Your Year End Checklist
As we reach the end of December, it can get easy to switch off and lay back throughout the holidays. However, it’s important to tie off loose ends and get your life ready for the start of 2021 before clocking off completely.
No matter what stage of life you’re in, you should have an annual checklist of tasks around not only your finances but also your life as it transitions. Here are some of the most important categories:
Digital
Retirement
Insurance
Tax
Estate Planning
Milestones
Digital
Hopefully you have all the accounts you need set up online. At the end of the year, it is time to review the programs and apps you’re using and update your passwords (even if you haven’t had any data breaches!). Also, your subscriptions and apps may have outlived their purpose and you could be wasting money by paying a monthly fee.
It’s also a good idea to clear and clean up your computer, moving documents to a cloud portal. Backing up everything to the cloud instead of on a hard drive should mean your documents are more secure and much more accessible. As well as work-related documents, you should have digital copies of your passport, drivers license and other important records and certifications. It’s even a good idea to make digital copies of your favorite photos, in case they get lost or damaged.
Retirement
We’re all trying to age gracefully but money is still a factor, especially later in life when a solid income is not guaranteed. Even if you’re not in retirement; Required Minimum Distributions may need to be taken from IRAs by December 31st to avoid penalty (except in 2020 only). You may also want to consider a Roth conversion by year-end.
Those who are earlier in their career should aim to max out their 401(k) or other retirement plans before December 31st. If you have started your own business this year (or your company doesn’t offer one), opening a retirement plan has probably not been at the top of your list. But, you should get organized with this before the year closes as various retirement accounts have different deadlines to both open and contribute to.
Health & Insurance
Year on year, our situations tend to change and it may impact the plans we have in place. Not to mention, medical issues often come as a surprise and sometimes we need to in a certain way to remain covered by insurance. First things first; enroll in marketplace health insurance. Or, do you have open enrollment at your employer? In both cases, review your deductibles and policy limits to ensure they fit with your health requirements.
It’s also important to check if you need to add to a certain policy. Your FSA funds expire each year if they’re not used, so ensure you are getting the value out of the money you’ve contributed. Further on this, review any life and disability insurance policies in case of changes. This can include increases in income and might impact the Medicare plan you are enrolled in.
Speaking of Medicare, those who will turn 65 in the next year should get familiar medicare enrollment. You have three months before your 65th birthday and three months after to enroll in Part A and B if appropriate to avoid permanent penalties. You should review your auto, property and umbrella policies, especially if you made a significant purchase. Check that purchases are covered, including:
A Boat
Art
Jewelry
Electronics or something else
Tax
Begin putting together your tax documents now so that you can avoid rushing in the first quarter of next year. Even with the delays of 2020, organization is key when it comes to taxes. For example, if you made any significant charitable donations, you can work with your advisor on tax loss/gain harvesting to balance the books.
We had a lot going on this year, and for many, life didn’t just stand still. For example, you may have moved home for work or bought or sold a house, got married, etc. If you went through a significant financial life transition, gather up information on things like child care, after school and summer program costs as these may be associated with your dependent care FSA in the following year.
Finally, you are legally allowed to make gifts of up to $15,000 and avoid gift tax. If you are contributing to a child’s 529 account (either by regular contributions, gifting, or superfunding), so check in with your financial planner and CPA to ensure you are maximizing your contributions.
Estate Planning
Each year, it is important to review your estate plans to ensure they still reflect your wishes and keep your family members in mind. This includes documents such as a Will, Living Will, and Powers of Attorney. If your family unit has changed this year, also check whether the beneficiaries on retirement plans and life insurance remain accurate.
If you’re on the receiving end of an inheritance next year, your financial planner should be there with you to work through the emotions and has an obligation to keep your best interests in mind.
Milestones
Getting older, it’s easy to forget how far we have come and what we have achieved in the years before. But with age comes access to those coveted retirement funds you spent so long saving for. Take a look at the ages below to see if you’re going to hit any of the following milestones within the next year:
50: You can contribute more to your IRA/Roth, 401(k)
59 ½: You can take distributions from retirement plans without the 10% penalty.
62-70: Review Social Security options. When is the best time to start benefits?
65: Apply for Medicare (best to do three months prior to turning 65) Do NOT skip applying even if you are still employed and have health insurance.
72: Begin Required Minimum Distributions from retirement plans or be sure to take if you currently are required to
If there are other items you’d like to discuss with me before we enter 2021, get in touch here.