Home » Articles » Year End Money Checklist

Year End Money Checklist

Last Updated:  December 15, 2017

It’s no secret that the end of December is one of the most stressful times of the year for many people.  Whether you’re getting the house ready for the relatives, stressing out about what to get your significant other for Christmas, or not-so-patiently waiting to see how big that holiday bonus will be, suffice it to say you probably don’t want to add on any additional financial burdens.  By checking off the items on this list, you can set yourself up for a more peaceful and prosperous financial future.

Year end 401k contributions
Contact your HR department to up your 401k contribution prior to year end

1. Max Out Contributions

While 401(k) contributions must be made before December 31, the IRA contribution due date extends until April 17, 2018.  Get ahead of the game by knocking both out as soon as possible.

If you haven’t maxed out your 401(k) plan, you may be able to reach out to your HR department and change your withholding on any year end bonuses or paychecks. Do this to make sure you get as much as possible into your 401(k) plan, because once 12/31 hits you’ve lost another yearly opportunity to fund your retirement.

2. Take RMDs

Certain retirement accounts require you to take Required Minimum Distributions (RMDS) by December 31 if you’re 70 1/2 or older.  Otherwise, you could face a penalty up to 50% of the sum you failed to withdraw.  This also applies to inherited IRAs.  Not all custodians are faithful to remind clients about RMDs from inherited IRAs, so be sure to ask your custodian about the best course of action.   

If you turned 70 1/2 this year, you have until April 1, 2018 to take your first RMD. April 1st of the year after you turn 70 and 1/2 is called your RBD or Required Beginning Date. Just because your RBD is 4/1 of the upcoming year doesn’t mean you can’t take the RMD now though!  Delaying it means you will have to take two distributions in 2018, which could shoot you up into a higher tax bracket.   

In past years, Congress has allowed those 70 1/2 or older to donate a portion of their RMDs to charity.  Contrary to the typical RMD, a donated RMD does not count as income.  The lower income for 2017 may put you in a better position to collect Social Security and Medicare next year. 

Roth IRA conversions need to be done prior to year end
Get your Roth IRA conversions done prior to years end

3. Roth Conversions

If the taxable income from your other retirement accounts is lower this year than normal, consider converting your traditional IRA to a Roth IRA.  While it may increase your tax liability, the long term benefits of moving from taxable to tax-free are substantial! 

Be careful with your calculations on how much to convert to a Roth IRA. We recommend trying to push your income up to the next tax bracket margin as close as possible, but not if it’s too high already! Work with a qualified financial and tax planner on these calculations, it’s well worth the cost you may incur.

4. Withholdings

It’s not too late to make adjustments to your paycheck withholdings if they’ve seemed a little high or low throughout the year.  While you never want to overpay Uncle Sam, if you underpay too much you may be subject to penalties.

Doublecheck your withholding, and even consider making an estimated tax payment if you somehow earned more than you expected this year. Again, a qualified tax professional is the best place to turn for help on this one.

5. Reduce Capital Gains Taxes

You can offset capital gains from mutual fund and ETF distributions by realizing any capital losses by December 31.  If your net losses exceed your gains, an additional $3,000 can be offset from ordinary income.  Any losses beyond that limit can be carried forward to future tax years.

6. Max Out Your HSA

This one is a little bit of a misnomer. You don’t need to fund your HSA by 12/31, you have until your tax filing due date each year to fund it for the prior year. That being said, we prefer funding them early and often so why wait to the end of the year or next year?

A high-deductible health insurance plan allows you to store away as much as $3,400 before taxes, a number that jumps up to $6,750 for families.  Those 55 and older can contribute an extra $1,000 annually as well.

We’re BIG believers in health savings accounts! Check out this great video from my Wealth Summit on the triple tax free Health Savings Account to see if you qualify!

7. Spend Flex Dollars

Flexible Spending Accounts are different than health savings accounts. They usually forfeit your unused funds at the end of the year, so be sure to utilize such accounts for any eligible health and medical expenses by December 31.  However, not all plans follow the calendar year, so contact your employer to confirm the deadline. 

Fund your 529 plan
Fund your 529 plan to use up your annual gift tax exclusion.

8. Contribute To Your 529

Eligibility for federal gift tax exclusion and state income tax benefits requires you to make contributions to your college savings plan by December 31. If you want to contribute to a 529 plan for a loved one, nows the time to do it to use up your annual gift tax exclusion if you haven’t done so already.

Charitable deductions must be done by years end
Get your charitable donations done prior to 12/31 to get the deduction!

9. Charitable Contributions

Charities receive full credit for the market value of a donated investment on the date of the donation.  Additionally, they aren’t required to pay capital gains taxes on investment gains. 

The best ways to make these donations is with shares of appreciated stocks, mutual funds, or ETFs.  Check out another great video from my Wealth Summit on charitable gifting.  This process can take some time, so don’t put it off until the last few days of the year. 

Show Caution Buying Mutual Funds in Taxable Accounts

Many funds held in taxable accounts declare distributions near the end of the year.  In order to avoid receiving a taxable distribution based on a few days of fund ownership, it’s best to wait until after the date of record or until after the distribution has been made to buy into the fund.  This advice isn’t applicable, however, for tax-deferred accounts such as an IRA. 

Maximize your money with this year end financial checklist
Follow this year end financial checklist to maximize your money

Year End Money Checklist Summary

As you can see, there’s probably a few more financial factors to consider near the end of the year than you might’ve thought.  Careful assessment of your contribution deadlines, tax liability, and gains/losses can make a significant positive impact on your financial health going forward.  Failure to do so can result in negative consequences felt perhaps years from now. 

Leave A Reply

Your email address will not be published.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Other Articles You Might Like: