Part One: 29 Smart Financial Tasks to Complete Before Year-End

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Year-end is often a busy yet rewarding season — full of quality time with family and loved ones, as well as an opportunity for rest and rejuvenation.

In the midst of holiday preparations, why should you take the time to consider your finances? Year-end often marks an important season for your money because several things can change in a calendar year — tax requirements, contribution limits, and investment opportunities, to name a few. Proper year-end planning can help you take advantage of available opportunities to set yourself up for a bright new year. 

Before you leave 2021 in the rearview mirror, here are some of the most essential financial moves to consider as you head into the new year. 

Retirement and Investments

Year-end marks an excellent opportunity to review your retirement accounts and other investments.

1. Aim to Max Out Your 401(k)

Contributing the maximum amount to your 401(k) each year comes with two distinct benefits:

  • You lower your taxable income
  • You save more for your golden years

Before the end of 2021, you can contribute up to $19,500 in your 401(k). If you are over 50, you have an opportunity to put in an additional $6,500 ($26,000 total). These numbers don’t even include your company match! 

Perhaps those limits are just out of reach this year — that’s okay! Be intentional about contributing as much as possible. Here are a few other year-end 401(k) best practices:

  • If you get a raise, increase the percentage you contribute each pay period 
  • Allocate a portion of your bonus to your 401(k)
  • Look into after-tax contributions if your plan is eligible
  • Contribute to a Roth 401(k) if you can
  • Check in on your 401(k)’s performance and see if you’d like to make any intentional changes or rebalancing efforts with your investments 

2. Fully Fund Your IRAs

Once you’ve maxed out your 401(k), turn your attention to funding your individual retirement account (IRA). IRAs are excellent complements to your 401(k) and may be the primary source of retirement funding for many small business owners and those who are self-employed

There are several types of IRAs, each with its own contribution scale:

  • Traditional IRA ($6,000 with an extra $1,000 for catch-up contributions) 
  • Roth IRA ($6,000 with an extra $1,000 for catch-up contributions) 
  • SEP IRA (For business owners: up to 25% of an employee’s compensation or $58,000)
  • SIMPLE IRA (For business owners; must match up to 3% of an employee’s compensation or a 2% nonelective contribution for each employee)

Aside from a Roth, you fund most IRAs with pre-tax dollars, again lowering your annual taxable income. 

Keep in mind that if you’re covered by a 401(k) or another workplace plan and earn above a certain threshold, you are likely unable to deduct contributions to your traditional IRA. Just like with your 401(k), be sure to evaluate your investments and rebalance them if necessary. 

If you are interested in learning more about the benefits of investing in both 401(k)s and IRAs, explore our article 401(k) vs IRA: How to Save for Retirement where we dive into strategic considerations for each account. 

3. Invest the Funds in Your HSA

A Health Savings Account (HSA) is a unique, tax-advantaged tool to save for medical costs. Its most significant claim to fame are its triple tax benefits:

  • Pre-tax contributions
  • Tax-free growth
  • Tax-free distributions for qualified medical expenses 

Those are great benefits, but did you know that you can also invest the money in your HSA?  Too often people use their HSAs more like a checking account than a long-term savings tool. Investing the funds can help the account grow and provide access to healthcare funds when you’ll likely need them most: in retirement. There are many other ways you can leverage your HSA. Learn how to maximize the benefits of your HSA in this blog.

To set up an HSA, you must be enrolled in a high deductible health plan (HDHP). You can put in $3,600 for individual coverage and $7,200 for family coverage in 2021 (these limits will increase slightly in 2022). 

As healthcare costs continue to rise, having sheltered funds specifically for this purpose is an enormous benefit. 

4. Review Your Asset Allocations and Rebalance

Your asset allocation determines the type of securities you invest in, like index funds, exchange-traded funds (ETFs), mutual funds, real estate investment trusts (REITs), bonds, bond funds, and more. 

It also looks at the weight you give each asset class — is your portfolio more heavily weighted toward equities instead of fixed income, or vice versa? Establishing the most appropriate asset allocation depends on several factors: 

  • Your risk tolerance (willingness to take risks)
  • Risk capacity (ability to take risks)
  • Time horizon (how long you’re investing until you reach your goal)
  • Investment goals (what you’re hoping to achieve)

Building your portfolio isn’t a one-and-done affair, it’s an ongoing process to maintain the best balance for your situation. Based on specific market conditions, your portfolio may get out of sync. If that occurs, you and your advisor can look to rebalance (buy and sell new securities) to keep your investments aligned with your needs. 

5. Consolidate Old Investment Accounts

Did you recently start a new job? Do you have multiple IRAs attached to your name?

Year-end is a great time to consolidate old accounts. Perhaps you’ll want to rollover funds from an old 401(k) to your new employer, or instead, put the balance in a traditional IRA. 

If you’re combining IRAs, you have an opportunity to evaluate the custodian you like best. Which institution offers the broadest investment selections? Do they have a user-friendly platform? What is the fee structure like?

