1. Social Security Cost of Living Adjustment (COLA) for 2022. The SSA announced the 2022 Cost of Living Adjustment of 5.9%, the largest increase in 40 years. The increase will be effective on December 30, 2021.

2. Take your Required Minimum Distribution (RMD) for qualified accounts and inherited IRAs.  In 2019, the SECURE Act changed the RMD age to 72 from 70 ½. In 2020, RMDs were not required with passage of the CARES Act. So this year if you will be 72 or older by December 31, you may be required to take a distribution from your qualified retirement accounts. Failing to do so will cost you 50% in penalty of the RMD that you didn’t take.  The initial withdrawal can be deferred until April 1 in the year following the year you turned 72 — for example, by April 2022 if you turn 72 in 2021. Subsequent withdrawals must be made annually by December 31. This requirement applies to money in IRAs, 401(k) plans, and most other retirement accounts, but not to Roth IRAs.

3. Spend Flexible Savings Accounts (FSA). Unlike HSAs, FSAs do not carry over year-to-year. The funds in these accounts must be spent in the year they are deposited. Use it or lose it. 

4. Make a charitable donation. Of all the year-end actions on this list, donating money to charity may be the most satisfying. Research services such as Guidestar.org and CharityNavigator.org list free information that can help you evaluate a non-profit organization, including whether or not it’s legitimate. Talk to your tax advisor to find out if a charitable donation might be deductible for tax purposes.

5. Consider converting to a Roth. With retirement income, it often makes sense to have a good mix of traditional and Roth IRAs. (Money you take from traditional accounts is taxable in retirement, while Roth withdrawals are tax-free as long as you meet certain criteria.)

You can manage income in a way that keeps you in the lowest possible tax bracket. One way to boost your tax-free savings is to “convert” some money in traditional accounts (either within your workplace plan or an IRA) to a Roth. Just keep in mind that doing so will trigger income taxes. Money you convert to a Roth is treated as a normal distribution, so you’ll need cash to cover tax on that amount. You may need to crunch the numbers to see if a Roth conversion makes sense this year. That might be the case if, say, you’re in a lower tax bracket, perhaps due to a gap in employment or other life event.

6. Offset capital gains with capital losses.“Tax-loss harvesting” is a complex name for a simple idea: selling stocks and funds that have lost value to offset taxes on profits from sales of those that have gained If you hold investments outside your tax-favored retirement accounts, and you’ve made money by selling some this year, see if you can lower your tax burden by selling some poor performers.

Even if you haven’t “realized” capital gains by selling winners, you can still use realized capital losses to lower your (taxable) ordinary income by up to $3,000. Bottom line: If you have capital gains this year, talk with your financial advisor or accountant to help you narrow down the best investments to unload to take advantage of tax-loss harvesting.

December 3, 2021

Year-End Financial Planning Reminders

1. Social Security Cost of Living Adjustment (COLA) for 2022. The SSA announced the 2022 Cost of Living Adjustment of 5.9%, the largest increase in 40 […]
November 30, 2021

Adventures in Candy Land with BCSWM

BCS Wealth Management is currently hosting a Christmas tree in Gumdrop Forrest, also known as Founders Park in Downtown Johnson City. Our theme for our tree […]
November 17, 2021

Infrastructure Bill Signed Into Law

President Biden signed the $1.2 trillion infrastructure bill into law earlier this week. The bill, which is being touted as a bipartisan success, will provide funding […]
September 10, 2021

National 401(k) Day

In the spirit of National 401(k) Day, we have four suggestions about how to celebrate. 1. Review your beneficiaries. When a major life event occurs, the […]
August 26, 2021

Defining the Proper Amount of Risk

In his book “Simple Wealth, Inevitable Wealth” Nick Murray makes two assessments related to risk that I believe the average investor is guilty of: 1) People […]
August 13, 2021

Financial Awareness Day

August 14 is National Financial Awareness Day! A famous framework in the study of psychology is Maslow’s Hierarchy of Needs. It is a construct for explaining […]
July 13, 2021

Summer Construction Projects, Continued

Summer is not over yet, and lumber futures prices are falling. We happened to publish our last article about lumber nearly at the peak of this […]
June 22, 2021

BCS Wealth Management Ranked in Accounting Today Magazine

BCS Wealth Management has been acknowledged in Accounting Today magazine for a seventh consecutive year. The 2021 Accounting Today “Wealth Magnets” article ranks the top 150 […]
June 15, 2021
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Secure Act 2.0 – Almost a Reality

The Securing a Strong Retirement Act of 2021, or “SECURE Act 2.0” as it’s commonly known, is expected to be approved later this year. While it […]
May 20, 2021
Dollar Bills

National “Be a Millionaire Day”

The word millionaire carries several connotations with it, ranging from wealth, status, and financial freedom to philanthropy, luck, hard work, and even stress. Regardless of the feelings that the word millionaire evokes for you, it’s likely different for someone else. Everyone’s definition of wealth is different.
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