year-end checklist
year-end checklist

Review your finances with our year-end checklist

As 2021 comes to a close, it’s an ideal time to assess your finances and set goals for the new year. We recommend reviewing your current financial situation, identifying money moves to make before year-end, and determining any adjustments needed for 2022. 

For a comprehensive review, consider the following:

Retirement accounts

Since there is no financial aid in retirement, make your retirement savings a top priority. If there is room in the budget, max out your contributions to your retirement savings plan(s). These contribution limits differ for various types of savings accounts and also change from year to year. If you had to pull funds from a retirement account to cover expenses caused by the loss of a job, family emergency, or medical expenses, don’t forget to return the money ASAP to avoid penalties and a dwindling account.

Children’s college savings

Year-end is a great time to check in on the progress of your children’s or grandchildren’s college savings accounts. Maybe you received a year-end bonus or had a financially fruitful year. There may be an opportunity to top off the accounts, which may also offer tax incentives for you on your upcoming return. These tax incentives vary state-to-state, so check in with your advisor on the tax credit for contributing to a 529 savings plan in the state where you reside. 

Transfer 401(k) accounts from any previous employers

If you’ve changed employers, don’t abandon your hard-earned 401(k) balance. If your portfolio is performing well, you may want to leave it put (if you can remember to check in regularly). However if your new employer offers a wider range of investments, it may perform better, and you may also prefer to manage a consolidated account. You may not need to take any action here, but take the time to check in with your accounts and explore the options.

Review your investments and financial strategy

Schedule a meeting with your trusted financial advisor to discuss your portfolio. Are your investments performing well? Do you need to take a step back in terms of risk? Are you on track for your long-term financial goals? Keep in mind, investing for the future is a marathon, not a sprint. Investing in turbulent times can be stressful. The markets will see highs and lows, so keep in mind your goals, strategy, and risk tolerance as you near retirement. And don’t forget to trust your advisors—they do have your best interests in mind.

Tax projection

We recommend scheduling a tax projection with your CPA annually. Year-end is the perfect time to do so, evaluating the past year’s income and expenses to project your taxable income. Completing a tax projection before year-end leaves ample time for planning out tax-saving opportunities in the upcoming calendar year.

Check in on emergency savings

If the pandemic taught us anything, it’s the importance of rainy day savings. It doesn’t take a global crisis; too often, people find themselves in a financial crisis due to unforeseen medical expenses and other occurrences in their personal lives. Being prepared is key. Putting a little cash aside each month can add up quickly. Take the time at year-end to evaluate your emergency fund. How much will you need to cover three-to-six months of expenses? If you’re not there yet, January is the perfect time to start contributing. 

Refinance your mortgage

If your mortgage rate isn’t favorable, consider refinancing. With the current mortgage rates at historic lows, you could be looking at thousands of dollars in savings depending on your rate. Keep in mind that there are fees associated with refinancing, but the savings might just outweigh those fees. If your income has increased since you purchased your home, consider whether switching to a 15-year mortgage could mean even more savings on interest. To determine how a refinance fits into your overall financial picture, discuss with your financial advisor.

Check on your HSA and FSA balances

HSA account balances roll over from year to year, and the investment grows tax-free. They’re also subject to contribution limits; if you haven’t met this year’s limit, consider whether you can top off the account and gain a tax deduction. On the other hand, FSA funds must be used before they expire. These funds can be used on eligible medical expenses such as new glasses, medications, deductibles, copays, and certain medical devices. 

Evaluate expenses

Take the time to sit down and review your expenses for the year. Many of us have daily, monthly, or yearly expenses that could be trimmed or eliminated entirely. There may be better uses for that money, such as topping off retirement accounts, starting an emergency savings account, or spending on family experiences. Take a look at recurring charges on your accounts—one of the most common areas for savings is in reducing or eliminating unused subscription services.

Revisit the budget

Setting a family budget every year can provide many benefits. Flexibility is important, but by having a budget, you can make sure you have the funds to contribute to the savings accounts that matter most and will benefit all generations, while also ensuring all debt is paid on time. At year-end, evaluate how the budget has weathered over the past year. Adjustments will likely need to be made to accommodate for additional expenses, debt, changes to income, and other upcoming needs. This is also a great opportunity to plan for family vacations or additions, vehicles, and other large purchases.   

Consider alternate investment income 

Diversity is your best bet to successful investing. While reviewing your year-end finances, consider adding an alternative source of investment income. One of the top sources of investment income is rental property. Short- or long-term rental property can be a great source of income at any time, especially during retirement. Be sure to keep track of all expenses to ensure you receive all related tax deductions available.

Estate planning checklist

The holiday season is filled with joy and time spent with loved ones. While the family is all together, it can be an ideal time to discuss estate planning. While the topic of estate planning can sometimes be somber, it’s best to make sure your last wishes are known, and all documents are in place to ensure they are carried out. This can mean many different things depending on your family situation and generations involved. 

A few things to review are:

  • Beneficiaries
  • Insurance policies
  • Wills
  • Living trust
  • Power of attorney
  • Advance care directive

Going through a year-end financial checklist can help to ensure all ducks are in a row to start the new year off on the right foot. By going over these topics, you take the guessing game out of your finances for the upcoming year and take control of your finances. If you’re not sure where to get started or need assistance with any of the topics above, call us to schedule a consultation. We would be honored to be your trusted advisor.

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