A Year-end Wealth Checklist

Brian Cody |

A Year-end Wealth Checklist

If the end of the year has you in planning mode, you’re not alone—starting a new year may be a great opportunity for a review and renewal. What steps might you take for next year? 

Review Asset Allocations

Most investment portfolios require periodic rebalancing as some asset classes may grow more quickly than others. If your target portfolio mix drifted off course, selling some overperforming assets and buying some underperforming ones might bring your portfolio back in line with your targeted asset allocations. 


As the saying goes, "Don't put all your eggs in one basket." Some who heavily invested in cryptocurrencies in 2022 may attest that having all your investments in one sector that crashes may devastate your total asset balance.If a significant amount of your portfolio is a single stock, company, or sector, it may be time to work with your financial professional to diversify your investments. 

Assess Tax Liability

By the end of the year, you should know how much you earned, what deductions and credits are available, and whether you need to pay any estimated taxes to avoid an underpayment penalty. Though you may not need to file your taxes early, sketching out your general tax situation might help you avoid any unpleasant surprises when "Tax Day" comes.

Consider Your 401(k) and IRA Contributions

In 2022, workers under age 50 may contribute up to $20,500 to a 401(k), while those aged 50 and older are eligible for an additional $6,500 catch-up contribution.If you did not hit this target figure for 2022, there might still be time. Each dollar you contribute to a 401(k) may lower your taxable income for 2022. 

Suppose you have a traditional or Roth individual retirement account (IRA). In that case, you may contribute up to $6,000. Unlike a 401(k), whose contribution deadline is Dec. 31, an IRA allows you to make contributions for 2022 until Tax Day during April.For most taxpayers, contributions to a traditional IRA are tax-free, while contributions to a Roth IRA are post-tax but not taxed again upon withdrawal.

Ensure Beneficiaries Are Up-to-Date

If it has been a while since you reviewed and updated the listed beneficiaries on your life insurance, 401(k) accounts, and other financial accounts, the end of the year is a good time to update them. These beneficiary designations may supersede wills, so its important to update them.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Asset allocation does not ensure a profit or protect against a loss.

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking # 1-05337697.


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