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Year End Financial Review and Planning Checklist

Posted by Doug Hutchinson | CFA®, Director of Research and Trading
December 9, 2021


Before the year ends, take some time to review your financial health. Here are 10 financial planning items to review before 2021 comes to a close.  

 1.  Take your Required Minimum Distribution 

 Required Minimum Distributions (RMDs) were temporarily suspended for 2020 due to COVID-19 relief legislation but RMDs are back for 2021 and beyond. 

If your 70th birthday is on or after July 1, 2019, you will have to take an RMD from your retirement account prior to December 31st once you reach age 72 in most situations.1 

Note that Roth IRAs do not have RMDs. Consult with your financial advisor to determine the exact amount of the RMD that you need to take before December 31st. 

 2. Consider Charitable Contributions 

If you are over age 70½, you may be eligible to take a Qualified Charitable Distribution (QCD) from your retirement account. A QCD is a direct transfer of funds from your retirement account to a qualified charity.   

If you are planning to donate money to charity, doing so in the form of a QCD may make the most sense.  A QCD can count towards satisfying your RMD for the year and a QCD excludes the amount donated to charity from your taxable income.2 

 3. Review any Unrealized Losses in Taxable Investment Accounts

The end of the year is a good time to review your taxable investment accounts for any tax loss harvesting opportunities. Tax loss harvesting is when you sell holdings in your taxable investment accounts that are below cost in order to book a loss. These losses can then be used to offset any realized gains that you’ve accumulated in your account throughout the year. If your realized losses end up exceeding your realized gains, you may be able to offset up to $3,000 of ordinary income for the year.3

There are some additional complexities to tax loss harvesting that you should consider:   

  1. Be mindful of the wash sale rule, which states that if you realize a loss by selling a security, you are not permitted to buy a “substantially identical security” 30 days before or after the sale, otherwise the realized loss will be disallowed.4

  2. When making sells for loss harvesting, consider temporarily investing the sale proceeds in a placeholder security. If you keep the sale proceeds in cash, you may miss out on potential market gains during that time period.
 Consult with your financial advisor to determine the best way to implement a tax loss harvesting strategy. 

 4. Review Retirement Fund Contributions 

The maximum amount you can contribute to a 401(k) is $19,500 for 2021 and $20,500 for 2022. If you are 50 or older, you can also make “catch-up contributions” of $6,500 for both 2021 and 2022.5 

For Individual Retirement Accounts (IRA), the maximum amount you can contribute is $6,000 ($7,000 if you are age 50 or older) across both a traditional IRA and a Roth IRA for both 2021 and 2022.6 

If your budget allows, consider taking advantage of the maximum contribution amount to your retirement fund.      

 5. Consider a Roth Conversion 

 In certain scenarios, it might make sense to convert some of your traditional IRA funds to a Roth IRA. A Roth is funded with after-tax dollars, so if you find yourself temporarily in a low tax bracket for 2021, it might make sense to convert some funds to a Roth to take advantage of the relatively low tax impact. 

 6. Check your Flexible Spending Account Balance and Deadline 

If you have a Flexible Spending Account (FSA), you are typically required to spend the balance of the account by the end of the year (or March 15th of the following year if your plan has a grace period), while being able to roll over only a certain amount into the following year. 

Congressional legislation changed the “use it or lose it” rules for 2020 and 2021 due to the COVID-19 pandemic. Employees may be able to roll over their unused 2021 health funds to 2022.7 Also, check to be sure that you’ve used all of your 2020 FSA dollars by year-end, as you will likely not be permitted to use those dollars after December 31st, 2021. 

 Check with your benefits department, as plan rules and deadlines can vary by employer.

 7. Review Beneficiaries and Review Gifting 

 Review the beneficiary designations of your retirement account and life insurance policies and make any changes as needed to ensure that your named beneficiaries accurately reflect your estate planning goals. 

The end of the year is also a good time to review any gifting strategies and confirm that any planned annual gifts to family members have been distributed.  Annual gifting can be part of an estate planning strategy to minimize the tax burden of your estate. You are permitted to make an annual gift of $15,000 ($30,000 for married couples) to an unlimited number of individuals in 2021 without having to file a gift tax form. Note that this amount will increase to $16,000 ($32,000 for married couples) in 2022.8

 8. Check your Credit Reports 

 The Fair Credit Reporting Act allows you to request a free copy of your credit report once every 12 months.9 Checking your own credit report does not affect your credit scores.10 

Checking your credit report allows you to check for any information in your credit that may be inaccurate and may help you detect if you have been a victim of identity theft. 

 9. Consider Rebalancing Your Portfolio 

Rebalancing your portfolio can help you realign your asset allocation with your risk tolerance. If the stock market has outperformed the bond market since your last portfolio rebalance, the percentage of your portfolio’s dollar value that is represented by stocks has drifted higher from its initial target.  

If, for example, you started with a 60% allocation to stocks versus a 40% allocation to bonds and the value of the stock portion of your portfolio has increased to 70%, you may be taking on more risk than you intended and a portfolio rebalance may be helpful to get back on target. 

Be mindful of any potential tax impacts from placing rebalancing trades and consult with your financial advisor to determine the best rebalancing strategy.

 10. Meet with a Financial Advisor and Review or Create Your Financial Plan 

Lastly, schedule a meeting your financial advisor to discuss any recent or upcoming life events such as a new job, an addition to the family, a home or car purchase, or anything else that would have an impact on your financial situation. 

If you need help getting started on a financial plan, consider reaching out to WrapManager at 415-541-7774 or Wealth@WrapManager.com to start a conversation about your financial situation and create a customized financial plan. 


About the Author: A member of the WrapManager Investment Policy Committee, Doug Hutchinson, CFA® is responsible for developing and refining our money manager due diligence and review standards. He is also responsible for monitoring and evaluating current and prospective money managers. 

Doug graduated from the University of California, Santa Barbara with a BA in Business Economics. He is a CFA® Charterholder and an active member of the CFA® Society of San Francisco. 


1 https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-requiredminimum-distributions-rmds

2 https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals

3 https://www.irs.gov/taxtopics/tc409

4 https://www.schwab.com/resource-center/insights/content/a-primer-on-wash-sales

5 https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits

6 https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

7 https://www.cnbc.com/2021/11/01/you-may-be-able-to-carry-over-your-entire-fsa-balance-this-year.html

8 https://www.nerdwallet.com/article/taxes/gift-tax-rate

9 https://www.consumer.ftc.gov/articles/free-credit-reports

10 https://www.equifax.com/personal/education/credit/score/will-checking-your-credit-hurt-credit-scores/

Retirement Planning Taxes Tax Planning Financial Planning