End of Year Reminders
Year End Reminders
December 31st brings promise of a new year, change, and many deadlines. As the end of the year approaches, our team has several reminders and opportunities for our clients. Create a plan for the remainder of your year, and as always, let us know how we can help.
We'll look at opportunities for your
- Retirement Accounts
- Investment Accounts
- Excess Cash
Let’s dive in, shall we?
Retirement Accounts
Required Minimum Distributions (RMD)
What is it?
Your RMD is the minimum amount you must withdraw from your retirement account each year, beginning at age 73 (the SECURE 2.0 Act raised the age)
Why now?
Unless it’s your first RMD, you are required to withdraw the minimum amount from your retirement by December 31st each year. Your first RMD is eligible to be withdrawn during a larger window, but let’s not complicate matters now.
Required Minimum Distributions reminders:
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RMDs apply to your retirement funds if you turned 70 ½ before January 1, 2020, or the year you turn 73 regardless of employment status
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You can make any number of withdrawals to make up your RMD
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If your distributions are less than your RMD, you are subject to a 25% tax on the undistributed RMD amount
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If you inherited an inherited IRA, you may have to take an RMD by year-end
Qualified Charitable Distribution (QCD)
What is it?
A direct transfer from your IRA to a qualified charity. This transfer can count towards your Required Minimum Distribution
Why now?
The funds must come out of your IRA by your RMD deadline to count towards your RMD (typically December 31)
Qualified Charitable Distribution may make sense for you if:
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You have a Required Minimum Distribution that you don’t have plans for
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You inherited an IRA with a Required Minimum Distribution that you don't have plans for
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You want to make a larger donation than you would be able to with cash
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Your Required Minimum Distribution would place you in a higher tax bracket than you would like
Roth Conversions
What is it?
Converting your retirement funds from a traditional IRA to a Roth allows you to pay the tax on your retirement funds now, and let your account grow until you plan to use the money in later years
Why now?
Roth conversions must take place before December 31st to apply to your 2023 taxes
Roth Conversion may make sense for your if:
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Your tax bracket in 2023 will be lower than normal
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You anticipate your tax bracket being higher in future years
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Your retirement account has experienced losses
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Funds are earmarked for beneficiaries, and you would like them passed on tax-free
Investment Accounts
Tax-Loss Harvesting
What is it?
Offsetting capital gains by purposefully taking a capital loss on investments.
Why now?
Any sales of investments will impact your 2023 taxes.
Tax-loss harvesting may make sense for you if:
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Your tax bracket is changing
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You want to offset other taxable income
Donor Advised Fund
What is it?
A charitable account managed by a sponsoring 501c(3) organization that is funded and directed by an individual donor.
Why now?
Donations to the Donor Advised Fund (DAF) are deductible during the current year
A Donor Advised Fund may make sense for you if:
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You have a charitable interest for your funds
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You have highly appreciated stock you would like to gift. Avoid capital gains tax, and still receive the tax deduction of a charitable gift
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You would like to gift items other than cash
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You want to earmark your philanthropic funds and donate at your discretion
Short-Term Savings for Cash
Treasury Bills (T-Bills)
What is it?
A Treasury Bill is a savings instrument that offers a lump sum return for a fixed period of time, less than one year.
Why now?
The Feds have raised interest rates a number of times this year. When they do, interest rates on deposit products typically rise. With a volatile stock market, T-Bills have offered favorable interest rates for the excess funds you have on hand.
Treasury Bill purchases may make sense for you if:
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You have excess cash on hand that you don’t need access to, and would like to have it grow
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You want fixed, predictable returns on a portion of your funds
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You would like a return that is exempt from state tax.
Money Market Accounts (MMAs)
What is it:
Money Market Accounts function similarly to a savings account, but often provide more favorable rates for investors.
Why now?
Like treasury bills, Money Market Account rates typically increase with the Federal Reserve's interest rate hikes.
Money Market Accounts may make sense for you if:
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You have want a higher return on cash savings than most traditional savings accounts
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You want easy access to your cash