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Financial Considerations For The End of 2022

Financial Considerations For The End of 2022

December 20, 2022
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As 2022 is coming to a close, deadlines for your personal finances are rapidly approaching. With it being the end of the fiscal year on December 31st, it’s time to get everything wrapped up in time to start 2023. To make sure you have everything taken care of, continue reading for financial considerations for the end of 2022.

Required Minimum Distributions (RMDs)

Traditional Individual Retirement Accounts (IRAs) come along with RMDs once you turn 72 years old. Your RMD amount is determined by dividing the amount in your IRA by a life expectancy factor that you receive from the Internal Revenue Service (IRS). If you have multiple Traditional IRAs, you will have an RMD for each one.

One of the main rules of Traditional IRA RMDs is when to take out your RMDs. The year after you turn 72 years old, you have to take your first RMD by April 1st. For every year after that, you have to take your RMD before December 31st. If you miss the deadline, you’ll be facing a penalty of 50% of your RMD amount.

Tax-Loss Selling

Tax-loss harvesting is a tax planning strategy to lower your tax implication for the year by selling an investment at a loss. This is a great strategy if you had a significant capital gain on the year that you need to offset tax-wise. Your significant gain could have been through the sales of securities, real estate, or your own business. It could also be a great idea if your personal income was much higher than it was in previous years, causing you to jump multiple tax brackets. By taking advantage of tax-loss harvesting, you can reduce or offset your tax bill for 2022.

However, you have to take advantage of tax-loss harvesting before the end of the year for it to be reflected on your 2022 tax return.

Roth Conversions

If your portfolio is down and you have a significant amount of life left to live, it’s a great opportunity to convert your Traditional IRAs into Roth IRAs. Instead of paying taxes on disbursements, you will pay taxes just one time on the conversion. You will no longer have to take RMDs since it is not a requirement on Roth IRAs. In a Roth IRA, your funds can grow tax-free over time.

Previously, you may not have been able to contribute to an IRA due to income limitations. However, a Roth IRA conversion does not have income limits, so regardless of your adjusted gross income, you can take advantage of the Roth benefits. This is a great option especially if you plan that your income is higher in retirement than it was during your career.

A Roth conversion is taxable in the year it is done, making the deadline December 31st to include it on your 2022 tax return.


The end of the year includes the need to wrap up several different areas of your personal finances. To make sure you reach these deadlines, enlist the help of a knowledgeable and trustworthy financial advisor. Call or email me today to set up a consultation:
(702) 818-1116 or aaron@abundancewealthsolutions.com

 

 

Sources:

https://www.schwab.com/ira/traditional-ira/withdrawal-rules/required-minimum-distributions

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