A Handy Checklist for Year-End Planning



The holidays are a busy time of year. Shopping, family events, company holiday parties, and more may dot your calendar. But I strongly suggest that you carve out some time for year-end financial planning so that you will be better positioned as the new year begins.

9 smart planning moves for year-end

  1. Review your financial plan 

Long-term data and my own personal experience tell me that the shortest distance between investors and their financial goals is adherence to a well-diversified, holistic financial plan. 

I stress that investors must take a long-term view, but I also recognize that 2022 has been a challenging year. As I build your financial plan, I tailor it to your specific goals.

How might you set goals? 

They should be:




Relevant (to your situation), and attainable within a specific 


These are SMART goals.

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An adaptable plan

A financial plan is never set in concrete. It is a work in progress which can and should be adjusted as your life evolves.

Are you reaching a milestone in your life such as retirement? Has there been another upcoming change in your personal circumstances? Whether you have welcomed a new baby or an adopted child into your family, a hearty congratulations is in order— but it’s also time to look at the financial side of the equation.

Did you become a grandparent or are there new grandchildren in your family?

A job change, job loss, marriage, or divorce are also events that usually warrant revisiting your financial plan.  

When stocks tumble, some investors become very anxious. When stocks post strong returns, others feel invincible and are ready to load up on riskier assets. I caution against making portfolio changes that are simply based on market action.

Remember, the financial plan is the roadmap to your financial goals. In part, it is designed to remove the emotional component that may compel you to buy or sell at inopportune times.

That said, has your tolerance for risk changed in light of this year’s volatility? If so, let’s talk.

  1. Harvest your losses and reduce your income taxes

Let’s look at strategies for taxable accounts. If you have gains from the sale of stock, you may decide to sell underperforming equities for a loss and offset up to $3,000 in ordinary income.

For example, if you sold a stock you have held one year or less and realized a profit of $30,000 and you sold a stock held for one year or less and took a loss of $35,000, you would not only pay any taxes on the $30,000 gain, but you could offset ordinary income of up to $3,000 in 2022 (married couples filing separately limited to $1,500).

You would carry forward $2,000 into 2023.

Losses on investments are used to offset capital gains of the same type. In other words, short-term losses offset short-term gains and long-term losses offset long-term gains. 

An asset held for one-year or less is a short-term gain or loss. Anything more than a year is long-term.


But don’t run afoul of wash-sale rules. The wash-sale rule prevents you from taking a loss on an investment if you buy the same or a “substantially identical” investment 30 days before or after the sale.

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  1. Tax loss deadline

You have until December 31 to harvest any tax losses and/or offset any capital gains.

Did you know that you pay no federal taxes on a long-term capital gain if your taxable income is less than or equal to $40,400 for single or $80,800 for married filing jointly or qualifying widow(er)?

Therefore, it may be worth taking a long-term capital gain. Simply put, you sell the stock, take the profit, and pay no federal income tax. And you could re-invest in the stock, upping your cost basis.

But be careful. 

The sale will raise your adjusted gross income (AGI), which means you’ll probably pay state income tax on the long-term gain. 

In addition, by raising what’s called your modified adjusted gross income (MAGI), you could also impact various tax deductions, impact taxes on Social Security, or receive a smaller ACA premium tax credit if you obtain your health insurance from the Marketplace. 

Or you might trigger a higher Medicare premium, as premiums are also based on your MAGI.

  1. Mutual funds and taxable distributions

This is best explained using an example. 

If you buy a mutual fund in a taxable account on December 15 and it pays its annual dividend and capital gain on December 20, you will be responsible for paying taxes on the entire yearly distribution, even though you held the fund for just five days.

It’s a tax sting that’s best avoided because the net asset value (NAV) hasn’t changed. It’s usually a good idea to wait until after the annual distribution to make the purchase.


Given the volatility in trading this year, some actively managed funds may have large taxable distributions, even though the NAV of the fund may be down since the beginning of the year.

