What to Review at Year End with Your Financial Advisor

As you prepare for your year-end meeting with your financial advisor, we compiled a list of topics and some insights for you to consider.

We are nearing the end of a year that has not been like any other year we have experienced so far. Between the pandemic, circumstances that have changed for many businesses, job security or changing how many people work, the election, and anything else that came up, it is definitely a year that likely came with some changes and/or a different outlook on life.  Due to this, it is important now more than ever to schedule a comprehensive meeting with your financial advisor to review the year that is almost behind us and look ahead to financial planning in 2021.

To help you prepare for your year-end meeting with your financial advisor, we compiled the below list of topics and insights for you to consider:

Sell Under-Performing Securities in Your Portfolio for a Tax Benefit
If you have any under-performing securities in your portfolio, you can consider selling them for a tax loss to offset taxable gains. Do not forget to keep the wash sale rules in mind, though. This means you are not able to buy a substantially identical stock or security within 30 days of selling. If this rule is not followed, the IRS can penalize you by removing any tax break you received from harvesting losses. We recommend that you consult with your financial advisor or CPA regarding your portfolio and tax situation.

Contribute the Maximum Amount to Your 401(k)
If your company offers a matching 401(k) contribution as part of your employee benefits package, we encourage you to contribute the maximum amount. This is free money to you and will be greatly appreciated soon or later in your life, depending on your circumstances. In addition, for 2020, you can contribute more than last year for certain retirement accounts.

You can check with your company’s Human Resources Department to see how much you need to contribute. We usually advise that you save at least what your employer is matching, if possible.

Learn more about 401(K) and other retirement account contributions.

Plan to Take Your Required Minimum Distribution (RMD)
According to the IRS, RMDs are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 72 (70 ½ if you reach 70 ½ before January 1, 2020), or if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 72 (70 ½ if you reach 70 ½ before January 1, 2020), regardless of whether he or she is retired. As you are planning for your future and your retirement budget, keep your RMDs in mind and see how they need to fit in to your financial plan and to avoid a penalty.

Review Health Insurance Plans for 2021
It is important to review and revise your health insurance plan for the upcoming year according to you and your family’s needs. Please note that for 2021, Pennsylvania has changed to a state-based insurance exchange called Pennie®. In addition, keep in mind the following key dates:

Open Enrollment Period: November 1, 2020 – January 15, 2021
Last Day to Apply for Coverage that Starts January 1, 2021: December 15, 2020
Last Day to Apply for Coverage that Starts February 1, 2021: January 15, 2021

Federal Health Insurance (Marketplace)
Last Day to Apply for Coverage that starts January 1, 2021: December 15, 2020

Medicare 2021 Enrollment
Last Day to Apply or Modify Plans: December 7; however, there may be other opportunities to make changes or reduce your out of pocket expenses in certain circumstances.

Consider the Non-Resident Income Tax if Residing Out of State During 2020
If you lived out of state during 2020, we recommend reviewing the laws regarding nonresident income tax and finding out which states offer a reciprocal tax agreement. A reciprocal tax agreement can allow a resident of one state to work in another state without having taxes taken out of their paycheck for the state where they worked. Due to many employees working remotely in 2020, there will likely be many that were able to work out of state for a period of time during 2020. Again, be sure to ask your CPA about any tax requirements if you have been working out of state.

RELATED: Read about the importance for women to take control of their financial future.

Reevaluate Your Financial Goals
If your circumstances have changed this year, or since the last time you met with your financial advisor, you should review those changes with your advisor during your meeting.  Some examples might include: if a child moved home (or is moving home) from college, if you are expecting a child, if you have changed jobs or do not have a job at this time, or if you are paying for unplanned bills. Some circumstances might change your financial goals, so reviewing those with your advisor can help to adjust your goals appropriately and/or confirm that the goals you already had established still make sense.

Having a year-end meeting with your financial advisor is always recommended, but it is even more important this year since changes to finances and financial goals may have occurred.  If you have questions about this information, or how we can help you meet your financial goals, we welcome you to call us at 412-630-6000. Our experienced financial advisors are here to help.

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