Montecito Bank & Trust’s Vice-President/Senior Portfolio Manager Albert Chu shares tips about smart year-end financial planning.
Q: Why is year-end financial planning important?
A: While it’s always a good idea to periodically review your finances, and progress towards your goals, there are certain things that do have year-end deadlines. If you’re a participant in your employer’s 401k plan, you’ll want to review and maximize your contributions or employer match for 2025. From a tax perspective, you’ll want to look at harvesting losses that may offset any capital gains and other situations like a RMD (Required Minimum Distribution) from your retirement accounts. The holiday season is also a great time to think about others so review any charitable donations and any gifts you’ll want to give to individuals to maximize your annual exclusions. There are also mundane things that you’ll want to review to not leave any money on the table. For example, if you have a Health FSA (Flexible Spending Account), you’ll want to ensure you use all funds that can’t be carried over into 2026.
Q: What are the main considerations when undertaking year-end financial planning?
A: As mentioned, there are items in your financial plan that need to be addressed each calendar year. In addition to these items, you’ll need to consider updating your financial plan for upcoming life events. These can be life events like having a child, starting a new venture or purchasing a second home closer to grandchildren that impact your finances. You also want to take some time and review your progress towards your current goals.
Q: What advice can you offer for those who may be having trouble getting started?
A: You don’t need to do everything in one day; dividing your checklist into manageable pieces will help you from feeling overwhelmed.
Q: Do you recommend meeting in person or is a phone conversation sufficient?
A: An initial phone conversation is great way to learn more about an individual’s situation. This will allow your financial advisor to research and prepare strategies that are customized to your needs. An in-person or Zoom meeting is important after to share ideas and recalibrate the strategy if necessary.
Q: What is the anticipated outcome of assessing finances at the end of the year?
A: With a year-end review you hope to optimize your tax strategy for the current year and set yourself up for the upcoming year. Reviewing your budget and expenses should provide some insight on opportunities to increase savings or reallocate resources. It also provides a set timeframe to check your progress on your long-term goals and adjust course if necessary for the coming year.
Q: When is the best time to perform this review—before the holidays or in November/December?
A: The best time to perform the review is sooner vs. later. The holidays can be a time filled with events, and it can be difficult to carve out time. Also, as you get closer to year-end, you may find more people rushing to get their financial check list complete as well.
Q: Any other general advice for readers regarding year-end financial planning?
A: With the new Tax Bill, you’re more likely this year to itemize deductions instead of taking the standard deduction, making it more important to keep good records of deductible items.
Q: What do you enjoy most about assisting clients with this task?
A: I enjoy working with clients and demystifying the financial planning process. It’s rewarding knowing that you can play a part in someone’s financial journey and seeing them reach personal milestones like retirement.
Q: What is challenging?
A: The biggest challenge is balancing the need to have a structured financial plan while building in the flexibility to adjust as life changes/surprises arise.
Albert Chu has over 25 years of investment management experience serving clients in private banking, prominent RIAs and a multifamily office. Albert works with clients to develop a goals-based approach to wealth management that incorporates both traditional and alternative investments. He holds both the CFA (Chartered Financial Analyst) and CAIA (Chartered Alternative Investment Analyst) designations.