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If 2020 taught us anything, it is to be adaptable to changing circumstances and to expect the unexpected. Along with the close of this past year and the beginning of the current one comes some unique opportunities and pitfalls with potential implications for years to come. Below are 6 factors that you should be considering as this year begins. The following are not meant to be exhaustive reviews of each topic, but rather a checklist of items to explore in more detail.

   1. Review Your Investment Risks (Riskalyze)

Are you adequately prepared for another market meltdown? If not, what steps should you be taking now? Click here to find out your appetite for risk at the current time and see what potential downside risk there is in your current investments via a brief, interactive risk questionnaire. If you are concerned your assets are exposed to more risk than your comfort level allows, it would be a good idea to meet with a financial professional for a more comprehensive review of the risk your assets carry and to see how to get these in line with your comfort level.

   2. Harvest Investment Gains & Losses

Do you know where you stand with realized capital gains and losses? Perhaps consider harvesting your gains by selling taxable investments if you have capital loss carryovers or year-to-date losses for the current year. Here’s a tidbit to remember: short-term losses are most effective at offsetting capital gains. If you have any taxable investments that have losses, consider using those losses to offset income in other investments or to offset your taxable income in 2020.

   3. Watch Out for Taxable Phantom Gains

If you own mutual funds, be prepared for the possibility that you may see phantom gains passed on to you at year’s end that may increase the amount of taxes you owe. These 1099 reported gains can be triggered in both positive and negative performance environments. In fact, we oftentimes see them in years where the overall stock market has experienced high levels of volatility, such as 2018 and 2019 and especially just in 2020.

   4. Consider Potential Tax Increases (From RMD’s to ROTHs)

If you think tax rates could go up in the future, consider a partial or full ROTH conversion. It is the opinion of our firm that we will see tax increases in the next 1-5 years and, if that transpires, we are likely in the lowest taxable environment we will see for a long time. Tax rates seem to be on sale right now so consider how you can use this to your advantage in the mid to long-term outlook. Our tax maps we offer to those we work with are easy, visual ways of uncovering these opportunities.

   5. Up-to-Date Estate Plan (Probate Avoidance)

Is your estate plan up to date? Are your trusts funded? Do you have any assets outside of retirement accounts that may be owned by you personally? If so, you may have assets that will be subject to probate. If probate avoidance is a priority for you, a year-end asset review could be in order.

   6. Avoid 401k Rollover Mistakes

Avoid mandatory tax withholding by making a direct rollover distribution to an eligible retirement plan including an IRA. If you receive money from your 401k, you must complete the rollover within 60 days or the IRS considers it an early withdrawal. If you are under age 59 ½, the penalties for an early withdrawal are substantial. For tips on how to avoid mistakes when rolling over retirement funds, please download Your Guide to Avoiding 401k Rollover Mistakes.

One of the most important decisions you can make as the new year begins is to speak with a financial professional to ensure everything is in order with your overall financial situation. Make it a priority of your resolution in this new year to have a plan which sets you on pace to achieving your financial and retirement goals. 

The first step in getting such a plan is to schedule a complimentary consultation or contact us at info@theivyag.com or at 866-360-2724.

*All decisions regarding the tax implications of your investments should be made in consultation with your independent tax advisor. This article is for informational purposes and should not be construed as advice.

The first step toward achieving your retirement goals is having a plan…