Shakespeare Blog: View from the Lake

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Year-End Financial Planning Reminders

By Brian Ellenbecker CFP®, EA®, CPWA®, CIMA®, CLTC®

Year End Planning ReminderAs we approach the end of the year, now can be a good time to make some last-minute planning moves. Position yourself to start 2022 off on a good financial note.

Congress is currently debating the Build Back Better Act. To pay for infrastructure bills and other items, they are contemplating tax increases. Most of the increases discussed earlier in the year have been removed from the latest draft; but it’s possible things could change before the final version passes. Keep an eye out for any last-minute surprises that might change your current course of action. We are also monitoring the situation and will share the details of the final bill once it’s passed.

Contribution Deadlines

Keep the following account contribution deadlines in mind as we approach year-end:

  • Employer Retirement Plans

    • Employee contributions must be made by December 31, 2021. The elective deferral limit for 2021 is $19,500 plus an additional $6,500 for individuals age 50 or older.
    • Employer contributions must be made by the tax filing deadline (April 15, 2022) plus extensions.
    • The deadline to make SEP IRA contributions is the tax filing deadline (April 15, 2022) plus extensions.
  • Health Savings Accounts (HSAs)

    • 2021 HSA contributions must be completed by April 15, 2022. The maximum contribution for a self-only coverage is $3,600.  If you have family coverage, the maximum contribution is $7,200.
    • If you are over the age of 55, you can contribute an additional $1,000.
    • Tax-free distributions for qualified medical expenses can be made at any time after the expense was incurred (as long as the HSA was in existence at the time of the expense). It does NOT have to be distributed in the same calendar year.  This allows you to pay for current expenses out-of-pocket and let your HSA continue to grow tax-free.  You can always withdraw the funds for that expense in a future year.
  • 529 Plans

    • The contribution deadline varies by state. Most states have a deadline of December 31.  However, in Wisconsin, the deadline to contribute to Edvest for 2021 is April 15, 2022.
    • Withdrawals for 2021 education expenses must be made by December 31, 2021.
  • IRAs (Traditional and Roth)

    • The deadline to make 2021 contributions to an IRA account is April 15, 2022.

Required Distributions from Retirement Accounts

After being allowed to skip required minimum distributions (RMDs) in 2020, they are again required for 2021.  Distributions must be taken by December 31, 2021.  This includes IRAs, employer retirement plans, and inherited retirement accounts.  The penalty for missing your RMD is 50% of the RMD amount, so be sure to take the distribution in a timely fashion.  If you are unsure of your RMD status for 2021, contact your Shakespeare advisor to confirm.

Charitable Giving Deadlines

  • If you plan to donate stock from your Schwab account managed by Shakespeare, please let us know by December 15. This will ensure we have enough time to process our request.
  • Donations of cash must be received by the charity by December 31, 2021. If you are mailing a check, it must be postmarked by December 31.  Remember that the postmark rule only applies to items sent via the US Postal Service, not other delivery services such as UPS, FedEx, etc.
  • If you are over 70.5 and plan to make a Qualified Charitable Distribution from your IRA, keep these rules in mind:
    • A QCD must be received by the charity by December 31 if the check is mailed from the IRA custodian directly to the charity. See next point if you are writing a check to the charity.
    • If you have a checkbook for your IRA and write a check, the check must be CASHED by December 31. If you plan on making a year-end QCD by writing a check, be sure to leave plenty of time to allow the charity to cash the check. You may even want to contact someone at the charity to notify them of your donation and remind of this unique rule.
  • Are you planning to make a contribution to your Donor Advised Fund (DAF) in 2021? If so, that must be completed be December 31, 2021.  However, due to processing times, cutoffs for various donations vary by firm. If you hold your fund through Schwab Charitable, they will accept donations up to December 31.  Depending on the type of property being donated, the processing deadline may vary slightly. If you are transferring assets from an outside firm, it is recommended that you initiate that transfer by November 19 to ensure timely processing.  For a detailed list of deadlines, see Schwab Charitable’s 2021 Year-End Charitable Contribution Guidelines.

Investment Considerations

  • Review your taxable investment accounts for any positions that may have a loss, especially if you hold accounts outside of those at Schwab managed by Shakespeare. Consider selling securities at a loss to book the tax loss. If you plan to reinvest the funds, watch out for the wash sale rule. Your Shakespeare advisor is monitoring your Schwab accounts on your behalf and takes losses when available throughout the year.
  • If you are interested in doing a Roth Conversion or other tax planning for 2021 and have not yet talked to your Shakespeare advisor, you should start that conversation prior to December 1. That will give us enough time to run the necessary calculations and explore the various scenarios available to you.

For more year-end planning ideas, attend Brian Ellenbecker’s Year-End Planning Webinar.  It will be held at 12:00 – 1:00 PM Central time on December 7.  To view the webinar, use this link: