Year-End Financial Planning Checklist, Episode #55
In this episode, we share our checklist of financial planning items we’ve found helpful to address (or revisit) as you approach the end of the year when managing your finances and looking to optimize the many moving parts. While it’s not an exhaustive list, we cover things such as confirming employer retirement account contributions, making backdoor Roth IRA contributions, confirming 529 plan contributions, checking FSA balances and HSA contributions, reviewing your investments, reviewing your charitable giving, and revisiting your overall goals and life situation. Our aim with this episode is to provide some helpful food for thought as we approach the end of the year.
Outline of this episode
- Saving money on taxes [1:34]
- Making a backdoor Roth IRA [4:07]
- Maxing out 529 plan deductions [7:26]
- Employer benefits such as FSAs and HSAs [10:30]
- Checking on your investments [14:00]
- Reviewing your charitable giving [18:09]
- Revisiting the bigger picture [21:06]
- The recap [25:20]
Maximizing tax savings, contributions, and deductions
It’s important to confirm your contributions to employer retirement accounts when the end of the year approaches. You should check to see how much you've contributed year to date, and how much you're on pace to contribute for the remainder of the year. If you aren't on track to make the maximum contributions and would like to, you can increase your per-paycheck contributions.
Additionally, you may want to consider making your backdoor Roth IRA contribution if you're planning to make one but haven't done it yet. Even though you have until April 15th of next year to do it, doing it within the calendar year makes things easier from a tax reporting standpoint and also protects against an unknown future and possible changes to tax legislation.
You should also confirm your 529 plan contributions. If you're contributing to a 529 college savings account for kids or grandkids, check to see how much you've contributed so far this year. You have until December 31st to make contributions for the current tax year. So if you want to contribute more, whether that's to get to the $10,000 Michigan state income tax deduction level or some other amount, you have time to make those additional contributions for the current year.
Check in on your savings plans and investment accounts
Other key areas you'll want to review at the end of the year are your FSAs and HSAs. If you have a flexible spending account, whether for healthcare or dependent care, check to see if you have any money in the account and if you do, be sure to withdraw it before year-end so you don't risk losing it. If you have a health savings account, check to see how much you've contributed relative to the annual contribution limit and increase your per-paycheck contribution if needed.
You’ll also want to review your investments. Take a look at your investment portfolio to see if there's any need or opportunity to rebalance your investments back to your target allocation. If you have a taxable investment account, see if you have any investments that are worth less than what you paid for them and are candidates for tax-loss harvesting.
Making the most of giving when looking at the bigger picture
If you're charitably inclined, you probably don’t give to receive but if you are giving it’s smart to make the most of it from a tax standpoint. Review your charitable giving and check to see how much you've donated relative to your target number for the year. If there's a gap, look for opportunities to give in the most tax-efficient way, including donating appreciated investments if you have a taxable investment account and the charity can receive them.
And the last item in our year-end review is to step back to revisit your overall goals and life situation. Do a big-picture reflection on your overall situation to see if your goals and priorities have changed, and if they have figure out how your required savings amounts have changed and make the needed adjustments in terms of savings and account strategy to meet your new goals.
Resources & People Mentioned
- Podcast episode #19: The “Other 20%” of Successful Investing
- Podcast episode #23: 5 Strategies for Tax-Efficient Charitable Giving
- Download our guide: The Toolkit for Optimizing Your Finances as an Employed Physician
- Download our guide: The Financial Checkup
Connect With Trent and Andrew
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