Year-End Tax Planning Tips 2021

Tax planning is important stuff. Perhaps not as exciting as the markets but saving money on taxes can still be exciting! Mid-November begins the countdown to year-end. The following is a handy Tax Planning Checklist.*  Some of these items, if done now, could make a big difference to the 2021 tax year AND add to savings.

1. How close are you to maxing out your 401k? The max is $19,500 for those under age 50 and an extra $6,500 for those age 50 and above. The deadline is December 31st and lots of 401k and 403b plans allow contributions of as much as 25-30% or even 100% of pay. Contribution rates can be lowered again in the new year.

There is still time remaining in 2021 to accomplish tax-deductions and/or create new savings vehicles!

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Will Social Security be There, Pt. 2

Last week tgif2minutes.com explored a basic statement directly from Social Security’s SSA.gov summarizing that taxes will mostly likely need to go UP TODAY to afford Social Security in the mid 2030’s and for future generations – which is only 15 years away.

This week’s edition will present several possible changes that could take place along the path to higher taxes in order to preserve the Social Security that American workers pay into dearly and expect to receive someday.

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Will Social Security Be There?

Here starts a mini-series of TGIF 2 Minutes editions.

The following is taken directly from the current Social Security website. The italics below are copied from the website and presumably are meant for emphasis. Underlines are mine.

The concepts of solvency, sustainability, and budget impact are common in discussions of Social Security but are not well understood. Currently, the Social Security Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75 percent of scheduled benefits. This increase in cost results from population aging, not because we are living longer, but because birth rates dropped from three to two children per woman. Importantly, this shortfall is basically stable after 2035; adjustments to taxes or benefits that offset the effects of the lower birth rate may restore solvency for the Social Security program on a sustainable basis for the foreseeable future. Finally, as Treasury debt securities (trust fund assets) are redeemed in the future, they will just be replaced with public debt. If trust fund assets are exhausted without reform, benefits will necessarily be lowered with no effect on budget deficits.

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Murphy’s Law is Expensive

One of the most critical factors of long-term personal financial success is… guess:

  1. The markets
  2. Spending
  3. Interest rates
  4. Stock selection
  5. Income level

And the answer is… SPENDING. This fact is why a truly competent financial planner will spend the most time on discussing spending, both today and future projected, along with GOALS (Goals are what people spend money on).

Things can go wrong at any time, therefore, count on one or more things going badly wrong along the course of a person’s life and financial life.

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Personal Board of Directors

As has been said, “No man [or woman] is an island.” The deeper meaning of the famous poem by this title may be somewhat philosophical: that we are all part of a bigger unit such as the world, a country, a family, or something. The less deep but equally serious meaning is more like,

  • why go it alone?
  • try reaching out to others from time to time to seek advice and larger perspective.

Regular readers of TGIF 2 Minutes may be thinking that Debbs has lost her mind here but the related idea of having a “Personal Board of Directors” has been worthy of featuring for some time. Coincidentally Brett Danko, my business partner and the principal and founder of Main Street Financial Solutions LLC, recently presented a similar topic including having and regularly consulting with a Personal Board of Directors which inspired this edition.

The Personal Board of Directors can be consulted regarding decisions of all sorts – personal, financial, and professional.

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A Quick 2Q Wrap-Up

Just like that it is July 2021! That means both the 2nd Quarter and 1st Half of the year have come to a close. Here are a couple of quick notes about the quarter including a few things that changed and did not change on the year.

Stock and bond markets along with portfolio performance continued to be strong. It seems there is less caution in the air with an economy continuing to come out of the pandemic. Although the expression “the most unloved bull market” is still on peoples’ minds. Reason being that worries abound as the US Fed and Treasury continue to pump record amounts of money into the US economy. And there are plans for the stimulus to continue. This state of affairs risks inflation among other economic maladies.

Stock and bond markets along with portfolio performance continued to be strong in 2Q.

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Are Tax Rates Going Higher?

The question of whether or when tax rates may go higher is one asked after many a US Presidential election. The actuality of taxes going up is altogether another issue with its own timing depending on the President, party and Congress involved. There can be signals of both higher and lower taxes that certain candidates and Presidents communicate to win friends (and elections) and influence people.

In fact, in reading this week the obituary of Walter Mondale it seems that his transparent insistency on a proposal to raise taxes in his mid-1980’s US Presidential bid was a major factor behind his losing the election to Ronald Reagan (Reagan’s 2nd term run). That was then, this is now. One could say that now President Biden ran on a platform to raise taxes – in part winning him the election. Taxes and tax plans may always be part of US elections as they say the only things certain in life are death and taxes.

There is no “magic bullet” strategy to avoiding tax increases.

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Quick 401k Tax Tip Video

From the January 2021 archives of TGIF 2 Minutes – a relevant 401k tax tip video. Remember, the 2020 tax filing deadline was delayed until MAY 17TH, 2021. Considering this extra time, it is never too late to plan for the rest of 2021 and beyond. Enjoy this quick video.

Click the PLAY button above.

Thank you for watching, stay safe and TGIF!

The 401k Trap: Contact me for a copy at kdebbs@msfsolutions.com

Quick 1Q Wrap-Up

In the interest of the upcoming Easter and current Passover holidays today’s edition will be quick. Similar to the 1st Quarter of 2021 which seemed to FLY BY!

Market – and my clients’ portfolio – performance was strong to start the year. There is caution in the air, however, as 10-year US Treasury yields climbed to levels not seen since early 2020 before the pandemic began. The swiftness of the rise in bond yields warrants caution in the overall stock and bond markets.

The swiftness of the rise in bond yields warrants caution in the overall stock and bond markets.

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The $1,100 Cell Phone…Again!

From the Archives of TGIF 2 Minutes… read on for 2021 updates. Originally sent, April 2019.

Cash flow. Wouldn’t you like to have more of it around tax time? Well then, it may be time to delay or reconsider that new cell phone purchase.

Recently [in 2019] this “sticker shock” issue came to the forefront when I forked over $1,100 for my new Samsung Galaxy Note cell phone. OK, you may say, “Why didn’t you go with the zero-interest payment plan?” or, “Where have you been, Kerrie?” To which I would respond,

Having in place a stash of cash savings, “rainy day” fund, or emergency fund is one of the first things I discuss with all of my clients, no matter their income.

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