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5 Things to Do Before the End of 2022

Getting Ready for 2023

As we begin to wind down 2022, it’s time to start thinking about some of the things that you really need to take care of before the new year gets underway. With all of the volatility we’ve seen in the stock market, as well as the sudden, dramatic rise in interest rates over the past 12 months, it’s easy to overlook the things that need to get done every year, regardless of what else might be going on. 

So here are some items that probably need your attention over the next few weeks:

1. Required Minimum Distributions

First, if you haven’t done so yet, be sure to take your Required Minimum Distributions (RMDs) for 2022. If you’re over age 72 at any time this year, and you neglect to take at least the minimum out of your tax-deferred accounts before the end of the year, you’ll face some very stiff penalties: 50 percent of the shortfall. You need to take the correct amounts out of ALL of your tax-deferred plans: your 401(k)s and IRAs, including SEPs, SIMPLEs, and so forth. One exception to this rule is that if this is your first year of RMDs (which for most people is age 72), you’re allowed to defer taking this year’s RMDS until as late as April 1 of 2023. But – that means you’ll have two RMDs for next year. 

2. Check Your Estimated Taxes on Your RMDs

Next, it’s a good idea to check the estimated taxes on your RMDs to see if you’ve had enough money withheld or paid in through estimated tax payments to avoid any under-withholding penalties. If you find that you haven’t paid enough, you may want to withhold extra taxes from your year-end IRA distributions. In fact, some people prefer to always withhold taxes from their RMDs, just to make sure they’re paid. Your financial advisor should be able to help you figure this out. 

3. Qualified Charitable Distributions

The third thing to do is to decide if you want to make any qualified charitable distributions (QCDs) for this year. I’ve talked about QCDs in previous videos, and if you want to know more about them you can check them out in the archives. The great thing about the QCD is that it may allow you to take a “de-facto” tax deduction for your charitable contribution, even if the current standard deduction won’t let you itemize. If you’re over 70 ½ years of age and giving money to a charity was already part of your plan for this year, the QCD may be the best way to do it. 

4. Tax Loss Harvesting

With the markets down so much in 2022, you might find that you’ve got some losses this year in your portfolio. If so, you may benefit from selling some of those losing investments to offset any gains you have in other equities you own, or establish an ordinary income tax deduction of up to $3,000. You may want to try to reduce any short-term gains first, which are gains that resulted in a sale of less than 366 days, because they’re taxed at a higher marginal rate. Just keep in mind that certain “wash sale” rules affect new stock purchases before and after the sale of a security, so be sure to have your financial advisor help you with this one. 

5. 401k Contributions

Finally, make sure you’ve contributed enough to your 401(k) and any other retirement accounts you have. You can contribute up to $20,500 to your 401k in 2022, and an additional $6,500 more if you’re age 50 or over. These pre-tax contributions can make a big difference to your tax bill, so check to see that you’ve contributed all that you’re able to. 

Next year’s 401(k) limits will jump to $22,500 and the catch-up increases to $7,500.  Some plans only allow you to make changes on a quarterly basis so if you want to max out next year, you might need to make those changes before January first. 

These are just a few important things to think about as 2022 comes to a close. Remember, most of these opportunities go away as of January 1, so take advantage while you still can. We strategize with our clients every single day at Lucia Capital Group, helping them with some of the most time-sensitive money moves. How can we help you the most? Just give us a call! 

Important Information:

The information provided should not be considered specific tax, legal, or investment advice and is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. 

Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy will be profitable for a client's or prospective client's portfolio, thus, investments may result in a loss of principal.

Accordingly, no client or prospective client should assume that the information presented serves as the receipt of, or a substitute for, personalized advice from Lucia Capital Group or from any other investment professional.

You should always seek counsel of the appropriate advisor prior to making any investment decision. All investments are subject to risk including the loss of principal. This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed.

IRA withdrawals will be taxed at ordinary income rates. Withdrawals prior to age 59½ may also be subject to a 10% penalty tax. 

Rick Plum is a registered representative with, and securities and advisory services offered through LPL Financial, a registered investment advisor and member FINRA/SIPC. The investment professionals are affiliated with LPL Financial and are conducting business using the name Lucia Capital Group, a separate entity from LPL Financial.

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