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Monday Money Report

| December 07, 2021

Omicron fears continue to depress the market, with the S&P losing about 1.5% for the week.  The Federal Reserve Bank has indicated it plans to end bond purchases soon.  The turn away from an expansive monetary policy led to drops in technology stocks especially.  While this drop might seem serious, the market is still positive for the year.

And as the year comes to a close, we have a few year-end ideas to consider.  If you have a philanthropic mindset, but aren’t in a position to itemize tax deductions, consider bunching your charitable giving. An easy way to do this is to alternate years for charitable contributions. Most non-profits use July 1 to June 30 fiscal year, so you can still contribute each year for the organization’s purposes. By bunching two years of gifts into one, you may by able to itemize in alternate years.

You can also contribute to a donor advised fund. You can make a large gift to the fund, and then distribute it to your charities over time. These funds are also a great way to develop a family legacy of philanthropy and giving back.

You have until the tax-filing deadline (usually April 15th) to fund your IRA for this year.  Those contributions are called “above-the-line” because they directly reduce your Adjusted Gross Income.  Staying under a certain income level may make you eligible for the child tax credit, health insurance subsidies, and other benefits.

On the flip side, Roth conversions must be completed by year end.  A conversion is when you move money from a traditional retirement account, such as an IRA, 401(k), or TSP, into a Roth account.  Why would you want to do that?

The idea behind the traditional account is that you’re in a high bracket now but will be in a lower bracket in retirement, so you’ll be paying a lower tax rate on that money.  The two problems with that idea are that you’re paying taxes on a much bigger pile of money (so a lower precent but times a bigger amount often equals more total tax dollars), and that many people actually won’t be in a much lower bracket, especially when the Required Minimum Distributions kick in later in life. 

The Roth requires you to pay taxes now, but you get tax free growth for the length of your joint lives plus ten years. Either converting what is already in a traditional account, or making Roth contributions, will accomplish the same goal of growing the tax-free portion of your assets for retirement.

In retirement, we can draw down on different account types to either reduce the amount withdrawn or increase net income.

Your action to take this week is to evaluate your tax position for this year, and make any year-end adjustments, contributions, or conversions.  Be sure to check out our website at, as well as our Facebook page for more information.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor.

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.