Year-End Planning

 In Videos

As the end of 2020 rapidly approaches, now is the time to start crossing off items on your to-do list and begin focusing on year-end tax and financial planning. In this video, Rob Auclair discusses the most important items you should be planning for in the months ahead and into the new year.

Topics Discussed:

  • Max out your retirement
  • Plan for required minimum distributions (RMD)
  • Manage your marginal tax bracket
  • Rebalance your portfolio
  • Refocus your goals


Nov 11 11:02

Rob: Welcome to successful living. On today’s show, we are going to talk about challenging yourself and what the benefits are when you challenge yourself. If you are struggling about how to find challenges to overcome. When we overcome challenges, we have an increase of self-esteem, we feel good about ourselves. We are going to be joined by Chad Kritzas. He is our real estate expert. We are going to talk about the current state of the real estate market and also the reasons why people are buying and see and why it’s so active. Then we will talk about year-end. We will also talk about the year and checklist.

Then, we will take a viewer question. The word of the day is challenge. To invite someone to do or say something that one thinks would be difficult or impossible. When we challenge ourselves, we give ourselves the opportunity for growth. It is something that we have to work hard to overcome. When we do that, we develop emotional and mental strength and that gives us a boost in our self-esteem and increases our happiness in our lifestyle. Let’s look at what some the benefits are when we challenge ourselves. Number one, we increase self-esteem. We achieve little goals and gradually build up confidence and feel good about ourselves. When someone says I want to lose weight, they don’t necessarily say I want to lose 25 pounds, they say I’m going to lose one or two pounds per week. That builds on little goals and the self-esteem is going to get much much bigger.

Number two, and if it’s of challenging yourself are it helps you identify your goals. When you challenge yourself and accept the challenge, you have a clear path to the end goal. Number three, it expands your mind. That contributes to overall self-esteem. We read, ask questions, become an expert in that yield. When I started, I had little to no confidence in what I was doing. As the years have gone along, I have gained more and more knowledge by reading, talking to other people, and gaining experience. Number four, it triggers creativity. New ways to do things. Number five, losing the fear of the unknown. Once we face our fears, it becomes less scary. That is the big thing in a challenge. We get moving on a day-to-day

Nov 11 11:05

Basis of the same routine every day. When I say try to challenge yourself, that is the important piece. We challenge ourselves, we can feel better. Let’s take a look at some ideas if you’re saying I don’t know what to do to challenge myself. Number one is the more social. I have a close circle of friends that I have had since high school. They are still going to be my best friends. But I use my neighborhood, where I live, and what I’m going to do to get new experiences and have new friends. Number two, get creative. Take an art class, woodworking, learn something you never thought you could do. I can do nothing with woodwork. But when I retire, I want to build stuff. I will take classes and do things online. Number three, exercise. This is probably the most common one. Where people get a huge plan in front of them and they can’t achieve it because it’s so big. Maybe what you say is I’m going to walk five minutes per day for a week. Then 10 minutes, then 20 minutes. You build your self-esteem and you get confidence in what you do. Number four, make time for people. I am guilty of this all the time as close as I am to my mother and sisters, once I had my own family, I don’t have as much time to spend with them and it gets away from me. I am very aware of that and for me, I tried to do more every week. Number five, get out of your comfort zone. When I first got into this business, I was scared to make phone calls. Every day when I finish them, I felt great because I challenged something I was scared of. You will raise your self-esteem and have a happier lifestyle.

Stay tuned, when we return, we will be joined by Chad Kritzas.

Rob: Welcome back to successful living. Every time we have on Chad Kritzas, I feel like I say the same thing. We are waiting for something to happen and it’s all good stuff in the market. Welcome to the show once again. How are you?

Chad: I appreciate it, how are you?

Rob: I am doing well. In general, you and I have talked about this, you are just as busy as ever.

Chad: Definitely. It has not slowed down a bit.

Rob: If we could take a look, we have some updated numbers from the housing statistics. If you could walk us through this, tha great.

Chad: We are going to break it down into multi— three categories. Multifamily properties, number of sales are down 9.2%. That is typical of the last few months. There’s a shortage of homes for sale. Single-family home sales up 13% on the median price. Number of transactions up 9%. Condominiums, median price of 6% and number of sales up 4%. We are seeing sales and prices continue to climb as we go through this.

