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Investor Insights Blog|Year-End Financial Checklist

Tax-Advantaged Accounts

Year-End Financial Checklist

With the end-of-year holidays upon us, it might be tempting to wait for the start of the new year to sit down and get your finances in check, however, there are some year-end tasks you can do to make sure you’re on top of things before jumping into 2024.

Whether you’re currently saving for retirement or already retired, the topics covered in the following checklist can be helpful for you to set your financial foundation for the year to come. Doing this at the end of the year gives you time to reorganize and address any areas of concern before the new year kicks off.

End-of-Year Personal Finance Checklist

1. Maximize contributions or withdraw your RMD

If you’re saving for retirement:

While you might automatically contribute to your 401(k) or IRA throughout the year, if you have the opportunity to do so, you might want to consider contributing more, or even max out your contributions before the end of the year. Contributing to your retirement account can give you the opportunity to potentially reduce your earned income depending on the account type and if you qualify, therefore lowering the amount of taxes you may owe for the year.

If you are under the age of 50, you’re able to contribute up to $6,500 to a traditional IRA or Roth IRA in 2023 and if you’re 50 or older you’re able to contribute $7,500.

If you’re already retired:

Be aware of Required Minimum Distributions (RMDs) if you’re over the age of 72 to avoid facing potential penalties. If you have a Roth IRA, there are no required distributions for account owners, however, RMD rules apply to 401(k) plans, 403(b) plans, 457(b) plans, traditional IRAs, SEPs, SARSEPs, and SIMPLE IRAs.

2. Review your progress or strategy

If you’re saving for retirement:

Track how close you are to achieving your retirement savings goal. Checking in with goals you’ve established can help you adjust as needed. Did you diversify your portfolio if that’s what you planned on doing? How did your investments grow this year? What worked and what didn’t? Asking yourself these questions can help you plan and evaluate your progress throughout the year to come.

If you don’t have a specific goal in mind, consider using the end of the year as an opportunity to evaluate, assess, and set one for next year to help yourself stay on track.

If you’re already retired:

Review your strategy and plan. It’s often recommended to evaluate your year-end financial status and track your investment gains and losses to ensure everything is aligned with your goals and preservation. Some individuals consider working with a tax professional or advisor to help them keep track of finances in retirement.

Video: Year-End Checklist

3. Determine your emergency fund amount

While analyzing your savings progress or strategy, the end of the year is also a good time to look at your emergency funds. An emergency fund is used when an unexpected event would impact your expenses/income, such as a layoff or medical emergency that leaves you unable to work.
To determine your emergency fund amount, ask yourself, “How much am I spending on a weekly or monthly basis?

You can start by looking at your critical expenses such as housing (i.e. rent or mortgage), food, utilities, and other personal expenses such as a car payment and health care. Essentially, look at what is necessary for you to function on a week-by-week basis to determine your monthly spending.

Then, you can multiply that amount by the number of months you think would be best to have saved. Some financial professionals recommend three to six months of emergency savings, but be cautious not to overestimate your emergency savings.

Reminder: If you have a Roth IRA, there are certain circumstances in which you’re able to withdraw contributions to use in an emergency. For example, if money is tight you can withdraw your contributions if the account has been established for at least five years. For complete details regarding Roth IRA early distribution requirements, please reference IRS Publication 590-B.

4. Consider contributing to a health savings account (HSA)

The cost of health care and health insurance prior to or during retirement has become a concern for many Americans. If you have a high-deductible health plan, a health savings account (HSA) can be a tool for you to utilize and combat the costs of health care. HSAs are able to be rolled over from one year to the next, therefore if you max out contributions year after year, you’ll have a separate savings account to access funds that you can use to cover qualified medical expenses prior to or during retirement.

5. Consider spending flexible spending account (FSA) funds

If you have an FSA, consider spending those funds before the end of the year. Depending on your employer/plan, you may have a grace period, or a certain amount may be able to roll over to the next year, but some FSAs expire annually. Check with your employer to see if you should spend your FSA funds before the end of the year.

6. Explore self-directed IRAs

Once you’ve evaluated potential areas in which you’d like to grow your funds in the year to come, explore the option of a self-directed retirement account. A self-directed IRA gives you the opportunity to invest in alternatives such as real estate, private equity, cryptocurrency, and more in order to save for retirement, healthcare, or education.

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