Year-end Financial Considerations – Visionary Wealth Advisors

Year-end Financial Considerations

Katie Martin, CFA, CFP®

December 3, 2021

With the end of the year fast approaching, it’s important to remember there are a few financial deadlines that come along with it. The holiday season can be hectic, but it’s a good idea to set aside a little time to check in on your finances before we turn the calendar to 2022.

Here is a quick list of items for you to consider. Need help determining which may apply to you? Your tax professional and financial advisor are great resources.

  • Be aware of capital gains distributions by fund holdings – If you hold a mutual fund in a taxable investment account, you may be subject to a capital gains distribution. Mutual funds may pay out gains to current shareholders based on the trading done in the fund throughout the year. Capital gains tend to become more common the longer we are in an up market. Exchange-traded funds (ETFs) may also pay out capital gains, although this happens far less frequently and the gains are often smaller, which is why they tend to be good investments to hold in a taxable account.

If you own a fund expecting to pay out a capital gain, what should you do? If it’s an investment you own for the long term, then it likely makes sense to continue to hold the fund and receive the capital gains distribution. Then, you can potentially look for other investments where you have a loss to help offset this gain (see next bullet.)

However, you may want to take a look at your personal unrealized gain or loss in the fund. If you have a loss or an unrealized gain that is smaller than what the fund is expecting to pay out, it may make sense to sell your holding and replace it with a similar investment (or whatever makes sense for the diversification of your portfolio.) You may also want to consider delaying any additional investment in the fund until after the gain is paid, provided it’s within a short time period.


  • Look for the opportunity to realize losses on your investments While the goal is typically to sell investments after they’ve made you money, it can also make sense to sell investments that are down in value to recognize losses, which reduces your taxable income. Losses on investments are first used to offset realized gains, which you may incur by selling an investment for more than you purchased it. If your losses exceed your gains, up to $3,000 of losses can be used to offset your ordinary income for the year. Any leftover losses can then be carried forward until they are able to be used.


  • Consider contributing to an education savings plan – If you intend to contribute to a 529 plan to save for your children’s education, you may want to consider doing so by the end of the year to make the most of your tax-free contributions. Anyone can contribute up to $15,000 for 2021 ($30,000 for married couples) to a 529 plan for a given beneficiary without triggering the gift tax. If your state offers a tax deduction on the contribution, that’s also accounted for on a calendar year basis. By contributing in December, you’ll still have the full $16,000 contribution limit ($32,000 for married couples) for 2022.


  • Consider a Roth IRA conversion – With a Roth conversion, you convert money from a traditional IRA to a Roth IRA, which then allows for tax-free withdrawals in retirement. Keep in mind that you will be required to pay taxes now on the amount you convert. If you’ve had lower income this year due to a job change or some other factor, it may be worth considering whether you could benefit from converting a portion of your traditional IRA to a Roth IRA to take advantage of a lower current tax bracket and better tax diversification in retirement.


While there are a number of other things that are good to check in on each year, such as updating your budget, reviewing your beneficiaries, and evaluating your financial plan, those aren’t as time sensitive. If you’re like me this time of year, you must prioritize your time in order to keep up with all of the craziness. After all, it’s important you have time to enjoy the holidays, too!


The information provided is for general information only and should not be construed as personalized investment, legal, or tax advice. The information contained within has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions. Please consult your investment advisor, attorney, or accountant to verify the accuracy of the information provided and prior to taking any action related to this communication.