Rob: One of the things we look at is it is increased and this is over last year correct? You are saying we are up over 13% on a single-family house in the pricing from one year ago. That was still a very good market.

Chad: It was a great market. It was a sellers market a year ago and it still is now. If you’re thinking about selling her house, you can capitalize on the equity.

Rob: You mentioned Newport County. Is it straight across the board that we are getting this good growth year-over-year? Or month over month? Or are there certain towns tend to stick out when better than others?

Chad: Each county has an increased. In Newport County, it has been Newport. East Providence has been busy. Narragansett, those are the ones that we have seen a large increase in the number of sales and that amount of time. Those same towns on average, you are dealing with 30% less days on market.

August typically like we talked about, it is a slower month because of back-to-school and family vacations and those kinds of things. That didn’t happen this year. We continue through august September November and it continues to go —

Rob: You mentioned in past discussions that things got delayed from COVID. Are you still considering these a delay because of what COVID did to us?

Chad: September and October are typically good months. August tends to be slower in the winter. If it snows, that changes everything. We had the blizzards and everything shut down. Last year, we had no snow and we stayed steady until march when COVID hit. Otherwise, we are staying steady now. It’s already typical for the fall market rate —

Rob: There is so much movement in and out. Where are people going or coming from? — where are these people going or coming from. What are reasons we moving in and out houses?

Chad: I have seen a lot of downsizing. People have been in their houses 20 or 30 years. They are capitalizing on the high sale price. When you take that same idea, we have people that are now working people looking for more space because they need a home office whereas my dining room turned into my home office for three months. There are contractors finishing out an office for us.

Rob: Are you seeing that? People making moves for that reason?

Chad: Yes because a lot of the big companies, they have already announced that nobody is to the office more than a limited timeframe until 2021. I think the home office is going to be more of a new norm. Probably less large office-based. Long-term and the commercial real estate market, I think it’s going to be something next year you and I will be talking about.

Rob: I had another question buried in this one. I have had it come up a few times. What advice would you give someone if they said they are ready to downsize or they are not ready to downsize but their kids have out of the house and they are saying I don’t know if I want to downsi, I don’t know for want to move to a different

Nov 11 11:15

State, but does it make sense with how high the market is right now that I do something? Do you have that come up? What is your recommendation in the situation?

Chad: Anyone who has considered selling their house, now is the time to do so. We have never seen an increase in certain neighborhoods like this. When they come on the market, they go up with multiple offers. We have a few neighborhoods nearby and I spoke to a seller who said they saw people knocking on doors asking if people are selling their house. You drive down streets and there are no for-sale signs. For any homeowner, if they have considered selling their house, maybe the market collapses tomorrow and maybe it doesn’t, but this is record numbers.

Rob: Those people, maybe they could rent a place temporarily if they don’t over they want to land that’s a possibility?

Chad: Absolutely.

That’s the niche in the market. If you considered capitalizing on the equity in your home, this is the strongest time.

Rob: You mentioned going into a winter season and the prices can change. What do you expect as we enter, this year has been great. What are your expert tatian’s — what are your expectations for this winter?

Chad: We never slowed down last year because there was no weather to slow anyone down. The interest rates are still ridiculously low. It’s like free money out there. Going forward, we don’t see a slowdown. Listing wise, we are carrying less listings because they sell quickly or there are fewer homes for sale. If there’s a big influx of inventory, that’s going to change the market dramatically.

Rob: To that point, inventory is moving so quickly, what would you say to listeners who might be potential buyers? How can they prepare themselves in this environment to be ready when they find something?

Chad: There are a couple of tips. Have your agent lined up. Know who you’re 6 c13 with. More importantly, have to be preapproved. Get there ahead of time. Speak to the mortgage broker or bank or whoever you’re going to use. Get everything lined up in advance so when you get into a scenario with multiple offers, you are prepared. It’s about being prepared and knowing what contingencies are going to have moving forward.

What is the timeframe what is the house worth? Have everything in advance so when that time comes, you’re ready to go and you can compete in today’s market.

Rob: As a buyer, you are competing and you need to make yourself as desirable as possible and you can move as quick as possible and of6 c13 much money as possible. As a buyer, you need to be prepared and ready to go. Someone who hasn’t sold their house, and — are they at a disadvantage?