  1. It’s time to take your RMD

If you are 72 years or older, an annual required minimum distribution (RMD) is required from most retirement accounts.

If you turned 72 this year, you have until April 1, 2023, to take your first RMD. That will reduce your taxable income in 2022, but you will be required to take two RMDs in 2023, potentially pushing you into a higher tax bracket next year.

If you miss the deadline, you could be subject to a 50% penalty on the portion of your RMD you failed to withdraw. 

For all subsequent years, including the year in which you took your first RMD by April 1, you must take your RMD by December 31.

The RMD rules apply to traditional IRAs and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. The RMD rules apply to all employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans and 457(b) plans.

The RMD is also required from a Roth 401(k) account. However, the RMD rules do not apply to Roth IRAs while the owner is alive.

Generally, an RMD is calculated for each account by dividing the prior December 31 balance of that IRA or retirement plan account by a life expectancy factor published by the IRS. 

If you continue working past age 72, you are still required to take your RMD from your IRA. 

If, however, you continue to work past age 72 and do not own more than 5% of the business you work for, most qualified plans, such as 401(s) plans, allow you to postpone RMDs from your current employer's plan until no later than April 1 of the year after you finally stop working.


  1. Maximize retirement contributions

By adding to your 401(k) plan, you can reduce income taxes during the current year. In 2022, the maximum contribution for 401(k)s and similar plans is $20,500 ($27,000 if age 50 or older, if permitted by the plan). 

The limit on a Simple 401(k) plan is $14,000 in 2022 ($17,000 if 50 or older).

For 2022, the maximum you can contribute to an IRA is $6,000 ($7,000 if you are 50 or older). Contributions may be fully or partially deductible. 

A Roth IRA won’t allow you to take a tax deduction in the year of the contribution, but it gives you the potential to earn tax-free growth (not just deferred tax-free growth) and allows for federal-tax free withdrawals if certain requirements are met. 

Total contributions for both accounts cannot exceed the prescribed limit.

You can contribute if you (or your spouse if filing jointly) have taxable compensation.

You can make 2022 IRA contributions until April 18, 2023 (Note: statewide holidays can impact the final date).

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  1. Convert your traditional IRA to a Roth IRA 

The decline in the stock and bond markets has taken a toll on most retirement accounts. However, this may be the time to partially or fully convert the reduced value of the account into a Roth IRA.

You’ll pay ordinary income taxes on the converted portion of the IRA. But going forward, you won’t have an RMD requirement (based on current law), growth is tax-deferred, and if you meet certain requirements, you’ll avoid federal income taxes when you withdraw the funds.

A Roth may make sense if you won’t need the money for several years, you believe you’ll be in the same or higher tax bracket at retirement, and you won’t need to use retirement funds to pay the taxes.

Once converted, you cannot ‘recharacterize’ (convert back to a traditional IRA). The deadline to convert is December 31.


  1. Charitable giving 

Whether it is cash, stocks or bonds, you can donate to your favorite charity by December 31, potentially offsetting any income.  

Did you know that you may qualify for what’s called a “qualified charitable distribution” (QCD) if you are 70½ or older?

A QCD is an otherwise taxable distribution from an IRA or inherited IRA that is paid directly from the IRA to a qualified charity. It may be especially advantageous if you do not itemize deductions.

It may be counted toward your RMD, up to $100,000. If you file jointly, you and your spouse can make a $100,000 QCD from your IRA accounts. 

You might also consider a donor-advised fund. Once the donation is made, you can generally realize immediate tax benefits, but it is up to the donor when the distribution to a qualified charity may be made. 

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  1. Take stock of changes in your life and review insurance

Let’s be sure you are adequately covered. At the same time, it’s a good idea to update beneficiaries if the need has arisen. 

I trust you’ve found these planning tips to be useful, and if there are any that you would like some help with, I am always here to assist. Please feel free to reach out if you have any questions or you may want to check in with your tax advisor.

Have a great holiday season!


Jeff Schlotterbeck, CFP®

Founder | Water Street Wealth Management

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