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Smart Money Moves to Make Before the New Year

IN THE PRESS:

Nov. 12, 2020

Deloitte projects holiday sales of $1.5 billion in 2020, a 1-1.5% increase over last year.

But in between shopping for loved ones, using the time before the end of the year to make sure you've dotted your financial I's and crossed your T's is smart money management. Consider it a gift to yourself, both for the short term and for years to come.

For example, a 2019 Northwestern Mutual study found that U.S. adults who 
work with a financial advisor report “substantially greater financial security, confidence and clarity than those who go it alone.”

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests average additional investment returns can range from 1.5% to 4% more each year.

SmartAsset’s new tool makes it easy to find the right financial advisor near you in just a few minutes. Our exclusive, no-cost tool matches you with up to three local fiduciary financial advisors that have passed a rigorous screening process. We confirm each is registered with the U.S. Securities and Exchange Commission (SEC) or the appropriate state regulator, possess the proper licenses and have no pending or valid regulatory disclosures within the past 10 years.

Giving yourself one of these four financial gifts can not only help grow your assets and plan for retirement, but also save money on taxes this year.

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Investing involves risk and no situation is the same. This is in no way intended as a personal recommendation and investment decisions are solely those of the reader.

SmartAsset is a personal finance technology company that features a financial advisor matching service. Financial Advisors who appear on SmartAsset are from companies with which SmartAsset receives compensation. SmartAsset takes into consideration wealth and location to determine how to match users with advisors. SmartAsset doesn't include the entire universe of Financial Advisors.

Sources:
1. Northwestern Mutual study
2. Value of a Gamma-Efficient Portfolio (2017), Morningstar Investment Management.
3. The Return on Advice (2016), Envestnet, Capital Sigma.
4. Value of a Financial Advisor Study (2017), Russell Investments.
5. Advisor Value (2014), Voya Retirement Research Institute.

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1. Pay Yourself -- Boost Your Retirement Account Contributions

Are you maxing out your retirement account contributions? If not, why not boost your contributions at the end of the year? Doing so not only allows more money to grow with compound interest toward your retirement goals, but also increases the amount you can deduct from your annual tax bill.

You can contribute up to $19,500 per year to 401(k) and 403(b) accounts. The catch-up contribution limit for those 50 or older is $6,500 per year.

For those with an Individual Retirement Account (IRA), you can contribute up to $6,000 in 2020. The catch-up contribution limit is $1,000.



2. Estimate Your 2020 Taxable Income 

It's important to preview your 2020 taxable income before year's end to avoid any unpleasant surprises next April. Will you fall in the same tax bracket as you expected to at the beginning of the year? If you're on the cusp of a higher tax bracket, determine whether it makes sense to decrease your taxable income by harvesting investment losses, deferring some of your income, or making tax-beneficial contributions like to a 529 Education Account. 


3. Get A Plan in Place for Next Year

You've got the pieces of information you need -- like what you expect to earn in 2021, your healthcare premiums, daily expenses, as well as planned retirement account, FSA, and HSA contributions (if applicable). Now's the time to build your 2021 financial plan so you're ready to achieve your goals starting January 1. What's even better? Engage a fiduciary advisor to help you develop a strategy to meet your long-term goals.

By definition, a fiduciary financial advisor is ethically bound to act in your best interest. This obligation eliminates conflict of interest concerns and makes an advisor’s advice legally obligated to be in your best interest. An advisor can look at your asset allocation, savings contributions and risk tolerance to find areas to help optimize your plan for increased returns and retirement confidence.

All of the financial advisors on 
SmartAsset’s matching platform are registered fiduciaries. This ground-breaking tool allows you to compare multiple financial advisors easily and transparently, plus interview them, for free. You have the power to choose the best advisor for you. 


4. Donate to a cause that’s important to you

Is there a particular charity or cause you’re passionate about? Why not make a charitable contribution?

Tax deductible charitable contributions are accepted up until Dec. 31. Make sure you collect all necessary documentation for your donation for tax purposes. This includes any receipts or bank statements that indicate your contribution.

Additionally, if you donate any property valued over $5,000, you’ll need to submit a written appraisal to qualify for the deduction.


The Best Financial Gift You Can Give Yourself

If you give yourself any gift this year, it should be speaking with a registered financial advisor to get on the path for aligning your finances with your goals. Ultimately, you want to be in a place where you can enjoy travel, family, and fun in retirement -- not finances.

Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one.

Our no-cost tool makes it easy to find the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have been rigorously screened for regulatory disclosures and to confirm their licenses.

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