Year End Money Moves

Well 2020 is flying by!

COVID-19 definitely threw a curveball for a lot of us, but luckily our family had a strong financial plan in place.

We’ve had more time to connect more with our friends & family from all stages in life.

So what are some money moves to make by end of year if you haven’t already?

  1. Roth IRA

For 2020 anyone making under $124k single or $193k married adjusted gross income (AGI) can contribute up to $6,000 to a Roth IRA.

If you are age 50 or older, that limit moves up to $7,000.

The power of a Roth is that you can withdrawal contributions after they have been in the account for 5 years with no penalty.

Roth Conversion for lower-income

Also if your income was on the lower end this year, say under $40,000 AGI, you can consider converting money from a traditional retirement account to Roth. You would pay the taxes on what you convert, but staying in the lower income bracket of 12% means you pay a little tax now & that money is free from being taxed later.

If you are interested in converting, you’ll need to do so by end of the year.

For higher-income, you won’t qualify for a Roth IRA but can still look into a backdoor Roth.

2. Maxing out Retirement Accounts

For those of you that are making more than that, you’ll definitely want to optimize what taxes you’ll have to pay. Maxing out retirement accounts are a great way to lower your AGI. This can also help out if you are on an income-based school loan repayment plan.

3. Business Deductions

Another great way to optimize taxes is to start your own business. Businesses save on taxes, especially with the cuts the TCJA gave us.

Starting a business is might be different than what you think. Not a storefront selling stuff, or a time-consuming endeavor.  For example, taking care of 1-2 other peoples dogs at home can be a business…. Consulting can be a business. Renting your house, sharing products you love with others on websites, etc.

For those who are already doing all of that, there are always additional ways to optimize your finances. Maybe you want to start Saving Thousands using Travel Rewards and Other Hacks, invest in low-fee index accounts, or even just consolidate old accounts. Once that money starts compounding you’ll have money problems like my high-income friend who is starting his own foundation!

You can catch a recent ChooseFI 2020 Wins webinar for inspiring stories of others making major changes in this past year.

What changes have you made or planned to make by end of year? Let us know in the comments