There are a few 2021 financial items that you can postpone right up until tax time. For example, you can make 2021 Individual Retirement Account (IRA) contributions until April 15, 2022. But some items have a hard deadline of the end of the year. Let’s discuss four of them.

Employer-Sponsored Retirement Plan Contributions

Last week someone told me that she had increased her 401k contribution to 50% of her salary for the month of December? Why? Because she was trying to maximize her contribution for 2021, and she was well short of the limits.

Employer-sponsored retirement plans have annual contribution and salary deferral limits. These limits vary from account to account, and may depend on the age of the employee. But the deadline for annual contributions is December 31.

If you do have to make a last-minute payroll adjustment, you probably want to coordinate with your human resources department to ensure the contribution change will impact the account before year-end. But if you are short, you can contribute up to 100% of your paycheck until you hit the limit.

Tax Loss Harvesting

I usually advise investors to take advantage of year-end tax loss harvesting in November. In fact, I covered the topic in a November article: Tax-Loss Harvesting, For a More Efficient Portfolio.

But if you have some nice gains in your portfolio this year, it may pay to sell some of your losers to offset those gains. You have about another week to do so, and then you will lose the opportunity until the end of 2022.

Roth IRA conversions

Although you can contribute to a 2021 Roth IRA until April 15, 2022, if you want to convert a traditional IRA into a Roth IRA, you need to do it before the year ends. There are a number of situations in which it may make sense to do such a conversion.

For a conventional IRA, the contributions can be tax protected in the year they are made. But then the withdrawals will be taxed as income. For a Roth IRA, the contributions aren’t tax protected, but the withdrawals are free of state and federal income taxes.

One case in which a conversion may make sense is if you expect to move to a state with a higher income tax rate after retirement. However, if you expect to move to a state with a lower income tax rate, or if you expect your tax rate to be substantially lower when you begin to make withdrawals, it will probably be better not to convert.

Charitable Contributions

Finally, if you still plan to make charitable contributions, consider whether there may be any impact of making the contribution in this tax year, or pushing it to the next.

For example, concentrating donations in one tax year year can increase the value of deductions beyond the standard deduction threshold, which could be then be taken in “off” years.

In closing, I hope you have had a profitable year. I appreciate you taking the time to read my articles, and I wish you a happy holiday season.

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