What’s On Our Fall “To Do” List

It’s fall, and the leaves are changing color for our friends up north.

Here in Florida, it’s still hurricane season (until November 30) which undoubtedly means more rain and a close eye on the tropics for another two months.

As we enter the last quarter of the year, here’s a quick rundown of what is on our agenda from now until December 31:

For most clients, we have completed Required Minimum Distributions (RMDs) and Qualified Charitable Distributions (QCDs). We still have a few folks making last-minute decisions on gifting their RMD to charity (and picking out the well-deserved recipients!), but we anticipate having all those distributions wrapped up shortly.

As a reminder for next year, if you are age 70½ or older, you can choose to direct all or part of your RMD (or up to $100,000) to a qualified charity. If you do that, you will not be taxed on that portion of the withdrawal that goes to charity. It’s a tax-smart way to handle charitable distributions if you are required to withdraw funds from your IRA and want to benefit a favorite charity or two. For more information, just give us a call.

Is there a Roth conversion in your future? When you do a Roth conversion, you withdraw funds from your Traditional IRA or 401(k), pay taxes on the withdrawal, then put the money into your Roth IRA where it can start growing free of tax. Roth conversions don’t work for everyone, but for some clients, they are a smart way to build tax-free funds for the future.

Over the next few months, we’re looking at clients’ situations to see if a Roth conversion might be advisable. For some clients, we have already committed to a long-term Roth conversion strategy and take partial withdrawals year-after-year. For other clients, it all depends on their tax situation that year, and we may elect to do a conversion or skip it, depending on their expected taxable income.

If you want to know more about Roth conversions, and whether they may be right for you, just give us a call. We’ll need a copy of your 2020 tax return on file to aid our analysis. Here’s a hint: If your taxable income is lower than normal in 2021, or you expect your income to clock in higher in 2022, you may be a good candidate for a conversion before the end of this year.

We’ll also be keeping our eyes on Washington D.C. from now to the end of the year. There is a surfeit of fairly momentous proposals on the legislative agenda, ranging from raising the debt ceiling, to the $1 trillion infrastructure bill, to the larger $3.5 trillion social safety net proposal, all of which could bring about major changes to the tax and estate planning status-quo.

For the moment, these initiatives are all in the “proposal” stage and we are waiting patiently for the plans to firm up. We’ll keep you informed as these proposals progress through the halls of government. Given the sheer volume of decisions to be made and amount of legislative uncertainty, we would not be surprised to see a near-term uptick in market volatility. But it’s important for long-term investors to keep their cool and remind themselves that the best action is often “no action,” or at least no action until we’ve had a chance to see the final outcome of these deliberations and weigh the impact.

As always, feel free to contact us with your questions or concerns, or to discuss your personal situation. We are always here for you.

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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