As we wrap up the year, we are focused on finishing projects, finding the perfect gift, and spending time with friends and family. Even though the end of the year can be busy with your to-do list to wrap up the year and the holiday season, you should make a little extra time to maximize your financial health and take advantage of any year-end opportunities. Below are some tips for year-end financial health:
Financial Health & Long-Term Planning
- Review Beneficiary Designations – Make sure your retirement accounts, other investment accounts and insurance policies have beneficiaries that reflect your wishes.
- Review Insurance Policies – Have you experienced a major life event or approaching a new life stage? Get married? Have a child or grandchild? Do Disability or Long-Term Care insurance solutions make sense?
- Maximize Health Care Plans – Have you met your 2024 health insurance deductible? If so, it may be significantly less expensive for other services. Take advantage of lower costs, if possible.
- Health Savings Accounts (HSA) – Contribute pre-tax income if eligible. Contributions grow tax-free, and qualified withdrawals are tax-free.
- Flexible Spending Accounts (FSA) – Utilize this tax-advantaged account to reimburse yourself for qualified medical expenses. Typically, you need to spend these funds before a specific deadline (I.E., calendar year-end).
- Review College Savings Plans – Consider opening a 529 plan for a child, grandchild, or yourself (if going back to school). These assets grow tax-deferred and are tax-free if used for qualified education expenses.
- Review Rates on Outstanding Debt – Check interest rates if you have a mortgage, personal loan, credit card balance, or margin balance. There may be opportunities to reduce interest expenses.
- Review Wills and Trusts – Check to ensure you have the appropriate executors, trustees, and guardians in place.
- Review Annual & Lifetime Giving – Annual exclusion gifts ($18,000 in 2024) could make sense to children in lower income brackets. You might want to take advantage of current tax exemptions for large gifts to dynasty trusts that can endure for multiple generations.
- Establish Automatic Payments – Avoid any late fees by establishing automatic payments to vendors.
Retirement Planning
- IRA/401k Contributions – Consider making additional contributions up to the maximum amount if your budget allows. These contributions may be deductible and reduce your taxable income for the year.
- Automatic Contributions – Consider investing automatically to help reach your retirement goals.
- Employer Roth Option – Check if your employer offers a Roth option for a 401(k)- or 403(b)- type plan. It could mean more tax-free income in retirement.
- Consider IRA Rollover – If you have a 401(k) from a previous employer or other eligible retirement plan, it may make sense to expand investment options and consolidate finances.
- RMD – Do you need to begin taking Required Minimum Distributions? Failure to withdraw the correct amount can result in substantial penalties.
- Consider Roth Conversions – It might be a good time to convert if you’re in a lower tax bracket. This may cause a current tax bill but reduce your overall long-term tax burden.
- Review Social Security & Medicare Elections – Are you eligible for Social Security Benefits? Confirm your annual Medicare coverage.
Don’t just focus on your financial house, get your actual house prepared for the year end.
- Clean and rake leaves from the yard.
- Clean and inspect the roof and gutters.
- Shut off exterior water sources like sprinklers to prevent freezing.
- Prepare your home’s heating system for winter.
- Inspect and insulate windows and doors.
- Clean the dryer vent.
- Inspect and clean the fireplace and chimney.
- Prepare snow removal tools and supplies – just in case.
- Cover the air conditioning unit.
- Insulate pipes to prevent freezing and turn off exterior waterspouts.
- Tighten hardware like doorknobs and cabinet handles.
- Clean your drains.
- Reverse ceiling fans for proper airflow.
Setting aside a little time to focus on some year-end planning may help you save on taxes, maximize your deductions, and give you a clean slate as you begin the new year.
