Here are some smart money moves to make before the end of the year

We’ve officially reached the last month of 2020. For many investors, that may prompt a sigh of relief.

But financial advisors say this is a great time to step back and assess which year-end financial moves you need to make now and revisit your money strategy to set yourself up for a prosperous 2021.

Before you do, you may want to throw out the Covid-19 pandemic mindset that has likely overshadowed all your life decisions this year.

“My biggest advice, in general, right now is let’s not overreact with long-term choices based on short-term circumstances,” said certified financial planner Jude Boudreaux, senior financial planner at The Planning Center in New Orleans.

In other words, this, too, shall pass. And when it does, you’ll be glad you made these financial moves.

There’s still time to make some key moves with your retirement savings.

If you plan to contribute to a traditional or Roth individual retirement account, you have until April 15 to do so and save on this year’s taxes.

But you may want to get a jump and fund those accounts now.

“Life happens,” said Roger Ma, financial planner at Lifelaidout and author of Work Your Money, Not Your Life. “If you’re already in the process of redoing your finances, you may as well make that contribution by the end of the year.”

In 2020, you can put up to $6,000 in a traditional or Roth IRA, or $7,000 if you’re age 50 or over.

With Roth IRAs, whether or not you can contribute depends on your modified adjusted gross income and marital filing status.

In preparation for retirement, you may want to do a Roth conversion, whereby you move money from a traditional pre-tax retirement IRA to a post-tax IRA. The move will add to your taxable income this year, but will enable you to withdraw that money tax-free in the future.

That transaction must be completed by the end of December in order to count for this taxable year.

“Do it before the last two weeks of December,” said Cathy Curtis, CFP, founder of Curtis Financial Planning in Oakland, California.

Curtis said she typically advises Roth conversions for clients who are in their 50s and 60s based on their anticipated future income.

Others may want to consider another strategy: increasing their 401(k) contributions.

It may be too late for those additional savings to be withheld from pay checks this year. But ramping up those contributions can help reduce your taxable income next year while increasing your retirement nest egg, Curtis said.

In 2021, individuals can defer up to $19,500 in their 401(k). Those ages 50 and up can put away an additional $6,500.

Another way to save on taxes this year is to give away money to charity.

But the best strategy for you depends on your income and tax filing status.

The CARES Act that was passed by Congress earlier this year made it possible so that you can deduct up to $300 in cash donations in 2020. The change applies to tax filers who take the standard deduction — $12,400 for single filers and $24,800 for those who are married and file jointly.

Around this time of year, Curtis said, she typically does a tax analysis for clients. If they are close to the standard deduction or will go over it, that means any more money they contribute to charity will translate into more tax savings for them.

For some, that entails writing checks as usual. Others may want to consider a donor advised fund, Curtis said.

Donor advised funds allow you to contribute money and get a tax deduction today, while the money can be donated in the future. Because many of these accounts come with minimums, the strategy does not make sense for everyone.

People who own stocks that have grown in value can transfer them to a donor advised fund instead of selling, and therefore avoid having to pay capital gains taxes.

“It’s like a no brainer for people who have taxable accounts with a lot of appreciated securities in it and who are charitably minded,” Curtis said.

At the end of every year, you should revisit your goals and evaluate whether tweaking your financial habits will help you reach them faster.

This year, the key to successfully doing that analysis is to not let the Covid-19 pandemic distort your plans, Boudreaux said.

For example, deciding to buy a vacation home now, when you usually prioritize overseas travel, could be a source of regret once there is a return to normalcy, he said.

“My hunch is in three to five years, there’s going to be a lot of those properties for sale,” Boudreaux said. “Once the world is open again, they’re going to want to go and experience the world, just like they have before.”

By doing a practical check-up — what Ma calls “good financial hygiene” — small tweaks could lead to progress you will likely be thankful for later on.

That includes checking your credit report to make sure there are no mistakes or red flags indicating that your accounts have been compromised.

Review the beneficiaries you have listed on all of your accounts in case they need to be changed.

Also, take time to evaluate your spending from the past year. Identify your short-term and long-term goals, and then check to see whether where your money is going actually aligns with those intentions, Ma said. Year-end credit card summaries can help identify spending habits.