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Your ultimate year-end financial checklist

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In the whirlwind month of December, the last thing most people want to do is review their finances. Instead, they reserve this task for the new year.

However, when you schedule a review with your financial representative in the final quarter, it becomes a means of meaningful reflection on the last year that will help you choose smarter goals for the next year.

Related: How to set and achieve financial goals for the new year

In keeping with your busy schedule, here are several financial items you should consider reviewing annually:

  1. Health insurance
  2. Retirement contributions and investments
  3. Charitable donations and gifting
  4. Budgeting
  5. Estate planning

1. Health insurance considerations

Open enrollment

For health insurance specifically, the end of the year marks the time for open enrollment. If you need to switch, modify, or enroll in a health insurance plan, now is the time to do so.

If you’re working with a financial professional, they can help you evaluate your employer’s options or self-employed solutions so you can get the right coverage at an appropriate price.

Get matched with a financial professional

Flexible savings account

If you have a flexible savings account (FSA), the end of the year is the time to either use what is in the account (schedule that dentist appointment you’ve been putting off) or learn your employer’s protocol for leftover funds. Some employers offer a grace period or rollover up to a certain dollar amount for remaining funds in these accounts.

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2. Retirement and investment considerations

401(k) contributions

Review your contributions to your retirement accounts throughout the past year and determine if you have the capacity to increase these through the end of the year.

You can contribute up to $19,500 into your 401(k) plan for 2020, up $500 from 2019. If you are 50 or older, you are eligible for an additional catch-up contribution of $6,500 in 2020.1

If you are unable to reach the maximum limit, try to increase your contributions to at least meet your employer’s maximum match for the year.

Related: Guide to retirement planning at every stage of life

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Not saving for retirement early is the number one financial regret among Americans.

Bankrate’s Financial Security Index, May 2019

Required minimum distributions

A Required Minimum Distribution (RMD) is the minimum amount that must be withdrawn from select retirement plan accounts once you turn 72.

“Investors with traditional IRAs or other types of employer-sponsored retirement plans may be required to begin taking distributions from these funds upon age 72,” says Ericka Schaefer, a financial advisor with Augustine + Johnson, an affiliate of North Star Resource Group.

The amount of the distribution is calculated based on IRS guidelines that take the account owner’s age and account value into consideration. Individuals who have inherited retirement assets may also be required to receive annual distributions from their inherited IRAs prior to December 31st.

If you are unsure when to take your RMD, connect with a financial representative to ensure you meet the deadline.

Qualified retirement plans

Both individuals with a qualified retirement plan and business-owners offering plans have opportunities to consider before year-end.

“Individuals who take advantage of qualified retirement plans through their employer may decide to fully fund these plans via elective deferrals,” says Schaefer. “Depending on the type of plan, a December 31st deadline may exist for these contributions.”

Business owners may be looking for tax-advantaged ways to save for retirement or provide their employees with additional benefits. Your financial representative can help you decide which plan best fits your needs.

Employer benefits services

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3. Charitable donations and gifting

Charitable contributions

December 31st marks the deadline to include your charitable contribution on April’s tax return. To cut your tax bill and give back at the same time, be sure to retain detailed records, such as a bank or payroll deduction record or detailed written communication of your contribution.

529 plan contributions

529 plans are tax-advantaged investment vehicles that encourage saving for education expenses. Consider contributing to a college-funding account this holiday season.

“Parents, grandparents, and other family members may find a contribution to an educational account more fulfilling than another toy or video game,” says Schaefer. “In some states, contributions may be state tax-deductible, so this gift benefits both the receiver and the giver!”

Related: 3 financial products that make great gifts for children

Charitable IRA distributions

If you are over 72, you may consider contributing to a qualified charitable organization directly from your IRA.

“Older individuals who receive Required Minimum Distributions from their IRAs may find themselves in receipt of more cash flow than is necessary to sustain their lifestyle,” says Schaefer. “To exclude these excess funds from annual income, the account owner may wish to perform a tax-free Qualified Charitable Distribution (QCD).”

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4. Budgeting

Find a time at the end of the year to sit down with your household and your budget for the past year. Markdown what worked, what didn’t work, and any thoughts you have on revising the budget in the future, if necessary.

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59% of Millennials, 54% of Gen-X, and 63% of Baby Boomers feel financially secure.

Bank of America, (2018), 2018 Better Money Habits Millennial Report.

Remember, stay realistic and focus on spending and saving based on your values. If you need help deciding how to distribute your income over the year, a personal financial representative can help.

Get matched with a financial professional

5. Estate planning

Your estate documents are critical to check on at least an annual basis, especially if the past year has involved a major life event, such as a marriage, divorce, or any new children or grandchildren. Items to review include your will, trusts, and beneficiary forms.  

Related: How to navigate estate planning with your adult children

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Working through this checklist can be a daunting task on your own, especially if your income and investments make your finances more complicated.

To make checking these items off your to-do list a lot less stressful, schedule an annual review with your financial representative. Need help finding a financial representative with your best interests in mind? Get connected with an associate who shares your values.

By carving some time out of your busy December schedule to act on these items, you and your family will be set for a productive and organized start to the new year come January 1st.

About Ericka Schaefer

Schaefer_Ericka_2017_circle.pngEricka Schaefer helps people established in their career with retirement strategies so they can save for the future without sacrificing a meaningful life now.

She differs from the average advisor by taking a goals- and needs-based approach to retirement strategies to help her clients live the life they’ve always dreamed of with the assets and savings they have available.

Follow Ericka: 

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1401(k) contribution limit increases to $19,500 for 2020; catch-up limit rises to $6,500. (2019, November 6). https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500.

*Financial professionals do not provide specific tax or legal advice.  This information should not be considered as specific tax or legal advice. You should consult your tax or legal advisor regarding your own specific tax or legal situation.

A 529 plan is a tax-advantaged investment program designed to help pay for qualified education expenses.  Participation in a 529 plan does not guarantee that the contributions and investment returns will be adequate to cover education expenses.  Contributors to the plan assume all investment risk, including the potential for loss of principal, and any penalties for non-educational withdrawals.

Your state of residence may offer state tax advantages to residents who participate in the in-state plan, subject to meeting certain conditions or requirements. You may miss out on certain state tax advantages should you choose another state’s 529 plan. Any state-based benefits should be one of many appropriately weighted factors to be considered in making an investment decision.  You should consult with your financial, tax or other advisor to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances.  You may also wish to contact your home state’s 529 plan Program Administrator to learn more about the benefits that might be available to you by investing in the in-state plan.

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