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Are You Prepared for 2021?


As we approach the end of 2020, you might be feeling grateful for the prospect of putting this year behind you. There has been no rest for the weary in November with the election and COVID case numbers on the rise again, and while positive vaccine progress has been made, much is still unknown. With the uncertainty and chaos of this year, it can feel impossible to plan for anything… but you can! Planning can provide a sense of control during a time when you are not sure what to expect from one day to the next. If this sounds too much like advice from a self-help book, take it from Confucius, who said something to the effect of:


“In all things, success depends on previous preparation, and without such previous preparation, there is sure to be failure.”


I am a big fan of checklists – who doesn’t love checking something off of a list? – so here is a list of steps you can take and financial strategies to review and discuss with your tax and investment advisors before year end:

  • Maximize your IRA and 401(k) contributions – IRA contribution limits for 2020 are $6,000 plus a $1,000 catch up for age 50 and older.

  • Revisit your 529 plan balance and investments – Are you on track for your college goals? Does your investment mix need to be updated? Here’s a helpful link to estimate your progress in this area - http://www.fidelity.com/misc/college-savings/college_savings.html

  • Consider taking capital gains this year if you need to rebalance or generate liquidity – Biden has indicated that he might increase capital gains tax rates on the highest income earners, although tax reform might face challenges if the government remains split. Also, if you are realizing gains, look for tax loss harvesting opportunities to offset those gains.

  • Bunch deductions to qualify for the itemized versus standard deduction ($24,800 in 2020) – For example, if you typically donate $10K per year to charity, bunch three donations for a total of $30K in one year instead.

  • Offset a high income year with accelerated giving – The tax deduction for charitable giving is based on a percentage of your adjusted gross income (“AGI”), so if 2020 has been a higher than average income year for you, you can again use that same concept of giving more this year to offset higher income.

  • Reduce the cost of a Roth IRA conversion with a charitable donation – It can potentially be applied against taxable income resulting from a traditional to Roth IRA conversion.

  • Donate appreciated assets (e.g., stock) to a donor advised fund (“DAF”) – Capital gains taxes can potentially be eliminated and you receive a tax deduction for the fair market value of the asset at the time of contribution to the DAF.

  • Utilize the qualified charitable distribution (“QCD”) for your IRA required minimum distribution – Up to $100K from your IRA can be distributed tax-free as a QCD to public charities. Using a QCD makes the most sense if your RMD would push you into a higher income tax bracket for the year, and if you don’t want to itemize your deductions.

  • Double check your beneficiary designations and trusted contacts for your investment accounts.

  • Update your financial plan with any changes to your income, savings, expenses, goals etc. – If you don’t have a plan, consider establishing one.

  • Update your estate plan, including your will, health care directives, powers of attorney and trusts, if applicable.


So, take a break from wallowing in 2020 and start planning for a better year in 2021. Be well and enjoy the holidays.



This communication is for informational purposes only and is not to be considered advice or a recommendation of a specific investment product or strategy for any individual. Information is from sources believed to be reliable but not independently audited. Views and opinions are subject to change at any time based on market and other conditions. Please consult your tax and legal advisors before taking any action that may have tax or legal consequences and to determine how the general information presented in this publication may apply to your own specific situation.

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