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End Of Year Planning

End of Year Planning and Execution

What are some different things you can do to wrap up the year financially?

In this episode, we discuss different issues you should consider before year end. We cover what to look out for, as well as the areas you may need to pay attention to. We also discuss why it's good to look back over your favorite and least favorite purchases of the year and any last minute tips before the end of the year.

Here are a few topics we will cover:

  • Tax Loss Harvesting
  • Loss Carryforward
  • Making sure all 401K contributions get in by EOY
  • Did the money go where your goals were?
  • Charitable giving

Our Podcast – Your Investment Partners

Sit down with Paul and Garrett of Ascend Investment Partners for a bi-weekly conversation about all things financial. Focusing on helping you plan, keep, and grow for a bright future.


Thanks for tuning in. Questions about today's episode let us know.


(801) 476 - 1200

Full Transcript:

00;00;06;29 - 00;00;23;15

Garrett & Paul

Hello and welcome to your investment partners with Paul and Garrett, where we talk about all things financial, focusing on helping you plan, keep and grow for a successful future. If you're new to the podcast, welcome. And if you're tuning in again, welcome back and thank you for listening. Hello and welcome to your investment partners with Paul and Garrett.

00;00;23;23 - 00;00;39;19

Garrett & Paul

Today we are talking about what issues you should consider before year end. We cover what to look out for for our clients as well as areas you may need to pay attention to. We also discuss why it's good to look back over your favorite as well as least favorite purchases for the year and any last minute tips before the end of the year.

00;00;39;28 - 00;01;00;05

Garrett & Paul

My name is Garrett Smith and we look forward to having you with us today. Well, here we go again. It's that time of time of the month where we've got to get this taken care of. You make it sound like it's such a burden. Well, it's always scary to you know, get on record yourself. So nothing like hearing yourself in your headphones over and over again?

00;01;00;10 - 00;01;19;12

Garrett & Paul

Yeah, for sure. But I think this is this is a really good topic. I'm looking forward to it. It's, you know, in the year planning and execution, making sure everything gets done. Things to be considering. As we were covering our notes before we hit record on this, I know there's there's a lot there, so I'll do our best to keep it him.

00;01;19;18 - 00;01;42;27

Garrett & Paul

We're just going to hit an amount of time. We'll just hit the highlights. But I think from a high level, there's plenty to do if you're bored this time of year. There's more planning that can be done. Yeah, for sure. For sure. But I think just kind of just touch on some of the things that we look really closely at for our clients that to kind of review what they are and why we do it.

00;01;43;14 - 00;02;04;12

Garrett & Paul

You know, I think obviously the biggest one, particularly this year because of the market volatility, has been tax loss harvesting. So why don't we just jump into that one? What is it? And you know, why should we pay attention? Yeah, So tax loss harvesting is really important because, you know, at the end of the day, we want to be as efficient as we can with people's taxes.

00;02;04;20 - 00;02;31;16

Garrett & Paul

You don't want to just willy nilly taking gains if you can avoid it. So. So picture our our model portfolio. Let's say we have, I don't know, 75 stocks in that portfolio, that blue chip stock portfolio that we manage. And let's say we started at the first of the year and, you know, it's been kind of a rough year, but there's going to be a lot of those stocks that are still up for the year and and quite a few of them that are going to be down.

00;02;31;26 - 00;02;59;29

Garrett & Paul

And what happens is, over time, a portfolio, you go two, three, four years down the road and some stocks are going to grow significantly. And other ones are not going to do so well. And, you know, you can't just let a stock grow to the moon in the portfolio. If you have a stock that just you know, it starts off it at, say, you know, one and a half or 2% of the portfolio and it gets up to five or six, It just has too much influence on the portfolio.

00;02;59;29 - 00;03;24;06

Garrett & Paul

And so we've got to trim that tree a little bit and that's going to trigger a capital gain to our our clients. And so what tax loss harvesting does is let's say we've got a stock that's that's down 20 or 30% for the year. Still good company pays its dividend. We still like the company but but it's down for the year.

00;03;24;12 - 00;03;51;29

Garrett & Paul

What a tax to harvest is is we'll go in and sell that stock and and realize the loss so that it offset some of the other gains in the portfolio. And then we'll come back. And as long as we repurchase that stock, you know, 31 days or more a down the road, then we avoid any, you know, any wash sale rules and some things like that that happen.

00;03;51;29 - 00;04;14;21

Garrett & Paul

So essentially what a tax loss harvest is, is just a sell a loser to offset the gain of a winner. And try to more neutralize your your current tax situation. Yeah. If you want to pay taxes you always pay more taxes. You're always welcome to send a check to the IRS. But let's not deliberately trigger that if we don't have to.

00;04;15;02 - 00;04;41;12

Garrett & Paul

And I think one thing to highlight along this as well is this you know, this only applies to basically non IRA accounts, trust accounts, joint accounts, individual accounts, anything that's not in that tax deferred or tax free, such as a Roth status. This is where tax loss harvesting can be greatly beneficial for kind of trimming or neutralizing grown or excessive positions in the portfolio.

00;04;42;04 - 00;05;07;02

Garrett & Paul

Generally, when good companies grow, they grow really quickly and it can kind of tip a tip of portfolio out of balance. And so it kind of it is a way to neutralize the taxes as well as help bringing the portfolio back into an alignment as well. Yeah, Yeah. And and so when we when we look at that, that's just always an ongoing consideration depending on somebody's taxable situation.

