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Get Ahead with This Year-End Financial Checklist

November 2nd, 2022 | 4 min. read

By Jacob Schroeder

year-end financial checklist

There’s no getting around the fact this year has been challenging for most investors. But that doesn’t mean it’s a total wash. Even though the year is quickly coming to a close, you can still take advantage of valuable opportunities and take proactive steps to set yourself up for the future. With that goal in mind, here is a year-end financial checklist to help you get ahead.

1. Still working? Increase your retirement account contributions

Watching the stock market decline -- and your retirement savings with it – is never easy. But another way to look at it is you get to take advantage of lower investment prices and higher expected returns.

The rule of thumb is to save 10-15% of your salary in your 401(k) or other employer sponsored retirement plan. With a couple months left in the year, workers should take a look at their contributions and see if they can increase them.

The contribution limit for 401(k)s and most other retirement plans is $22,500 for 2023. Employees age 50 and older can save an additional $7,500 in catch-up contributions. However, you may be able to make additional after-tax contributions, if your total contributions – from yourself and your employer – don’t exceed $66,000 or 100% of your compensation, whichever is less.

For IRAs, investors have until April 15 of next year to keep making contributions.

Simply put: any contribution increases you’re able to make can help boost your long-term financial trajectory.

2. Retired or about to retire? Adjust your withdrawal rate

How much you plan to withdraw from your retirement accounts is a personal choice, depending on factors such as your level of wealth, annual expenses, sources of guaranteed income (pensions, Social Security, etc.) and age when you retire. A common starting point is withdrawing 4% of your portfolio, adjusted for inflation each year.

For everyone though, the math is the same. The higher your rate, the lower the chances your portfolio will last throughout retirement. One way to bypass that danger is to maintain a flexible withdrawal rate, which can improve your portfolio’s longevity.

Now is a good time to reevaluate your withdrawals. By taking modestly lower withdrawals, if possible, in a stock market downturn can help preserve some of your balance and give it time to recover. It also puts you in position to possibly spend more during those future strong years.

3. Harvest your investment losses

When the market gives you lemons, make tax lemonade.

One option is to lower your taxable income by selling losing investments from your taxable account. This is known as tax-loss harvesting. When properly done, you can sell investments that have lost value to offset up to $3,000 in ordinary income.

4. Consider a Roth conversion

During periods of lower stock prices, it may make sense for a Roth conversion. That is, transfer some or all your funds from a traditional IRA to a Roth IRA. Withdrawals from Roth IRAs are tax-free, and Roth accounts are not subject to RMDs. A Roth conversion is a taxable event, in which you pay taxes on the money you rollover that you haven’t paid taxes on before. Since you would be converting a lower balance because of the market downturn, your conversion taxes would be lower as well.

There are a variety of tax rules to navigate here, so these moves are best done with the guidance of a tax or financial professional to avoid triggering any unnecessary taxes.

5. Replenish your emergency fund

If you’ve tapped your emergency fund this year, set yourself a goal of replenishing it. For most people, it makes sense to save around three to six months’ worth of expenses. Put those funds somewhere that is accessible, such as savings and checking accounts, money market funds and CDs.

6. Review and update your budget

How did you do this year? What do you think you could do differently next year? Asking questions like these can help you review and adjust your budget for the new year. It can be as simple as looking over past bank statements. Cancel any services you don’t plan to use anymore, such as gym memberships. And, then determine how you want to apply any of these newfound “savings”.

7. Shop around for insurance and reassess your insurance needs

Shopping around among various companies can help you save money on your premiums. Using a broker who can do this for you with multiple carriers will save you a lot of time, too. If your needs or responsibilities have changed this past year (say, the kids moved out), you want to be sure you have the right amount of coverage.

8. Set up or update your estate plan

What happens to your spouse if you pass away? What about your children? Who will inherit my wealth? If you can’t answer these questions, then it’s a good indication you need to create or update your estate plan.

An estate plan designates who will receive your assets and manage your financial obligations after your death or incapacitation. What documents you need depends on the size of your estate and your situation. That includes where you live, as estate rules can vary by state. Among the key documents for your estate plan include: a will, designated beneficiaries, living trust, advance health care directive and a financial power of attorney. Because your financial assets are involved, a financial adviser is also a valuable resource to ensure your wishes are fulfilled.

9. Make your charitable donations

Although the end of the year is known as a time for giving back, you don’t have to wait to make your annual donations. On the other hand, making it a seasonal financial goal is a good way to make charitable donations a consistent part of your financial life.

By donating cash, you receive a tax deduction for the total amount, up to 60% of your adjusted gross income. Meanwhile, a gift of appreciated securities or appreciated property (real estate, art, automobiles, etc.) held for more than one year allows you to take a deduction for the fair market value of the securities or property on your income tax return while avoiding recognition of capital gains.

Always make sure the non-profit organization is a 501(c)(3) public charity or private foundation. Also, get a receipt. When it comes to giving charitable gifts in excess of $250, a paper trail is required.

If you’re an IRA owner who is at least age 70 ½, a qualified charitable distribution allows you to transfer up to $100,000 a year directly from your IRA to charity. That transfer is excluded from the IRA owner’s income and, if done correctly, counts toward the owner’s required minimum distribution. So, you can meet your RMD requirements and avoid taxes on what would be a taxable distribution. The key is that the distribution is directly transferred to the charity.

10. Meet with a financial adviser

The shorter days are a good reminder to get a check up on your financial plan and investment portfolio. That is, if you haven’t met with a financial adviser yet this year, especially during times of market volatility. Are you still on track to meet your financial goals? Do you need to rebalance your portfolio or change your investment strategy? Are there any known events in 202 that will impact your finances?

A meeting with a financial adviser can help you navigate any short-term challenges and make any necessary adjustments to achieve your long-term goals before it’s too late.

Have you taken the steps necessary to be on track for retirement?


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