Yr-Finish Monetary Planning Subjects to Talk about with Shoppers


With the tip of 2022 quick approaching, year-end monetary planning conversations with purchasers are probably already beginning to take form. It’s been a yr of attention-grabbing developments—from pandemic-related reduction that has come and gone to the emergence of recent packages round scholar mortgage debt—and purchasers might be trying to you to assist navigate these adjustments. Having this guidelines in your again pocket could make your planning conversations with purchasers extra productive and assist them keep on observe.

1. Improve Retirement Contributions to the Max

10YearEnd – 1

Office accounts. Encourage purchasers to think about maximizing contributions to their office plans and to take full benefit of any employer match profit. For 2022, the utmost worker deferral for 401(ok), 403(b), and 457 accounts is $20,500, and people ages 50 and older can defer a further catch-up contribution of $6,500. For SIMPLE IRAs, the deferral stays $14,000 and the catch-up is $3,000.

Conventional IRAs. Maxing out contributions to a conventional IRA is another choice. For 2022, the contribution restrict is $6,000 or 100% of earned earnings, whichever is much less, with a $1,000 catch-up for purchasers ages 50 and older. Modified adjusted gross earnings (MAGI) limits for contributions to conventional and Roth IRAs elevated in 2022, so make sure to assessment MAGI eligibility thresholds.

2. Spend FSA {Dollars} and Contribute to HSAs

10YearEnd – 2

If permitted beneath an employer’s plan, a person can carry over unused well being versatile spending account (FSA) quantities, with a most carryover quantity of $570. Though the rollover choice applies to the employer’s plan yr quite than the calendar yr, this year-end evaluation is an efficient reminder to ensure your purchasers are on observe. As well as, purchasers with dependent care FSAs can save as a lot as $5,000 (household restrict) or $2,500 (married submitting individually) in 2022.

Now can be a good time to debate most well being financial savings account (HSA) contributions with purchasers who’ve high-deductible well being plans (HDHPs). Though this could be a pretty complicated planning space, basically, right here’s how HSA limits work: In 2022, the utmost contribution for a person HSA is $3,650, and the utmost for a household HDHP is $7,300.

Plus, purchasers ages 55 and older can contribute a further $1,000. Don’t overlook to debate prorated vs. “final month rule” contributions for purchasers who had an HDHP for a part of 2022.

3. Assess Marginal and Capital Positive aspects Tax Issues

10YearEnd – 3

Shoppers on the brink of a tax bracket might be able to put themselves within the decrease one by deferring some earnings to 2023. Listed here are just a few thresholds to remember:

  • 37 p.c marginal tax fee: Taxable incomes exceeding $539,900 (particular person), $647,850 (married submitting collectively), $539,900 (head of family), and $323,925 (married submitting individually)

  • 20 p.c capital positive factors tax fee: Taxable incomes exceeding $459,750 (particular person), $517,200 (married submitting collectively), $488,500 (head of family), and $258,600 (married submitting individually)

  • Further Medicare tax: For purchasers with W-2 or self-employed earnings above sure MAGI thresholds, complete Medicare taxes might be 2.35 p.c and three.8 p.c, respectively

  • 3.8 p.c surtax on funding earnings: The lesser of web funding earnings or the surplus of MAGI higher than $200,000 (particular person), $250,000 (married submitting collectively), $200,000 (head of family), and $125,000 (married submitting individually)

4. Evaluate and Rebalance Portfolios

bar and circle graph on a balance

Yr-end monetary planning ought to embrace a assessment of capital positive factors and losses to your purchasers and an evaluation of whether or not it’s time to rebalance shopper portfolios. This course of could reveal tax planning alternatives, akin to harvesting losses to offset capital positive factors.

5. Faucet into the Tax Advantages of Charitable Giving

box and heart

Charitable contributions donated on to a professional charity or a donor-advised fund might help obtain a federal tax deduction. Be mindful, nonetheless, that this technique will solely be useful if itemizing deductions. So, it’s worthwhile for purchasers to debate with their tax professionals if their charitable contributions, along with different deductions, will surpass their commonplace deduction.

Deductions on contributions to donor-advised funds are capped at 60 p.c of AGI for money and 30 p.c of AGI for long-term appreciated securities.

Certified charitable distribution (QCD) guidelines haven’t modified, so purchasers older than 70½ could make a QCD of as much as $100,000 on to a charity; married joint filers could exclude as much as $100,000 donated from every partner’s IRA. Additional, a QCD may be useful from a tax perspective, because it reduces taxable earnings whereas additionally satisfying the RMD requirement.

6. Put together a Technique for Inventory Choices

10YearEnd – 7

Various minimal tax (AMT) exemption limits elevated in 2022 to $75,900 for single tax filers and $118,100 for married joint filers. Relying on AMT projections, purchasers could need to wait till January 2023 to train incentive inventory choices.

7. Plan for Estimated Taxes and RMDs

10YearEnd – 8
  • A retiree’s first RMD have to be accomplished by April 1 of the yr after they flip 72. After the primary yr, they have to fulfill their annual RMD distribution by December 31 for each ensuing yr. If a taxpayer chooses to delay the primary RMD till April 1, they might want to take one other RMD earlier than year-end (i.e., basically two RMDs in that first yr, in the event that they delay).

  • Shoppers who could also be topic to an estimated tax penalty can request that employers (by way of Kind W-4) modify their withholding to cowl shortfalls. The IRS tax withholding estimator could be a useful useful resource right here. They may additionally discover utilizing Kind 1040-ES to make their estimated quarterly funds for earnings that’s not topic to withholding.

8. Get Able to Repay Pupil Loans

10YearEnd – 9

Pupil mortgage funds are set to restart on the graduation of 2023. Underneath the Biden administration’s one-time scholar mortgage debt reduction plan, funds can be decreased to five p.c of discretionary earnings for many undergraduate loans. Extra data on this plan might be introduced within the coming days and weeks. To get the most recent, your purchasers can seek the advice of this useful truth sheet and join updates on the U.S. Division of Schooling web site.

9. Consider Property Plans

10YearEnd – 10

It’s at all times a good suggestion to assessment property plans as a part of year-end monetary planning. Relying on a shopper’s web value, establishing a faulty grantor belief, spousal lifetime entry belief, or irrevocable life insurance coverage belief could also be an efficient technique to scale back property tax publicity.

When you assessment a shopper’s property plan, make sure to replace beneficiary designations and assessment trustee appointments, energy of legal professional provisions, and well being care directives.

Be a Trusted Useful resource and Information

Though this year-end monetary planning guidelines covers loads of floor, it’s supposed to function a springboard to your planning conversations with purchasers.

You’ll have an excellent place to begin to speak by means of high-level points and deadlines which are most related to them and have the chance to succeed in out proactively—and supply to collaborate with—CPAs, attorneys, and different professionals they work with. These planning conversations are simply one of many many alternatives you need to show the worth you ship and deepen your shopper relationships.

In fact, it’s probably that many purchasers can have extra difficult points to think about. Learn the way having a group of specialists at your fingertips could possibly be a recreation changer to your follow and your purchasers.

Commonwealth Monetary Community® doesn’t present authorized or tax recommendation. You need to seek the advice of a authorized or tax skilled concerning your particular person state of affairs. Third-party hyperlinks are supplied to you as a courtesy and are for informational functions solely. We make no illustration as to the completeness or accuracy of knowledge supplied at these web sites.

Editor’s Word: This publish was initially printed in October 2021, however we’ve up to date it to convey you extra related and well timed data.


Please enter your comment!
Please enter your name here