Getty Images

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.

Revisit your retirement saving strategy

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.

Plan your charitable contributions

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.

Reassess your lifestyle