• Bernhardt Wealth Management

Getting Your Finances Ready for Year-End: Part 1 of 2

Updated: Mar 14

As 2021 slides toward its close, it’s probably a good time for most investors to do a few year-end “tuneups” on portfolios, financial and estate plans, and charitable or philanthropic strategies. In this and next week’s article, we’ll mention a few items that almost always benefit from some attention, especially at year-end.

1. Stay focused on your core holdings. While there are always distracting trading temptations, it seems as if 2021 has had more than its fair share of them. Remember the January excitement over GameStop and its ilk? That frenzy was soon followed by “SPAC-Man” Chamath Palihapitiya, tweeting out “Shooters shoot” to his disciples, as special-purpose acquisition companies (SPACs) started flying every which way. Tradeable memes and non-fungible tokens (NFTs) became a thing around then, too, followed by the pursuit of cryptocurrency in the form of fluffy little dogecoins.


Our Advice: Instead of chasing investment fads, we encourage you to lean into the returns our resilient global markets are expected to deliver over time. As always, this means looking past the “hot ideas du jour” and building a low-cost, globally diversified portfolio, tailored for your personal financial goals and risk tolerances. Isn’t that your aim to begin with?


2. Revisit Your Saving and Spending. COVID changed a lot of things, including our saving and spending patterns. Stimulus and unemployment checks offered cash flow relief for many families. Businesses owners received generous loans. Moratoriums on paying off college debt and removal of penalties for dipping into retirement savings helped as well. Retirees were permitted to skip taking Required Minimum Distributions (RMDs), which is NOT the case in 2021, by the way.


Our Advice: As these and similar relief programs wind down, now is an excellent time to recalibrate your own financial plans. If you borrowed from your future self by withdrawing from or not adding to your retirement reserves, please establish a disciplined schedule for paying yourself back. If you became accustomed to spending less on items you used to think you couldn’t live without, try directing those former expenditures to restoring your retirement and rainy-day funds. Work with a financial planner to assess other ways your budgeting may benefit from a fresh take. Every little bit counts!


3. Watch for Fund Distributions. Even as we’ve continued to weather the pandemic storm, our forward-looking, global markets have been delivering relatively strong returns year-to-date for many foreign and US stock funds. That’s good news, but it also means mutual funds’ capital gain distributions may be on the high side this year. Capital gain distributions typically occur in early December, based on the fund’s underlying year-to-date trading activities through October. For funds in your tax-sheltered accounts, the distributions aren’t taxable in the year incurred, but you’ll owe taxes for funds held in your taxable accounts.


Our Advice: Taxable distributions aside, staying put to earn all potential market returns is the more important determinant in our buy-and-hold approach. With that said, in your taxable accounts only, if you don’t have compelling reasons to buy into a fund just before its distribution date, you may want to wait until afterward. On the flip side, if you are planning to sell a fund anyway—or you were planning to donate a highly appreciated fund to charity—doing so prior to its distribution date might spare you some taxable gains.


At Bernhardt Wealth Management, our sole aim is our clients’ benefit, at year-end and at all other times. If you’d like to discuss any aspect of your portfolio, your financial plan, or any other important financial matter, we are here to provide authoritative answers, based on the most current research and our years of experience. Your best interest is our chief concern. Please contact us.


Buen Camino!

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