Take Control of Your Financial Wellness: A Year-End Checklist
October 19, 2023
As the year winds down, it’s easy to feel overwhelmed by everything you see or hear about in the news, from market fluctuations to political uncertainties. But while these factors are out of your control, the good thing is, there are plenty of things you can control to support your financial wellness.
Here are some ways to set yourself up for financial success as the year comes to a close:
Take care of Your RMDs
If you’re a retiree, it’s crucial to address your Required Minimum Distributions (RMDs) before the year ends. Neglecting to take your RMD could result in a tax penalty and make your financial situation more complicated. For those who don’t need the income generated by the RMD, converting it into a Qualified Charitable Distribution (QCD) can serve a dual purpose—fulfilling your RMD requirement while also giving to a cause you care about, tax-free. To be eligible for a QCD, you must be at least 70 ½ years old.
Assess your tax situation
For both retirees and those still building their retirement savings, year-end tax planning is crucial. Review your capital gains and losses for opportunities to engage in tax-loss harvesting. This strategy can help offset any capital gains you may have, potentially reducing your tax liability for the year. Of course, always consult a tax professional to explore these options fully.
Maximize your annual contributions
If you’re still saving for retirement and you have the financial ability, you should also contribute the maximum annual amount to your retirement accounts—401(k)s, IRAs, Roths—as well as your Health Savings Account, if you have one. Failing to do so is a missed opportunity for growth.
To your loved ones: The annual exemption amount for charitable gifts is $17,000 per individual, per recipient. That means if you have three (very deserving) grandchildren to whom you’d like to give financial gifts, you can give each of them $17,000 without reporting it on your annual tax return. Anything given above this amount must be reported and will count against your lifetime gift exclusion.
To organizations: If you plan to give to charities, consider using tax-efficient methods like donating appreciated stock, opening a donor-advised fund, or a Qualified Charitable Distribution—instead of simply writing a check, which is the least tax-efficient method.
Review your objectives & progress
The end of the year is also a good time to assess your asset allocation and financial goals. Does your current portfolio align with your future objectives? How does your emergency fund look? Are you maintaining a healthy balance between growth-oriented and conservative assets? (If you haven’t read our recent blog about bonds, now is a great time to do so.) A year-end review can offer valuable insights into these questions, paving the way for smarter investment decisions.
Talk with your advisor
Life is filled with uncertainties, but by focusing on the things we can control, we can navigate through the unknowns more confidently.
If you’re ready to tackle some of the items on this list or you have questions about your situation, we’d love to help. Schedule a consultation with us or give us a call.