Chad: We know the market time is shorter. Having a prepared, having it staged and cleaned out all the things you’re going to do in the time comes and being ready so that when the time comes, you can pull the trigger and move quickly. Stuff sells very fast.

Rob: As we wind down a little

Bit, what is your advice when, when they’re going into the winter season and selling their house, do they put Christmas ornaments on or decorate? Do they leave it as is? All real estate agents are different. Some are going to give advice and some may not. If you are still living in your house, what do you recommend?

Chad: Staging and decluttering are expected. We have professional photographers to do these things for us. If you have a holiday tree up and we do the photos, we are happy to send a photographer back into redo things and freshen it up. There’s nothing worse than having a house on the market in april but there are still holiday pictures online. Is our job to make sure we stay on top of those things and everything is updated properly.

Nov 11 11:20

Rob: Open houses as COVID numbers are increasing, are the open houses the same or have been narrowed down doing less of it? Are you still having open houses?

Chad: We are. We are only letting one group in at a time. We’re limiting the number of people to go in and3 everything is open before they go in inside so they are touching things. Masks and gloves and we go through with cleaning wipes afterwards.

Rob: As always, you could great information to our viewers. I hope to have you here next time and get away from zoom. Thank you. Stay tuned. When we come back, we will talk about your checklist for year-end will we talk about financial affairs.

Rob: Welcome back. We want to give you some to do’s for year-end. Let’s take a look at some specific year-end tax planning. If you have yet to max out your retirement, you want to do that. 19.5 is the maximum you can put in if you are under 50. If you’re over 50, you can put in another $6,500. If you feel like you can do more, call your HR department and do so. If you have your own IRA, you can put in $6,000 per year. A newer rule is if you have turned 70.5, you use to not be able to contribute to 401(k)s or IRAs, but you can in all instances. Spend your FSA. This has to do with medical expenses. You want to make sure that you check to see if you don’t use it, you don’t lose it. In most cases, a lot of plans will say here is the balance. They have made some exceptions on some of the plans with COVID this year under the CARES Act. Number three, plan for RMDs. You don’t have to take them this year. They have moved the age up so if you turned 70.5 after January 1 this year, your new required minimum day is 72. This year, you don’t have to take out RMDs, but you can if you choose. Number four, adjust withholdings. A lot of people may have collected unemployment this year. You might want to fill out a W-4 form with your employer. Make some estimated tax payments. Number five, try not to hit the next marginal tax rate bracket. We are going to pop into the next slide right away.

Nov 11 11:25

We’re going to take a look at the 2020 tax brackets and the way they work. Someone earning $80,000 per year, they are going to p 10% on the first 20,000 and 12% on the next 20-80,000 dollars. Make sure you are aware that. There’s a big jump soon as you get to the next dollar amount. It does not change what you paid on the dollars below 80, but every new dollar gets taxed at 22%. Make sure you are aware of capital gains rates. After you move over $80,250, you go from 0% capital gains rate to a 15% capital gains rate. Medicare premiums are affected by this taxable income. You are going to increase from $150 per month for 3 premiums and now, you will end up paying $207 and keeps going and going so be aware of that. Reduce your taxable income, hold off if you are taking money from your retirement plan. If you itemize, see what other deductions you might have like charitable deductions or paying our taxes ahead of time, that might be helpful.

Let’s go to the next slide. Here are some year-end planning. Rebalance your portfolio. It has probably grown this year. Make sure if you started 6040, you get back to that. Number two, plan for large expenses and safer them now. Vacations, tax bills, home improvements. Review estate planning. Did you open a new account or a new property? Update the trustees, power of attorney’s and beneficiaries. Refocus your goals. Make sure you are saving more, spending less, and keep track of it.

If you do these things, you will finish a solid — a solid 2020 and start a solid 2021.

Rob: Welcome back. George writes in, I am 60 years old and I have a 401(k) and a taxable investment account. Should allocate them both the same? The thing you need to think about is get your asset allocation correct first. In a perfect world, you would take the bond part of the portfolio, put that in your IRA account C13 bonds get taxed as ordinary income which would be the higher tax rate. Take the equity portion, put that in your non-IRA or brokerage account. Those will get taxed at capital gains rate. Make sure you get that asset allocation done correctly. We appreciate you joining us. We hope you have a great week and we look forward to seeing you again next week.

Recommended Posts
Word of the Day: PerseveranceWhen Does Social Security Get Reduced