Investing Checklist: Things to Do by Year-End

As we count the days left in 2021, some people might be ready to create fresh financial goals for 2022. But there are still plenty of opportunities left in 2021 to enhance your investment portfolio.

Before you hit restart, go through our checklist and see if any strategies could maximize your money before the year’s end.

Review your retirement plan

“At least once a year, [investors] should review their retirement plan to see whether or not they’re on track, and that should be ongoing based on what their goals are,” says Pamela Plick, a certified financial planner in Palm Desert, California.

Plick says before the year ends, investors should take a look at their 401(k) or Roth and traditional IRAs and see if there’s anything that needs adjusting, and that includes your contribution amount.

Max out your accounts

If you haven’t yet maxed out your retirement accounts, that’s also something to do before the end of the year, says Steven Podnos, CFP and CEO at Wealth Care LLC based in Cocoa Beach, Florida.

“Contributing the maximum amount they’re allowed to pre-tax is the No. 1 big wealth builder for most people,” Podnos says.

The 2021 maximum contribution limit for traditional 401(k)s is $19,500 ($26,000 if you’re 50 or older) and the 2021 max for traditional and Roth IRAs is up to $6,000 ($7,000 if you’re 50 or older). Podnos suggests putting as much in there as you can. That said, for IRA accounts, you usually have until the tax-filing deadline (typically April of the following year) to contribute.

If you’ve already maxed out your accounts

If you qualify and your 401(k) plan allows after-tax contributions, you can contribute up to an additional $38,500 in after-tax dollars to a mega backdoor Roth IRA or Roth 401(k) in 2021. For those who earn too much to contribute to a Roth IRA, you could try a strategy known as a backdoor Roth. The process includes putting money into a traditional IRA, paying taxes on that money, and then rolling it into a Roth IRA.

Take care of any payroll deductions

Some investment contributions are made through payroll deduction, such as employer-sponsored retirement plans and health savings accounts.

Delia Fernandez, a CFP and investment advisor based in Los Alamitos, California, recommends contributing to these before the end of the year, especially if you get an employer match (who doesn’t like free money?).

Fernandez suggests you find out your payroll deduction contribution deadlines before the cut-off date passes. She also suggests checking where you stand with your health savings accounts.

“If you realize you didn’t take advantage of all the health savings account contributions that you wanted to make, you want to go ahead and take advantage of that by contributing,” she says.

You can contribute up to $3,600 to your HSA for individual coverage and $7,200 for family coverage in 2021. You can leave any money you don’t spend on health-related expenses in the account for tax-free growth. When you turn 65, you can withdraw money from your HSA for use on medical or non-medical expenses with no tax penalties.

Consolidate investment accounts

If you have several accounts in different places, keeping track of your investments might be difficult. For this reason, Plick recommends investors tie up these loose ends.

“If they have an old 401(k) from a previous employer that they’re no longer contributing to, or maybe multiple IRAs or retirement accounts, maybe looking at consolidating those,” she says.

For example, consolidation can be simply moving the money in several traditional IRAs into one or doing a 401(k) rollover from an old employer retirement account.

Check on your taxable investments

Just like you gave your retirement portfolio a once-over, do the same with any taxable accounts so that your investment portfolio stays aligned with your goals and your desired asset allocation.

If you notice any significant losses or gains, tax-loss harvesting — a strategy to offset investment gains with losses and save money on taxes — could be a good solution.

Fernandez recommends matching short-term losses with short-term gains and long-term losses with long-term gains.

If your capital losses exceed your capital gains, you may be able to claim some of those losses on your taxes.

Review your estate plan

Although your estate plan isn’t an investment, it determines what happens to your investments once you die. So here are a few questions you might want to ask yourself:

• Have you included all of your assets in your estate plan, especially ones you recently acquired?

• Do you have the most recent appraisals of any properties you own?

• Do your will and beneficiaries still align with your wishes?

• Are you setting up your estate in the most tax-efficient way?

Fund investing accounts for dependents

Remember to put any investment accounts you have for your dependents on your end-of-year list, too. If you have 529 plans, ABLE accounts, custodial IRAs or other custodial accounts, fund them, Podnos says.

“Do that as early as possible in the child’s life because you then benefit from many more years of tax-free accumulation for educational expenses,” he says.

You’ll benefit from compounding interest, plus you may also be eligible for tax deductions if you have a 529 plan. Some states offer state-level tax deductions on 529s. If your state offers tax deductions, consider funding the account so you can get that tax deduction this year.