Year End Financial Planning: A 7-Item Checklist

The end of the year can be a busy time.  Sometimes things slip through the cracks.  But I hate to see opportunities missed just because you didn’t realize there was a deadline, or that you had to take action.  So!  To help you finish up the year strong, here are 7 items you should know about:

  1. Have you squeezed out the most you can from your employer-sponsored retirement plans?
    1. Level 1: check to make sure you contribute enough to get the FULL employer match.  For example, if your employer will match up to 6%, and you’re currently contributing 4%, consider increasing your contribution to 6% to get the full match.  If you’re not doing this, you’re walking away from “free money.”
    2. Level 2: employer-sponsored plans offer a great tax benefit.  Level 2 is to take the maximum advantage of that by contributing the maximum to your plan.  For 2017, for example, the maximum you can contribute to a 401k or a 403b account is $18,000 if you’re under age 50 and $22,000 if you’re over age 50.  (Side note: next year those limits will be increased slightly – yay!).  That’s approximately $1500/month or $1833/month.  If that’s not feasible for you, that’s ok.  Consider increasing your contributions gradually, to get closer to the maximum each year.
    3. Level 3: If you receive a year-end bonus, consider directing this into your retirement plan (if your HR Department allows).  Not only will you potentially reap tax savings by doing this; you also plant seeds for a future savings harvest!
    4. Remember: IRA contributions can wait if need be.  Traditional and Roth IRA’s can accept 2017 tax year contributions up until the 2017 tax filing deadline (which is April 17th, 2018).  So, focus on employer-sponsored plans first.
  2. If you’re over age 70 ½ OR have an inherited IRA, one very important IRA maintenance item that CANNOT wait until next year is this: be sure to take your RMD’s (Required Minimum Distributions).  Earlier this year, you should have gotten a notice stating how much you need to take out.  Please check and make sure this was taken care of. (If you’re working with us, we’ve done this for you by now.) If this becomes confusing, chat with your financial planner or CPA to make sure you’re all good.  The penalty for not taking your full RMD by the deadline is one of the steepest in the tax code: 50% of the amount not taken.  In other words, if you are supposed to take $4000 as your RMD and you don’t do that by December 31st, you will owe the IRS $2000.  Ouch.
  3. Back to Employer-sponsored benefits: now let’s talk health insurance.
    1. If you have an FSA, don’t forget to use that money before you lose it (generally before December 31st, unless your employer makes an exception).  Some good “fast facts” about FSA’s can be found here, if you need a refresher: FSA info.
    2. If you have an H S A, your contributions can roll over to next year, as well as earn interest, so there’s no real incentive to spend unless you truly have a need.  Again, some reference info: HSA info.
    3. If you don’t have either of these types of plans, but your employer offers them, take note!  December is often open enrollment for employer sponsored plans.  Be sure to check in with your HR Department and know what is available to you and how to take advantage of it.
  4. If you own a small business, consider “accelerating your expenses” – ie, buying stuff, to increase the amount of deductible expenses you can claim for 2017.  This is especially a good time of year to think about this, because many major retailers are having sales.  If there are major purchases you’ve been considering (ie, computers, office furniture), you may want to do it in the next few weeks.
  5. Another option to consider: if you have a taxable investment account (not a retirement account), you could sell losing positions to offset any reportable gains.  It’s a juggling act with the ultimate goal of attempting to save you money in taxes.  Consult with a knowledgeable CPA or financial planner about “tax loss harvesting” to help you navigate this.  (Again, if you’re working with us, we have technology which can do this for you.)
  6. Plan your year-end charitable contributions.  Not only is this good for tax planning; you also get the added bonus of a “warm fuzzy” for supporting a cause you’re passionate about.
  7. And finally, a suggestion, rather than a hard deadline: review your estate plans and beneficiaries.  You should do this regularly whenever you meet with your financial advisor, but now is an especially good time to think about this if you haven’t in a while.  Not only is it nice to know it’s “done” by year-end; it also corresponds to a time when many of us will be seeing family members over the holidays.  You’re probably already focusing on what family means to you, so thinking about how you want to leave your financial legacy can be a natural part of that.  Bonus points: when seeing family, consider having a conversation about what your wishes are once you are gone.  It’s so much easier on your loved ones when everyone knows what you want.

And there you have it!  I hope this list of year-end tips helps you get a handle on your finances, take advantage of opportunities available to you, stay out of trouble with the IRS, and feel more focused going into the busy holiday season and new year!

I’d like to leave you with a quote by Anne Frank:
“Everyone has inside of him a piece of good news. The good news is that you don’t know how great you can be! How much you can love! What you can accomplish! And what your potential is!”

Peace,