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Wealth Planning

Fall opportunity: How to optimize your 2021 finances now

See our 10 planning tips that may help you end this year well.

Every year-end, it is wise to assess your finances and tax liabilities. But this fall, we recommend starting your review a little earlier. There has been so much potential upheaval: the evolving global pandemic, possible changes to U.S. tax law, and the all-time highs of the U.S. equity markets.

Give yourself the gift of more time to connect with advisors, make thoughtful decisions—and act. 

To help, we offer these top 10 planning tips to make your year-end review as effective and efficient as possible.


Take stock: What changed for you this year?

A big-picture review not only helps you identify and act on matters that are in your control, but also lays a solid foundation so that you can respond quickly to any potential changes in the future. To do that review well:

1) Get organized. Use new “FinTech” (financial technology) to help you quickly and efficiently get a handle on all your financial holdings and cash-flow activity. Such an “aggregation” of assets used to require a legion of accountants. Now, it’s a simple matter of signing up—which you can do online.

2) Embrace the “fresh-start effect.” Use the reopening of the economy as an opportunity to re-examine what is important to you and how your financial resources can support your personal goals and values. For example, maybe you want to support the next generation of research into breakthrough healthcare, consider environmental or social investments, or purchase a piece of property that your family can use to gather and spend quality time together.

3) Review your portfolio. Equities kept soaring in 2021, and our market outlook remains positive. Even so, you should make sure you understand how you’re currently positioned and check that your overall strategy is still aligned with your goals. Pay particular attention to any holdings that have become a “concentrated position” and which might disrupt your financial future if markets were to turn. 

4) Be intentional with your cash. U.S. consumers are holding record levels of cash that earn all-time lows in interest. Make sure the amount you hold is intentional, based on what you need for operating cash flow, near-term, big-ticket purchases, opportunistic dry powder or a psychological safety net.


Look ahead: What’s needed for you to stay on track?

 Your J.P. Morgan team will work hard to keep you up-to-date as change happens. For now, we highlight some potential actions to take, given this year’s unusual circumstances and unique opportunities:   

5) Take advantage of low interest rates. While low interest rates don’t boost your savings account, they do create opportunities for the liability side of your balance sheet. Many people are refinancing and restructuring current debt to take advantage of, and lock in, historically low interest rates.

If you’re a U.S. taxpayer thinking of buying a home, you might also consider paying for it in cash and cash-out refinancing, then using the mortgage proceeds for investments. Doing so would allow you to classify interest on the loan as “investment interest”—which you can deduct fully against your investment income. By contrast, interest classified as “qualified residence interest” is limited to interest on no more than $750,000 of acquisition debt.

U.S. taxpayers are also exploring the many estate planning strategies that are potentially more lucrative when interest rates are low, such as grantor retained annuity trusts (GRATs), charitable lead trusts (CLATs) and intra-family loans.

6) Start thinking about potential year-end tax planning moves. Some smart tax planning strategies must take place before the year ends to be counted toward 2021 tax returns. So make sure you start contemplating whether you want to make annual exclusion gifts to family members, convert traditional IRAs to Roths, make charitable gifts or harvest tax losses in your investment portfolio. You’ll also want to confirm you’ve fulfilled the 5% annual distribution requirement for your private foundations, and whether it makes sense to change trustee or other fiduciary appointments so your trusts are as income-tax-efficient as possible. 

7) Don’t forget retirement accounts. Required Minimum Distributions are back on the table for 2021 (pandemic-inspired legislation suspended RMDs for 2020). So be sure to take any of yours by year-end to avoid steep penalties. If you’re charitably inclined, remember that you can do a qualified charitable distribution (QCD) from your IRA directly to a charity (not a donor-advised fund), and the amount given will go toward satisfying your RMD.1    

If you’re still in accumulation mode, make sure that you’ve made use of all the tax-advantaged savings opportunities available to you through your retirement plans and deferred compensation arrangements. Many companies have elections that must be made by December 31.

8) Know your gifting capacity. Whatever federal lawmakers might do to the U.S. estate and gift tax exemption in 2022, one thing is for certain: Current law already will reduce the exemption in 2026.2 Given this fact and the positive market outlook, consider using your lifetime exemption now if you have the desire and capacity so that future growth is off your balance sheet. 

Further, if you’re considering gifts to charity before year-end, funding those gifts with highly appreciated long-term securities can offer a one-two punch from a tax planning perspective.  You could receive a deduction based on the fair market value of the securities gifted, plus you can avoid paying any income tax on the embedded appreciation. 

A donor-advised fund can offer flexibility if you’re looking for a way to streamline your gifting or “pre-fund” many years of charitable giving in a high-income year when the deduction might serve you best.


Look around: How can you help the people you love?

9) Gather and educate family members. Plan now to hold a holiday-time family meeting. Such meetings are a wonderful opportunity to review general family finances, educate the young, discuss everyone’s values, hopes and aspirations for the short and long terms, and come to an agreement about what your “family success” might look like.

This year, as many teens and young adults have been re-entering the physical world after a long lockdown, you may want to help them get on the right financial track by reviewing with them how they can avoid common behavioral biases to which people in their teens and early 20s are especially susceptible. Read here to learn more.

10) Stay cyber safe this holiday season. Every year, cybercriminals and fraudsters take advantage of the increase in virtual holiday shopping and less cyber-secure home environments to target potential victims. This is why it is essential that, as your year-end preparations move into high gear, you remain vigilant in your transactions and interactions. For tips on ways to protect yourself this holiday season.


Ask for help: Are you getting the most from all your advisors?

Your J.P. Morgan team is ready to help you close out your 2021 on a high note, and to ensure you are set up for a successful year ahead. Please do not hesitate to ask us for help in making sure all of your resources are working for your benefit. 

1. Up to $100,000 per taxpayer.
2. Under current law, the lifetime exemption is scheduled to be reduced beginning in 2026 to $5,000,000 per person, adjusted for inflation.




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