One Last Gift: Wrapping Up All of Your Financial Contributions Before the New Year

The end oft he year is not just a season for celebration and reflection but also a perfect time to ensure that our finances are in order. This includes crucial aspects such as wrapping up all financial contributions before the year-end for retirement savings plans such as Keogh, Solo 401(k), and 401(k) and making strategic decisions about selling stock to realize gains or losses.

Here's how to 'wrap up' contributions and tax-savings strategies promptly before the year-end IRS deadline of December 31st.

Keogh Plan

A Keogh plan ,or HR 10, is a tax-deferred pension plan available to self-employed individuals or unincorporated businesses. With these specialized plans, the contributionlimit is up to a specific limit or 100% of earned income, whichever is lower.

The IRS determines the contribution limit each year, so it's vital to consult with afinancial or tax professional regarding this year's limit. Remember, you must make your year-end contributions by December 31st.

Solo 401(k)

The solo401(k) plan is another well-known retirement savings strategy for self-employedprofessionals. This plan allows one to contribute as an employee and employer,increasing the permissible IRS contribution limit.

As a businessowner, you can contribute up to this year's IRS limit through tax-deferredcontributions, plus additional contributions as an employer that aretax-deductible to the business. As the year draws to a close, be sure you'vemanaged your contributions to take advantage of the tax savings oncontributions you and the company receive.

401(k), 403(b), and 457 plans

Managing yourcontributions is essential if you work in a job offering a traditionalretirement savings plan such as 401(k), 403(b), or 457 plan. The total amountyou can contribute each year is capped unless you're over 50 years old, inwhich case the limit increases through a catch-up provision.

Your 401(k)contributions must be completed before December 31st. Contact your HR Department or consult your financial or tax professional for this year's limit.

Tax-loss harvesting

If you holdstocks or other investments, the end of the year is an excellent time to reviewyour portfolio's capital gains and losses. A strategy known as tax-lossharvesting aims to mitigate the investor's total taxable income. Tax lossharvesting involves selling off an underperforming or losing investment tocounterbalance the gains from a well-performing asset.

Timing iscrucial to fully optimizing tax loss harvesting. Typically, it is employed nearthe end of the calendar year when individuals clearly understand their totalincome, capital gains, and losses.

While tax loss harvesting can be beneficial, investors must understand that it's not a one-size-fits-all strategy. Before initiating this strategy, investors must consider their investment goals, risk tolerance, and tax circumstances. For this reason, engaging with financial or tax professionals is vital to help you understand whether tax loss harvesting is appropriate for your situation.

Inconclusion, wrapping up your financial contributions before year-end is crucial to a confident financial future and can provide potential tax benefits. Take this time to reevaluate your goals, adjust your retirement savings contributions, and consult a financial professional to help you start the New Year with a well-designed financial roadmap.

Important Disclosures:

The opinionsvoiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Allinformation is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

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Sources:

https://www.investopedia.com/articles/taxes/08/tax-loss-harvesting.asp

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