tips below are simply guidelines. Feel free to check with your tax advisor, as various nuances can crop up. As always, we would be happy to assist you.


  1. Health care open enrollment has begun. If you obtain your health insurance through the Heath Insurance Marketplace, now is the time to purchase your health insurance for 2021.

This is the one time of year you can change your health insurance coverage or enroll.  If you don’t act by December 15, you will miss out on coverage for 2021 unless you qualify for a special enrollment period. Plans sold during open enrollment start January 1, 2021.


  1. On a similar note, open enrollment for Medicare has begun. You can sign up for Medicare health and drug plans between October 15  and December 7.

Decide if your coverage will meet your needs during 2021. If you like what you had this year and it is still available next year, you won’t need to take any action.


  1. Did you max out your retirement accounts? You can put up to $6,000 into an IRA in tax year 2020; $7,000 if you are 50 or older. You will have until Tax Day to make a 2020 tax-year contribution. The sooner you contribute, the longer your assets can grow tax-deferred.

Contributions to your 401(k) are automatically deducted from each paycheck. Contributions for tax year 2020 must be made by the end of the year to count against 2020 income.

The 401(k) contribution limit is $19,500 for 2020 and the catch-up limit is $6,500.

Your employer or plan administrator will let you know if you can adjust changes to your contribution this year. As we have said in the past, we strongly suggest that you contribute the minimum amount necessary to receive your entire employer’s match. It’s free money. Don’t leave free money on the table.


  1. This year’s RMD wrinkle. If you are 72 (or turned 70½ before January 1, 2020), you are obligated to take a required minimum distribution (RMD) from your IRA. But this year is an exception.

Thanks to the CARES Act, the RMD is waived in 2020. This RMD waiver applies to everyone with a 401(k), IRA, 403(b) or 457(b) account. Owners of inherited IRAs may suspend RMDs for 2020, too.

If you took an RMD between January 1 and August 31, you were eligible to roll the funds back into your retirement account up until the August 31 deadline.


  1. If you are over 70½, you may be eligible to transfer up to $100,000 from your IRA to a charity without paying taxes on the distribution. This is called a qualified charitable distribution or QCD. Moreover, a QCD satisfies the RMD requirement as long as certain rules are met.


  1. Let’s consider “harvesting” tax losses. Do you own stocks, exchanged-traded funds, or mutual funds that are below the purchase price? If so, you may sell by the end of the year and offset up to $3,000 in ordinary income or capital gains.

    However, please be aware of the ‘wash sale’ rule and treatment of long-term and short-term losses. The rule defines a wash sale as one that occurs when an investor sells a security at a loss and, within 30 days before or after the sale, buys a "substantially identical" stock or security. If so, the IRS disallows the loss.

Short-term capital gains occur when an asset that is sold was held for one year or less. Short-term capital gains are taxed as ordinary income. Long-term gains are taxes at a more favorable rate.


  1. Consider converting your traditional IRA to a Roth IRA. Depending on the outcome of the election, tax rates may rise next year. Therefore, converting a traditional IRA into a Roth IRA this year would require taxes to be paid at 2020’s rate, but it would enable the account holder to withdraw funds without paying federal taxes at retirement.

Whether or not tax rates rise next year, a Roth IRA is an excellent retirement vehicle.


Final thoughts

Let me remind you that these year-end financial planning steps are guidelines. One size does not fit all. The advice we recommend is tailored to your specific needs and goals.  We would be happy to entertain any questions that you may have. We are simply a phone call or email away.

I trust you’ve found this review to be helpful and educational.

We have addressed various issues with you, but I have an open-door policy. If you have questions or concerns, let’s have a conversation. That’s what I’m here for.