Adapted from an email sent to my private wealth management clients on December 10, 2021.

2021 Year-end Financial Planning Notes

As the year comes to a close, I wanted to call your attention to a few time-sensitive year-end financial planning actions:

Series I Bonds

Series I, “inflation protected,” savings bonds are currently paying a 7.12% annualized rate and are issued by the U.S. Treasury. These bonds are typically deemed to be among the safest securities in the world. The bond’s actual interest rate is 0%; however, due to the recent spike in our cost of living, the current inflation rate component of these bonds brings the composite return to 7.12%!

With this noteworthy 7.12% inflation rate component, these bonds could potentially be a valuable part of your emergency fund or act as a staging area for mid-term spending goals (keep in mind: you are NOT ABLE TO REDEEM AN I BOND WITHIN 1 YEAR OF PURCHASE).

The Series I Bonds are not tradable, and we are not able to purchase them on your behalf in your managed investment accounts. You will need to go to TreasuryDirect.com to purchase these I Bonds, only after carefully reading the details of bond redemption restrictions. Depending on the size of your emergency reserve, you may want to purchase your $10,000 individual limits in 2021 and then again immediately in 2022.

Here is a good blog post providing more detail on Series I Bonds, along with a key excerpt:

“While the current Fixed Rate for newly purchased I Bonds is 0%, the inflation rate for I bonds purchased before May 1, 2022 is an annualized 7.12%, meaning the composite rate is also an annualized 7.12% (the highest rate of I Bonds since May 2000!) for the first six months that the I Bond is held (after which a new composite rate will be determined by any change to the Inflation rate). While I Bonds have a 30-year maturity, they can be redeemed after being held for at least 12 months. Investors who redeem I Bonds between 12 months and 5 years after issue will forfeit the last 3 months of interest, but I Bonds held for more than 5 years can be redeemed at their current value.”

Here is a radio interview I had earlier this year where I discussed preparing for inflation.

Charitable Giving

One of the many rewarding aspects of our profession is working with clients to fulfill their charitable giving and philanthropic desires. In addition to emotional, social, and spiritual rewards from charitable giving, there are often appealing tax advantages. In addition to the potential income tax deduction for the value of the gift, our financial planning commonly reveal opportunities to avoid capital gains tax (e.g., gifting investments that have increased in value, either directly to a charitable organization or via a Donor Advised Fund (“DAF”).

If you would like to make such gifts in 2021 or talk to us about your options, please let us know as soon as possible because there is some lead time to process these transactions. The cutoff date for processing gifts of securities is December 23, 2021.

I spoke in more detail about charitable gifting strategies in this article and a separate radio interview. Bear in mind that some of the numbers were 2020 specific (and noted as such in the article), but the primary strategies are still valid.

Scams & Fraud Attempts

Our team was recently able to help bring an end to a serious scam that was being perpetrated on one of our clients. This was an elaborate long-term criminal effort that involved repeated “helpful” interactions to gain the victim’s trust—eventually gaining access to the victim’s financial information—in an attempt to steal hundreds of thousands of dollars.

These types of attacks, traps, and ransoms are all too common. Please be extra vigilant and pay special attention to the people in your life who may be vulnerable and could benefit from an extra set of eyes. There are extra precautions and steps that can be taken to make those close to you “hard targets,” which will hopefully encourage the criminals to move on. Here is a useful resource from the FBI on elder fraud, including a short video with 95-year-old William Webster, former Director of the FBI, who helped foil a scam.

Additional Thoughts

In the vein of combating inflation and helping to protect yourself and your loved ones against emergencies, here is a recent radio interview I had on the topic.

As always, please feel free to contact us with any thoughts or questions.

Thank you,

Scott