Consolidating your accounts will help you get a bird’s eye view of your investments. You’ll be able to create a thorough strategy when you aren’t wading through multiple accounts with several custodians. 

6. See if You’re On Track to Reach Your Retirement Goals

At this point, goal-setting, keeping, and tracking are like year-end traditions. Ask yourself:

Abacus loves helping people create retirement plans that are unique to their goals — everyone is different, and your plan should be, too. No cookie-cutter financial plans here (we’ll save the cookie cutters for holiday treats). 

7. Keep Investing Outside of Your Retirement Accounts

Retirement isn’t the only reason why you invest. Investing in other avenues like a brokerage account and real estate opens up additional options as you move through your life and career. 

Maybe you know exactly what you want to use the funds for or maybe you’re not quite sure yet. Either way, intentionally investing your money gives your funds time to enjoy compound interest and gives you more freedom when you want to use the funds — whether that’s in retirement or finally going on your dream vacation.


While proactive tax planning is a year-round task, there are two significant “tax seasons”: filing in April and year-end. 

Why is year-end tax planning such a big deal?

It’s one of the last opportunities you have to make strategic decisions that will impact your 2021 tax return. Here are a few year-end tax considerations. 

8. Determine if You’re Itemizing or Taking The Standard Deduction

To itemize or not to itemize, that is the question. But the answer has been more straightforward for many people given the higher standard deduction thresholds. In 2021, the standard deduction is as follows:

  • $12,550 for those filing single or married filing separately
  • $18,800 for heads of household
  • $25,100 for married filing jointly 

You may have different tax opportunities depending on the route you choose. 

If you have deductions that exceed these limits, itemizing may result in a lower tax bill. Here are some common things you can itemize:

  • Mortgage interest
  • Student loan interest
  • Some healthcare costs (if they exceed 7.5% of your adjusted gross income)
  • State and Local (SALT) taxes
  • Home office expenses
  • Charitable contributions 

9. Book an Appointment with Your CPA

Whether you itemize or not, it’s worthwhile to get yourself on your CPA’s schedule. You may be surprised at how quickly their schedules fill up during tax time, so reserve your spot early!

10. Organize Your Tax Documents

While you’re in “tax mode”, be sure to get all your documents in order, like your identification (Social Security number or Tax ID), income statements (W-2, business, retirement, investments, rental property, stimulus checks, etc.) proof for itemized deductions, and dependents and spousal information. 

Keep in mind you may not have all of these documents right away. Often, your investment custodian will send a 1099 in January, so watch out for these at the beginning of the year. 

11. Double-Check Your W-4 Withholdings

Did you receive a big refund check or did you owe money to the government? 

Both of these indicate your W-4 withholdings are likely off. Your W-4 is a document you fill out indicating how much your employer should withhold from your paycheck to cover federal and state taxes. 

In general, the lower the exemptions, the more is withheld. You may want to update your W-4 after major life events like marriage, divorce, or a new child or dependent. 

12. Consider Tax-Loss Harvesting

While you always want your investments to earn money, sometimes this isn’t what happens. But, never fear, because a few outlier investments could present a vital tax opportunity. 

Tax-loss harvesting is a strategy where you sell investments for a loss. By doing so, you can offset any realized capital gains, mitigating your tax liability. If your capital losses outweigh your gains, you can deduct up to $3,000 in ordinary income. Capital losses in excess of that number can be rolled over to the next tax year. 

13. Strategically Realize Capital Gains

While it’s important to keep your taxes at bay, sometimes it makes sense to realize capital gains and pay taxes on the investments. This may become more important for high earners (those making above $400,000) as tax law changes are possible in the new year. 

If taxes increase, realizing capital gains now means you’ll pay taxes at a lower rate than in the future. Work with your advisor and tax professional to determine if this makes sense for you. 

14. Consider a Roth Conversion

With a Roth conversion, you convert money from a traditional IRA into a Roth IRA. This strategy is excellent for high-earners who earn too much to contribute to a Roth IRA directly. Not sure if that’s you? Check out the IRS chart for income thresholds.

A few reasons why Roth conversions are special:

  • You can build up tax-free dollars in retirement
  • Enjoy tax-free investment growth
  • Leverage current and future tax brackets (if you anticipate your tax bracket to be higher in the future, you’re paying taxes at a lower rate today)
  • Roth IRAs are tax-efficient estate planning and inheritance vehicles
  • Roth IRAs don’t have required minimum distributions (RMDs) in retirement 

Before you implement the strategy, consider the following:

  • Do you have sufficient funds to pay the tax bill (ordinary income tax)?
  • Are you having a low-income year?
  • Will a conversion have an inverse effect on other areas of your income, like net investment income tax, Medicare Premiums, or Social Security tax?
  • Have you created a plan with both your financial advisor and tax professional?

Review Your Plan With Your Advisor

That was a lot, but we’re halfway through! Check out part two of the year-end money moves series coming soon.

You’ll want to start off 2022 on the right foot, which may mean working with your advisor to help set you up for success in the new year. Set up a time to collaborate on your future today!


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