Financial Review Checklist: Year-End Edition

Reviewing your finances before year-end helps you capture tax-saving opportunities, maximize contributions, and tie up loose ends before deadlines pass. It also gives you a clear picture of your progress and what adjustments you may want to make heading into the new year. Think of it as your financial version of making a list and checking it twice—only this time, you're the one giving future you a gift.

√ Confirm your RMD is done by 12/31

• Required minimum distributions (RMDs) from IRAs must be done by year-end for those age 73 and older

• Inherited IRA owners may or may not have to take an RMD. If you inherited an IRA before 2020. If you inherited an IRA in 2020 or after, the rules are more complex. If the original IRA owner was over 70, the odds are that you need to take a distribution this year. It's worth verifying because the penalty for not taking your distribution is equal to 25% of the distribution you didn't take

  
  

√ Complete your charitable giving by 12/31

• Many people over 70.5 make qualified charitable donations (QCDs) from their IRAs. Checks must be issued by December 31st to count as a distribution for this tax year.

• Gifts of stock can take a while, especially during the busy month of December. Make gifts of stock to charity or your donor-advised fund before December if possible.

  
  

√ Maximize 401(k), 403(b), and 457 plan contributions by 12/31

• Review a recent pay stub or investment statement to make sure you are on track to contribute the maximum amount. If not, ask your employer to increase your contributions from your remaining paychecks for the year.

• If you aren't maximizing your contributions, confirm you have deferred enough to your plan to receive the full company match on your contributions.

  
  

√ Contribute to 529 education accounts by 12/31

• Contributions made before year-end will qualify for a state tax deduction in many states

  
  

√ Empty your Flexible Spending Account (12/31 or by early March)

• Spend money remaining in your flexible spending account, as unused funds are forfeited. Some employers allow you to carry over FSA balances until early March, while others have a December 31 deadline.

  
  

√ Review your tax projections by 12/31

• Now is a good time to see how the tax you have paid stacks up against the tax you will owe with next year’s return. If you are underpaying, increase withholding through payroll or make an estimated quarterly payment by January 15th to avoid underpayment penalties (which recently went up).

  
  

√ Realize capital losses by 12/31

• In non-retirement accounts, selling positions that are worth less than you paid for them allows you to capture a realized loss for tax purposes. These losses can offset other capital gains or be used as a deduction of up to $3,000 against other income. Reinvest the proceeds into a similar part of the market so the sale doesn’t negatively affect your investment returns.

  
  

√ Optimize a low-income year by 12/31

• A low-income year, for whatever reason it comes, offers a tax planning opportunity. It's a great time to consider selling appreciated stock, which is taxed at 0% if you are in the bottom two tax brackets. That up to 23.8% lower than you could pay on capital gains during a high-income year. A low-income year can also be an ideal time to do a Roth conversion. Want to learn more about harvesting losses or doing a Roth conversion? Read this.

  
  

√ Maximize IRA, Roth IRA, and HSA contributions by mid-April

• You have until your tax filing deadline to complete IRA, Roth IRA, and HSA contributions for this year.

  • IRA & Roth IRA contribution limits

    • The maximum contribution is $7,000, or $8,000 if you turn 50 by December 31st. Confirm you qualify to contribute based on your income. You can contribute to either an IRA or a Roth IRA, but not both.

  • Health Saving Account contributions

    • The maximum HSA contribution is either $4,300 for individual coverage or $8,550 for family coverage.

    • Over 55? You can contribute an extra $1,000 to your HSA for the year, and so can your spouse. The caveat is that your 55+ year-old spouse must contribute their $1,000 catch-up contribution to their own HSA account, not yours. They can open an HSA anywhere to contribute.

    • Remember that your employer’s contributions DO count toward the overall limit. For example, an individual whose employer deposits $1,000 into their HSA can contribute no more than $3,300.

    • If you haven’t contributed the maximum to your health savings account, you still have a chance! Deposits do not have to come directly out of your paycheck; you can make a supplemental HSA contribution from your checking and savings accounts.

      
      

√ Maximize self-employed retirement account contributions (deadlines vary)

• Employer profit-sharing contributions, cash balance plan, and defined benefit plan contributions are due by the time you file your taxes. Without an extension, that means these deposits are due by mid-April. If you extend your tax return, you have until the extended due date of your return.

• Need a self-employed plan after 12/31? SEP IRAs can be opened after January 1st and funded up to the extended due date of your tax return.

By taking a little time now to organize, review, and plan, you set yourself up for greater clarity and confidence in the year ahead. And if you ever need help turning that checklist into action, we're here to help. Have a wonderful rest of the year!