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Financial Symmetry: Balancing Today with Retirement

When considering retirement, do you wonder what financial opportunities you may be missing? Busy lives take over and years pass without taking advantage. In this retirement podcast, the Financial Symmetry advisors unveil financial opportunities, to help you balance enjoying today so you are ready to retire later. By day, they are fiduciary fee-only financial advisors who answer questions about tax savings, investment decisions, and how to save more. If you’ve been putting off your financial to-do list or are just not sure what you’ve been missing, subscribe to the show and learn more at www.financialsymmetry.com. Financial Symmetry is a Raleigh Financial Advisor. Proudly serving clients in the Triangle of North Carolina for over 20 years.
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Nov 22, 2021

The end of the year is a great time to start tax planning for next year. 

Video example: https://youtu.be/lzghkK2iP3Q

This week we are discussing the strategies you can utilize to enhance your tax situation before year-end.

You’ll learn which tools you can use and how the actions you take in one area of your financial life can flow into other areas.  

Are you maximizing your retirement account contributions?

When considering your pre-tax retirement account contributions there are a couple of aspects that you should consider. These contributions are a great way to reduce your tax burden, but you also need to examine your cash flow. 

Do you maximize your employer match? If not, look at your budget to see how you could take advantage of this free money. You could also take your savings a step further to maximize the pre-tax retirement account contribution cap. In 2021, the yearly max was $19,500, but in 2022 that number rises to $20,500. 

If you are maximizing your savings, it is important to review whether you are at risk of over-contributing both this year and next. After analyzing the amount that you want to save, then you can consider which account type is best for you to save in. 

Harvesting capital losses or capital gains

Another tax opportunity is to harvest capital gains and losses. Harvesting capital losses can offset any capital gains that you have realized over the year. This year it may be difficult to find capital losses; however, this is a concept that you can explore so that you can understand how it impacts your tax return. Harvesting capital losses creates an opportunity to reduce your tax burden. 

Itemizing vs taking the standard deduction

The standard deduction changed in 2017 to $12,500 for singles and $25,100 for married people filing jointly and thus causing 90% of filers to utilize the standard deduction. There are 4 deduction categories to consider when calculating whether to take the standard deduction or to itemize deductions: state and local income taxes, mortgage interest, charitable contributions, and medical deductions.

Listen in to learn if you should take the standard deduction or whether it would make sense to itemize, you’ll also hear how you could receive a tax benefit of $600 for charitable contributions.

Should you utilize Roth conversions?

Roth conversions can be an exciting opportunity to take advantage of current tax rates and have your investments grow tax-free. However, you have to be careful about how you take them. The best way to consider whether to make Roth conversions is to zoom out and look at your overall lifetime tax plan. 

If you are in a higher tax bracket than you are projected to be in the future then taking a Roth conversion now doesn’t make much sense. You also need to consider how taking a Roth conversion now could trigger other events, especially if you are 63 or older. Listen in to hear how doing a Roth conversion at age 63 could trigger an additional Medicare premium. 

Outline of This Episode

  • [2:42] Your retirement account contributions
  • [6:00] Harvesting capital losses or capital gains
  • [8:47] Review your deductions
  • [14:23] How to utilize Roth conversions
  • [18:05] Tax withholding for high earners
  • [20:58] Utilize catch-up contributions to supersize your savings
  • [27:50] RMDs are back in 2021
  • [29:39] Create a checklist of these opportunities

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