Six End-of-Year Financial Planning Tips
Decorations are up, delicious food is being prepared, family and friends are making get-together plans, and the year is rapidly coming to a close. As you prepare for the holiday season, the end of the year is a great time to do some quick housekeeping when it comes to your finances. Here are six quick things you can do to finish the year strong:
1. Beneficiaries
Have you checked your beneficiary designations lately? Life changes fast! It is prudent to review your beneficiary designations (i.e. who you are leaving your accounts to should you pass) at least annually. Check your life insurance and retirement account (think IRA and 401(k) plans) beneficiaries to ensure the individuals listed are still correct.
2. Emergency fund
Take a pulse check on your emergency fund – how is your cash savings? It is a best practice to keep between 3-6 months of living expenses in cash (we recommend keeping that cash in a high-yield savings account to earn interest!). If your emergency fund is dwindling, make a plan to rebuild your savings back up as quickly as possible starting in the new year.
3. Charitable donations
Have you been meaning to make charitable donations before year-end? Now is the time! All charitable donations must be made by December 31st to count as a deductible charitable gift for that tax year.
4. Contributions
As above, if you want to get a state income tax deduction for contributing to a 529 plan, contributions must be made by December 31st of that tax year. Saving to a 529 plan is a great way to set money aside for future education expenses and receive a state tax deduction (if your state offers deductions).
5. RMDs
If you are over age 72, make sure you took your Required Minimum Distribution (RMD) from your pre-tax retirement accounts to avoid being subject to penalties.
6. FSAs
Check your flexible spending account (FSA) balance and make sure to spend any of the remaining account balance on eligible expenses (either on dependent care or healthcare expenses, depending on which type of FSA you have) by your plan’s deadline.
As you wrap up this year, take a moment to ensure your financial house is in order and you are on track to reach your goals before the new year even starts!
Grace Moore, CFP®, CKA®
Lead Financial Planner