December 2021
College and Tax Planning

In the final weeks of the year, it’s smart to review your retirement, education (529, Coverdell), and health savings accounts (HSAs) to ensure you’re taking full advantage of the benefits offered and finding ways to reduce your taxes. Here is a handy year-end checklist to use as a guide when evaluating your tax-advantaged accounts. 

• Fully fund your employer- sponsored retirement plan. In 2021, you can defer a maximum of $19,500 into your 401(k), 403(b), 457(b), or Thrift Savings Plan (TSP). This limit is an aggregate of all pre-tax and/or Roth contributions. Plus, individuals age 50+ can defer an additional $6,500 in “catch up” contributions.

• Have the “back-door” Roth discussion. A backdoor Roth IRA is a retirement savings strategy where you contribute after-tax funds (nondeductible) to a traditional IRA, which virtually everyone can do, and then immediately convert the funds to a Roth IRA. Roth IRA eligibility is means tested—that is, an investor must satisfy an annual income threshold as set by the IRS. For you to contribute directly to a Roth IRA, your income must be under a threshold dependent on your tax filing status. However, high-income earners, regardless of the amount of household income, are eligible to convert funds to a Roth IRA.

• •Contribute to an HSA. You may be eligible to contribute to a HSA if you are enrolled in a high-deductible health plan (HDHP). HSAs are triple-tax-advantaged savings accounts that are designed to be used for future medical costs. In 2021, an eligible individual with single coverage can contribute $3,600, whereas the limit is $7,200 for those with family coverage. In addition, a $1,000 catch-up contribution is available to those individuals age 55 and older. Once you determine the maximum allowable HSA limit, contributions can be made anytime between January 1 and April 15 of the following year.

• Ensure your beneficiary designations are in order. Retirement accounts generally are not subject to probate; therefore, the beneficiary designation on file versus a will is what prevails. Did you get married this year? Divorced? Did a previously designated beneficiary predecease you? Birth of a child? Adoption? Any of these life events could affect your beneficiary designation. Review and, if necessary, update your beneficiary forms for all your retirement accounts. Are the correct individual(s) designated to receive the benefits? If you are unsure who to name as your beneficiary (primary or contingent), You can discuss your estate planning needs with us. Refer to our Financial Planning Tip this month for some critical information about how beneficiary designations work.

Give us a call at the office if you have any questions about the accounts you have entrusted to us for management and if you want talk about any of these year end tips!

If you have questions, please contact us.

MARKET UPDATE
FINANCIAL PLANNING
401(K) ALLOCATION
GRAPHIC OF THE MONTH

To download the December 2021 Newsletter: CLICK HERE