Greetings from D.C.! The month of December seems to rush by in a wintry mix of shopping, eating, and overspending. With that in mind, the final month of the year is also a good time to get your finances in order and prepare for the new year. As we sit here in a Washington D.C. Hotel looking at the White House, here’s an end-of-year financial checklist to work with that both parties can approve:
1.Schedule a meeting with your financial planner or accountant and your estate planning attorney. If you don’t have a financial planner or estate planning attorney, now is the time to visit one. The end of 2017 or beginning of 2018 is a good time for a financial checkup. A financial planner can help someone segment and prioritize goals for 2018. Do you need to change your monthly spending? Would you like to give more to charities? Are your investments working for you? Should you look at bitcoin? A financial planner can answer all of these questions and generally won’t charge you for a financial review. If you use a tax accountant, consider checking in before Dec. 31 in case the professional recommends time-sensitive planning like deferring income. I’ll touch on this later.
2. Donate to charity. Dec. 31 is the deadline for charitable contributions you plan to deduct from your 2017 tax return. Instead of donating cash, some people donate investments such as low-basis stocks or mutual funds to avoid capital gains tax. This is where an accountant comes in. If you transfer that investment, there’s no tax to you, and when the charity sells it, there’s no tax to them.
Not sure yet where you want your charitable contributions to go? Check out the best rated charities every year here.
3. Max out retirement contributions. You have until you file your tax return next spring to make a 2017 contribution to an individual retirement account (IRA), but 401(k) contributions are only deductible when made in the same calendar year. If you want to establish a retirement plan for 2017, the plan documents also must be signed and put into place in 2017. The 2017 contribution limit is $18,000 for 401(k)s and $6,000 for IRAs (with an extra $500 catch-up contribution option for those ages 50 and older).
4. Use up FSA money. If you still have money set aside in a flexible spending account for health care expenses, see if you can order new glasses or schedule that dental work you’ve been putting off. Some companies offer a grace period into the spring or a $500 FSA carry-over from one year to the next, but this is rare. If your employer doesn’t offer these provisions, then you’ll lose any unused FSA money once the ball drops in NYC.
5. Check your beneficiaries on all banking and investment accounts. You can check the beneficiaries on your retirement accounts or insurance policies at any time, but it’s a good idea to do this at least annually. I always encourage rational chroniclers to review their beneficiaries because someone may have died, or you may have gotten divorced. Don’t leave your ex-spouse as a beneficiary on your retirement funds. If you make this part of your year-end financial task list, then it will be easier to remember.
Stay Rational.
– B&T