Five Year-end Tax and Retirement Conversations

Now is the time to talk with clients about RMDs, capital gains taxes and charitable giving.

By Assunta McLane
Assunta McLane
Assunta McLane

We know how busy this time of year can be for all, but before the holiday hustle and bustle truly kicks into gear, take some time to check in with your clients to make sure their personal finances are in good order. Here are a few ideas for you to consider when speaking with them:

1. Required minimum distributions (and new IRS direction)

If your client has an IRA, they are more than likely aware that at some point they will be required to take required minimum distributions (RMDs). They may not know this requirement kicks in for any kind of non-Roth IRA by April 1 following the year in which they reach age 72. Going forward, distributions must be made by December 31. The Internal Revenue Service assesses a 50% penalty on the required amount when investors miss taking a required distribution.

If your clients don’t need the additional income, they may want to consider a qualified charitable deduction (QCD). A QCD allows investors to direct funds — up to $100,000 — from their IRA to a qualified charity of their choice. According to IRS rules, this can satisfy all or part of their RMD. In addition, the amount of the distribution given to charity will not be included in their gross income and it will not count towards the limits for charitable contributions.

If your client was named beneficiary of an IRA any time after January 1, 2020 and qualifies as a non-exempt person, they will be required to take yearly mandatory distributions. Beneficiaries are required to distribute their inherited IRA no later than 10 years from the decedent’s date of death. New information from the IRS clarifies that if distributions were not taken in 2020, 2021 and 2022, investors will be exempt for those years. However, your client will be required to take yearly distributions moving forward. []

If your client is required to take a distribution from either a personal IRA or an inherited IRA, be sure they are also setting funds aside for taxes. They may choose to have taxes withheld at the time of distribution or earmark funds separately in an account for taxes. No one likes a surprise tax bill.

2. Maximize retirement saving

In 2022, individuals can contribute $20,500 to their 401(k) or other employer-sponsored plan, or $27,000 if they are age 50 or older.  Remind those who are financially unable to contribute the full amount that they should try to contribute at least the amount that their employer will match.

Now is also a good time for your clients to confirm with their plan administrators if they have the option to make Roth 401k contributions. Although there is no up-front tax deduction when contributing to a Roth 401(k), investors get long-term tax-free growth and the added bonus of no required distributions when they turn 72.  Furthermore, unlike with a Roth IRA, there are no income limitations when contributing to a Roth 401(k).

All contributions to an employer-sponsored plan must be made by December 31. If your client expects a year-end bonus, they may be able to request a larger, set amount to go into their retirement plan.

Your client can also contribute $6,000, ($7,000 if they are 50 or older) to an IRA. They have until April 15, 2023 to make their 2022 IRA contribution.  Depending on your client’s adjusted gross income, some contributions may be deductible. Either you or your client’s tax professional can help them check whether they meet the income-eligibility limits for funding a Roth IRA.

3. Review capital gains and losses

The markets have certainly been rocky this year. This is a good time to review your clients’ taxable portfolios with them and help them look for opportunities to book losses. These can offset taxable gains they may have already accumulated this year and moving forward. If their capital losses exceed their capital gains, the amount of the excess loss that they can claim to lower their income is the lesser of $3,000 ($1,500 if married filing separately). Remind clients that they can recognize current stock losses with a temporary sale, and that they should wait at least 31 days to repurchase the same security in order to avoid the wash sale rule. If a transaction in the stock is executed within 31 days, the IRS will not allow your client to benefit from that loss; you don’t want them to be caught off guard.

4. Giving to family and friends

Once your client has considered their personal situation, they may choose to gift to family and friends. In 2022, they can give $16,000 to as many individuals as they choose, or $32,000 if they are a married filing jointly. This is a perfect time to gift to family and friends.

Your client may choose to make an outright gift with either cash or a check. It is important to note that if making a gift by check, the check should be cashed before December 31.

If your client would like to make a gift to a minor but would prefer not to give outright cash, they may consider gifting to certain vehicles that qualify for the annual exclusion gift.  Your client may consider making a gift to a Section 529 plan, Uniform Transfers to Minors Act (UTMA), Achieving a Better Life Experience Account (ABLE) and a Crummey Trust to name a few.  These accounts are typically set up with a custodian and invested for the benefit of a minor. These each operate a little bit differently and careful consideration should be given to determine which option works best for your client and their families. Each of these vehicles have different rules that apply which should be discussed with an advisor and/or attorney.

As long as clients limit gifts to no more than the annual exclusion amount of $16,000 to any individual, they are not required to file a gift tax return. If they choose to gift more, they will be required to file an additional tax return and should discuss specifics with their tax advisors.

5. Gifting to Charity

Charitable gifts are one of the few remaining tax deductions. Your client may choose to make cash donations, but they may want to consider donating appreciated securities. When using appreciated securities your client may be able to deduct the full market value of the security but they also avoid paying capital gains on the donated appreciated security. Non-cash gifts are  limited to 50% (or sometimes 30%) of adjusted gross income. Before year-end is a great time to review your client’s portfolio and suggest they utilize securities with large unrealized capital gains for charitable donations.

We hope this list provides some talking points as you meet with clients to wrap up the year and kick off the new year with a fresh start. We hope you enjoy the holiday season with loved ones.

Assunta “Susie” McLane CFP, is a vice president and senior wealth advisor with Summit Place Financial Advisors LLC.  She can be reached at or 908-517-5884. 




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