00;05;07;09 - 00;05;28;18

Garrett & Paul

But it's something that we look at every year, We regularly look at it and we that's one thing we do internally for our clients and we're always keeping an eye on that. It's not something that a client needs to call up and say, Hey, let's make sure we do this. It's just it's just part of it. And the other one that we keep a very close eye on are those required minimum distribution.

00;05;28;18 - 00;05;49;10

Garrett & Paul

Now, these are specifically talking to IRA accounts for those who are over previously seven and a half and now 72. Uncle Sam says you're required to take some money out of the account to pay the taxes. But Paul, why don't you kind of walk us through the process of of, you know, how we handle those and why it's so critical to make sure they get done?

00;05;49;28 - 00;06;18;28

Garrett & Paul

Yeah, I think the in regards to RMDs, the you know, the government allows these retirement plans, which is great. You know, we need to pile up money for retirement to just supplement Social Security. It's it's just, you know, we just really need to do that. And but it gets to a point where the government says, okay, we've we've kind of let you defer the tax on this account for long enough and we want you to start using it.

00;06;18;28 - 00;06;50;13

Garrett & Paul

That's what it's for. It's for your your later years. And so, you know, they just have a mathematical formula. And essentially when you start, they take your account balance on December 31st. So let's say you turn 72 this next year, we're going to take your account balance at the end of this year, December 31st. And there's just a divisor and essentially, you know, approximately, you're going to have to take out about 4% of that account balance.

00;06;50;13 - 00;07;12;10

Garrett & Paul

So let's say you have 500,000 your your your IRA account at the end of the year, your your RMD amount is going to be approximately $20,000 for the year. And when that comes out, it has to be taxed. So it's we're going to send you a 1099 R that willing that will go in with your your tax return for the year.

00;07;12;28 - 00;07;44;27

Garrett & Paul

And it's just it's so critical that that money is comes out of the account because the penalties are egregious. If if we miss an RMD the penalty is is the federal government it's a 50% penalty. So on our previous example there would be a $10,000 penalty for not taking the RMD. And in addition to that, you have to pay tax on the whole $20,000, which if you're in a, you know, 25% tax bracket, that's another $5,000.

00;07;44;27 - 00;08;13;18

Garrett & Paul

So if we miss one, you know, it's easily it could easily end up being a 75% tax penalty situation. And so we just want to make sure that those RMDs get get taken care of and get sent out. And we've never missed one so far where some would I need to knock on that. But that's something that we just wait recheck and recheck and recheck starting in about middle of October through the end of the year to just make sure those RMDs are all taken care of.

00;08;14;06 - 00;08;31;29

Garrett & Paul

Yeah, those are, those are really critical to make sure they're handled correctly. There are some creative things you can do from a gifting perspective on those, which I think we'll kind of touch on later. But know, making sure those the right dollar amount gets taken out. Most people satisfied if they're taking income through the course of the year kind of gets over that hurdle.

00;08;31;29 - 00;08;59;28

Garrett & Paul

But occasionally, oh, fairly often it's not quite enough. Especially as people increase in age, that number tends to seems to go up. If the market's up, you're a little bit older, you generally get to see a larger number every year. Yeah. And so, yeah, that's that's one thing that we work here as a team to make sure those happen for our clients and just need to step forward on those so that they're not not missed on an ongoing basis.

00;09;00;07 - 00;09;23;07

Garrett & Paul

But then there's kind of some things that are outside of our control, some things that we don't always have an entire visibility on. Sometimes losses from other investments or other projects that happen outside of of what we manage here for clients often impact us. And, you know, so at the end of the year, how do you kind of see reconciling all those together?

00;09;23;07 - 00;09;42;04

Garrett & Paul

So you always want to look for loss carryforwards. And and, you know, I always have the expression that when you have a good year, Uncle Sam wants to be your partner. So, you know, if your business does well, you make, you know, half a million dollars. Uncle Sam, he's just he's just so happy for you and just wants to be your partner.

00;09;42;04 - 00;10;06;18

Garrett & Paul

But when you lose money, Uncle Sam doesn't want to be your partner. And so let me give you an example of of a loss carry forward. So let's say you have a business or you bought a home or a piece of property, whatever, and you pay a half a million dollars for it. And you know, two years later, for whatever reason, the bottom drops out of everything and you end up half into to to cash that investment in and you only get $250,000.

00;10;06;18 - 00;10;38;01

Garrett & Paul

So you lose $250,000. What I mean by Uncle Sam not wanting to be your partner on that is you can't you cannot write off that $250,000 loss. You can offset some other gains with it. But if if that was your only investment for the year and you have a $250,000 loss, Uncle Sam will let you write off $3,000 and he'll let you write off $3,000 every year until that $250,000 is all used up.

00;10;38;01 - 00;11;00;15

Garrett & Paul

So in other words, you'll be dead long before you use up the that $250,000. So the reason we have people bring in their tax return, we you know, we're not tax advisors, but we have to work hand in hand with your tax advisor to to understand and to know is there loss carryforwards because that's something that we can implement in our planning for your individual situation.

00;11;00;15 - 00;23;52;18

Garrett & Paul

We may be able to harvest some gains to offset.

The commentary on this website reflects the personal opinions, viewpoints and analyses of the Ascend Investment Partners employees providing such comments, and should not be regarded as a description of advisory services provided by Kesler, Norman & Wride, LLC dba Ascend Investment Partners or performance returns of any Ascend Investment Partners Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Ascend Investment Partners manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. 

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