Year-end Financial Checklist

Well, 2021 is rapidly coming to an end – for many not a minute too soon. But before you start your holiday celebrations, you might want to find time for money management tasks you may have overlooked. That’s important, because year-end is a great time to give your finances a careful once-over, maximize your tax savings and make sure you’re on track to reach your goals.

Whether you’re early in your career and building wealth, fine-tuning your future, or preparing for life in retirement, there are things you should do before December 31 to tidy up your finances.

Max Out Your Retirement Contributions

In 2021, you can save up to $19,500 in your 401(k) or other employer-sponsored retirement plan. For those over 50, you can take an extra $6,000 in catch-up contributions. If you don’t have a workplace plan, you can still save up to $6,000 ($7,000 if you’re 50+) in a traditional IRA.

Consider Converting to a Roth IRA

One way to boost your tax-free funds is to “convert” some money in traditional accounts (either within your workplace plan or an IRA) to a Roth. Remember, doing so will trigger income taxes – money you convert to a Roth is treated as a normal distribution, so you will need funds to cover tax on that amount.

Offset Capital Gains with Capital Losses

Review any tax losses. If you have losing stocks, consider selling them to offset gains and reduce taxable income. Remember, the IRS only allows $3,000 of losses per year. You should try to be proactive in your tax planning. If you have capital gains, speak with your financial advisor to help you narrow down the best investments to unload to take advantage of tax-loss harvesting.

Plan for Life Events

A job change, home purchase, marriage, grandchildren, surgery, or other life event requires financial planning ahead, if possible. Unfortunately, many people don’t fully recognize that even small life events can have a huge impact on your ability to save and plan.

Fine-tune Your Budget

Year-end is the perfect time to review your spending and savings to see if you need to make any changes. Review your service bills, such as wireless and cable, to see if you can get a lower rate. Also consider bundling your insurance policies with a single carrier. Check the balances in your long- and short-term savings accounts; if you’re not reaching your goals, look for ways to economize so you can get there next year.

Check Your Flexible Spending Accounts

If your employer plan does not allow rolling money over into the next year, make sure you spend the balance on qualified expenses, so you don’t lose out.

Make Sure You’re Adequately Insured

Review your home, auto and life insurance policies to determine if you have enough coverage or if deductibles need to be adjusted.

Review Estate Plans and Beneficiaries

Double-check that changes or updates are not needed on your accounts. It is all too common to leave an ex-spouse, for example, assigned accidently.

Finally, the most important decision you can make as the year ends is to speak with a financial professional to ensure everything is in order with you overall financial situation. There is still time left in the year to act if needed, but time is running out.

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