What You Need to Know
- There is still time before the end of year to help your client improve their financial position.
- Advisors should prepare a client's tax report before meeting with their CPA.
- A potential increase in taxes means it's wise for clients to covert traditional IRA funds to a Roth.
As 2021 enters its final days, there is still time to do meaningful planning to help improve your client’s financial position and solidify your relationship.
Here are five areas that you should address with your clients:
1. 2021 Tax Estimate
Set up a meeting with your client’s CPA and prepare a 2021 tax estimate. This can be valuable in uncovering opportunities that you and your client can address before the end of the year.
Start by preparing a tax report for the CPA outlining the income, gains/losses, and capital gains for the year. Not only is this a great way to add value for your client, but you build a relationship with their CPA, too.
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2. Tax Loss Harvesting & Rebalancing
Using the tax report, review your client’s gains and losses for the year. Markets have been generous the last two years, but you may still have losses that could be harvested.
Be sure to review your client’s most recent tax return to identify if they have carry-forward losses that could be used. This may present an opportunity to sell assets that have appreciated greatly with little or no tax liability.
Rebalancing at the end of the year may make sense for a client. You can realign assets with their goals, objectives and risk tolerance. Just make sure this is coordinated with their year-end tax picture in mind.
3. Review Retirement Accounts & Year-to-Date Contributions
Review retirement accounts and see what contributions were made this year. Clients may be able to defer additional monies by increasing their withholdings on the remaining checks this year. Self-employed individuals could bonus themselves and defer it toward their retirement.