End Of The Year Financial Checklist

It’s hard to believe, but the final quarter of the year is now upon us. As 2021 comes to a close, here are some key money moves you can make to finish the year off strong and set yourself up for success in 2021.

MAX OUT YOUR 401(k)

If you’re planning to max out your 401(k) for 2021, mark your calendar for Dec. 31, as this is the last chance to do so. If you receive an end-of-the-year bonus, you may want to consider putting as much of it toward your 401(k) plan as you are able to. Additionally, if your company offers a match that you haven’t maxed out, now is the time to do so.

CONTRIBUTE TO YOUR 529 PLAN

If you have young children, hopefully you are already contributing to a 529 plan to help pay for college when the time arrives. If not, now is the time to set one up. If you already have an account set up, make sure you remember to make your annual contribution. 529 plans have varying deadlines set by the state, but many have a December 31 cut-off. If you miss the end-of-year deposit deadline for your plan, you could be missing out on significant state tax savings. These tax deductions reduce your taxable income, giving you a percentage reduction in taxes owed reflective of your tax bracket. Lots of states offer a state income tax deduction or tax credit so make sure to do some research to see if you qualify for one! 

MAKE ANY CHANGES TO YOUR HSA

If you have an HSA, now is the time to make appropriate changes or contributions to your plan. Every year , the IRS creates a contribution limits for health savings accounts and this year the limits have increased by $50 dollars for individuals and $100 for families. Check this out for other HSA contribution limits. 

CONVERT TO A ROTH IRA IF ELIGIBLE

A Roth IRA conversion involves transferring retirement funds from a traditional IRA or 401(k) into a Roth account. Since the former is tax-deferred while a Roth is tax-exempt, the deferred income taxes due must be paid on the converted funds at that time. There is no early withdrawal penalty. Inquire about whether a Roth conversion is right for you. 

CONTRIBUTE TO A DONOR ADVISED FUND OR OTHER CHARITABLE ORGANIZATION

Donor-advised funds are tax-deductible financial accounts provided by 501c3 nonprofits who are approved, donor-advised fund sponsors. The funds are opened in the donor’s name, and they enable a donor to donate funds and get a tax-deduction immediately while deciding later which organization those funds will support.

After you set up a DAF, you can add money or appreciated assets into one of these funds and get the full tax deduction for the money or assets on the day you put them in the fund. And then, any time in the future — whether one day or ten years later — you can give the money out to any charity of your choosing. 

If a DAF isn’t for you, many people look for ways to combine their desire to help the causes they believe in—including COVID-19 pandemic relief efforts—with their desire to save on taxes. Generally, if you itemize your deductions, making charitable contributions can decrease your tax bill, and since high‐income earners generally pay tax at higher rates, they may enjoy a particularly large tax benefit from charitable contributions. Check out our podcast with Elizabeth Goldstein regarding Donor Advised Funds and how to get involved.

CHECK ON YOUR ANNUAL SUBSCRIPTIONS

Now is a good time to make sure you are actually using all of those annual subscriptions you are paying for. Do you really need Netflix, Hulu, Apple TV and other streaming services at the same time? You might be able to cut down on some of your monthly expenses by taking a good look at what you are actually using vs. what you are paying for. You’d be surprised at how these services add up so it’s a good time to assess what you might be able to save money on in the upcoming year.

Finally, now is a great time to schedule a meeting with your financial advisor to review your year-end financial planning. It’s important to have that meeting before year-end to set the stage for a financially successful year in 2022. Besides the list mentioned above, there are tons of other tasks you may need to check off your list before the end of the year so let us know if you need any help!  If you don’t currently have a financial advisor and would like some help with your year-end planning, please contact us for a free 30-minute consultation today! 

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