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Year-End Planning Checklist

From FSAs to making donations, there's still plenty to do in 2020.


  • Don't forget to use your Flexible Spending Account (FSA) funds.

  • No Required Minimum Distribution (RMD) this year, but plan on it in 2021.

  • Feeling generous? Consider donating stock and using a Donor-Advised Fund.

  • Prepare for taxes on your equity compensation.

  • Build out tax-free balances with Roth and HSA opportunities in 2021.


While 2020 has been a year of challenges, it also has been a year of learning and perspective. For some, one of the biggest takeaways is the value of planning. Year-end can be a very busy time of year, but it’s crucial to carve out some time to make sure that you end 2020 on a high note and position yourself in the best way for 2021.

While we can’t cover every potential planning item, here is a strong list of considerations to have on your radar.

Flexible Spending Account (FSA)

The vast majority of FSA plans do not allow you to roll balances into the following plan year. Because it’s often a use-it-or-lose-it scenario, make sure you use your balance on qualified expenses. Generally, you have until December 31st to incur the expenses and until April to submit reimbursement requests. Check with your provider to confirm plan-specific features and dates.

Required Minimum Distribution (RMD)

Due to the COVID-19 pandemic, retirees and beneficiaries are not required to take any distributions in 2020. No guidance has been given for RMDs in 2021, but retirees and beneficiaries should expect RMDs to resume.

Beginning in 2020, the new age at which RMDs begin is age 72. If you’re already of RMD age, you know the drill – distributions have to be made by December 31st. If you are a retiree who doesn’t need your RMD to live on, then you may want to consider a qualified charitable distribution (QCD).

Gifts & Donations

If you’re looking back on the year and feeling extra generous with family and loved ones, then you can gift up to $15,000 per person in 2020 without impacting your estate tax exemption.

With the higher standard deductions in place since 2018, most taxpayers find it helpful to bunch their donations into a single year to maximize the tax benefits. Did you know that donating highly appreciated stock is a very tax-efficient way to make donations? A Donor-Advised Fund (DAF) is a great way to turn your lump-sum donation into a multi-year donation strategy.

Equity Compensation

December is a great time for executives and other employees to review their equity compensation. Keep tabs on what you’ve accumulated this year and anticipate what will be coming next year.

From a tax standpoint, consider that the value of restricted stock and exercised non-qualified stock options (NSOs) are taxed as ordinary income. If you exercise incentive stock options (ISOs) but don’t sell the stock in the same year, then you may be subject to alternative minimum tax (AMT).

As far as your investment strategy goes, determine whether to keep your accumulated shares or sell them. A strong consideration in your strategy is how much you are invested in your current employer. Between your income, options, and grants, you don’t want too much of your success to depend solely on your employer.

Portfolio Review

Year-end is a perfect time to assess your household investment strategy, with extra emphasis on the household. Each account should be playing a role and complementing all of your accounts – even the 401(k) from three employers ago that you haven’t done anything with.

Evaluate each position, rebalance your portfolio to its desired targets, and have a clearly defined strategy in place. If you have losses in your taxable account, then consider selling those positions to generate a tax loss. If you’re retired, then consider carving out some or all your cash needs for 2021 right now. If the markets dive, then you’ll already have your spending needs accounted for and will avoid selling more shares to generate the same amount of cash.

Roth Conversions

It's very common for people to have the majority (if not all) of their retirement savings in pre-tax dollars, meaning those dollars have never been taxed. This creates a potential tax risk in the future because we don’t know what your marginal tax rate will be in six months, let alone in 10 to 30 years. We do know that if tax rates go up, more of your money will go towards paying taxes than supporting your lifestyle.

To help you navigate any high tax environments in the future, consider Roth conversions. Anyone who finds themselves in a much lower income tax situation this year should see if converting a portion of their pre-tax savings to Roth makes sense. While you will be paying taxes today, the Roth dollars will now grow tax-free for the rest of your life and for the next generation. Roth conversions require a lot of thoughtful planning and cannot be reversed so be sure to work with your advisor and CPA.

Identify Opportunities for 2021

Did you max out your 401(k) and still have money to save? Find out if your 401(k) plan offers an “after-tax” contribution option – no, this is not the same as Roth. If so, you might be able to take advantage of a “super backdoor Roth” strategy.

If you’re an executive, your company may offer a 457 or deferred compensation plan that will allow you to save above and beyond the 401(k) limits. While tax-deductible contributions are nice to have, be aware of the credit risks that come with a deferred compensation plan before participating.

Interested in contributing to a Roth IRA? In 2021, the income phaseouts will start at $125,000 for single filers and $198,000 for married filing joint filers. If you’re not eligible for contributions, then talk to your advisor about a “backdoor Roth IRA.”

If you’re in a high deductible health insurance plan, then you’re eligible for arguably the strongest savings vehicle out there – a Health Savings Account (HSA). HSAs offer triple-tax savings potential.

  • Tax-deductible contributions

  • Tax-deferred growth (if invested)

  • Tax-free distributions for qualified health expenses

On top of the tax benefits, some employers will even make a match contribution to your HSA. With health issues that can arise later in life, HSAs are perfect for long-term care planning. And, unlike a Flexible Spending Account (FSA), an HSA is a savings account, so your balance stays with you.


Your checklist may be different from another person’s, and your own list may be different year-to-year. Take this time to reflect on what you're truly working towards to know which planning items should be on the top of your list. Your GPS won’t give you directions until you tell it where you want to go. The same applies to your money. Identifying your goals will allow you to have a real strategy and see if you are on the right track.

Frank Iozzo, CPWA®

President, Private Wealth Advisor


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