By Debra Taylor, CPA/PFS, JD, CDFA™
Now that we are able to close the books on 2022, January is a great time to review major processes and to create a plan for the new year. No question that 2022 was a challenging one for all of us.
So here are the “Five must dos” we are tackling for early 2023 for all our clients.
To start off with, Taylor Financial Group has created an annual service calendar for the year, which includes all planning areas such as insurance, estate planning, cash flow planning, debt management, retirement planning, and so forth.
Secondly, we are constantly reviewing our investment thesis. This is important because the market environment and economic conditions are constantly changing. Towards the end of the tax year, we typically look for the upcoming opportunities, but in 2022, we reviewed this on a weekly basis. Our current thesis is that although the market will be turbulent, we believe the risk of missing out on a market rebound is higher than the risk of further substantial losses. We are also bullish on commodities and “reasonable growth” companies.
The third “must-do” is to prepare for tax season in advance. Every January, we send our clients Tax Preparation Letters that summarize transactions from the prior tax year. This includes (but is not limited to) Roth conversions, IRA contributions and taxable gains and losses. A good amount of time goes into each letter. See an example below.
Fourth, although we typically wait until Q4 to perform Roth conversion analyses, we have a unique opportunity to perform Roth conversions at a discount when the market is down. We want to take advantage of these opportunities as soon as possible in the New Year so that you can get tax-free growth on the converted assets—assuming the market rebounds, which we believe it will.
The final “must-do,” is to create a distribution strategy. Every year, a new distribution amount is set for each client based on their required minimum distribution (RMD). For most, the distribution amount will be lower in 2023 than in 2022 because of the market decline. This could open up other opportunities, such as partial Roth conversions or tax-gain harvesting based on your tax bracket. Although this may seem like an ambitious list, I consider every single item a “must do” for January and early February.
As always, please reach out with any questions.