Your Year-End Financial Planning Checklist

As the transition from pumpkin-spiced lattes to eggnog and falling leaves to falling snow signals the approach of a new year, it is opportune to review your finances and confirm that you are on course to achieve your goals in the upcoming year. The following are 11 crucial financial steps to consider before the close of 2023 and the advent of 2024.

1. Review your financial plan

Reflect on any alterations in your life or objectives over the past year that may have implications for your financial plan. Collaborate with your wealth manager to implement any requisite adjustments to ensure alignment with your current circumstances and goals.

2. Optimize your retirement contributions

If feasible, contemplate maximizing your 401(k) and IRA contributions before the year concludes. The 2023 contribution limit for 401(k) is $22,500 (with an additional $7,500 catch-up contribution for individuals aged 50 and above), while the IRA contribution limit is $6,500 (with an additional $1,000 catch-up contribution for those aged 50 and above).

• If reaching the maximum contribution limits is challenging, contemplate augmenting your retirement plan contributions by any feasible amount. Even a modest increase, such as 1% to 2%, can significantly enhance your retirement savings over time, with minimal impact on your take-home pay.

• A crucial reminder, contributions to employer-sponsored plans must be completed by December 31, while contributions to an IRA must be made by April 15, 2024.

3. Implement measures to reduce your tax liabilities

Collaborating with your wealth manager can prove instrumental in identifying opportunities to minimize your tax liabilities through practices such as year-end tax-loss harvesting, strategic asset location, charitable giving, and other relevant strategies.

4. Rebalance your investment portfolio

If it has been a while, consider rebalancing your investments to adhere to your initial (or revised) asset allocation. This proactive step helps secure gains from well-performing sectors and ensures that your portfolio stays in alignment with your goals and risk tolerance.

5. Finalize your year-end charitable donations

Effectively lowering your taxable income for a specific year can be achieved through charitable donations. In instances where your 2023 income exceeded the usual, considering the establishment of a donor-advised fund (DAF) can be beneficial. A DAF permits you to secure an immediate charitable tax deduction in the present year, contingent on filing an itemized return. Furthermore, it provides the flexibility to disburse donations from the DAF to your preferred charities at a later date.

• Alternatively, you might explore a “bunching” strategy, consolidating several years’ worth of charitable donations into a single substantial contribution. This approach enables you to file an itemized tax return for the year in which the consolidated donation is made.
• Your wealth manager is well positioned to assist you in formulating a tax-efficient charitable giving strategy tailored to your specific circumstances.

6. Assess your current insurance coverage and evaluate your risk management needs

Evaluate any shifts in your life and financial circumstances that might necessitate additional insurance coverage. Significant life events such as the birth of a child, marriage, starting a business, or divorce can impact your insurance needs. Collaborating with your wealth manager can aid in assessing whether adjusting your current coverage level is prudent.

7. Reevaluate your healthcare coverage

Assess whether any alterations in your life or health mandate a modification in your healthcare coverage. If so, leverage your employer’s open enrollment period to enact any requisite adjustments to your healthcare coverage.

• Seize the opportunity to select contributions for a Health Savings Account (HSA) or Flexible Spending Account (FSA) during this period as well.

• Regarding FSAs, it is prudent to devise a plan to utilize any remaining funds on qualified medical expenses before the year concludes. Failure to do so may result in the forfeiture of these funds.

8. Check in your emergency fund

If you tapped into your emergency savings in 2023, it is advisable to focus on rebuilding it at this juncture. A prudent guideline is to maintain three to six months’ worth of expenses in a liquid account to provide a financial buffer for unforeseen expenses.

9. Review your estate planning documents

Initiate the establishment of estate planning documents promptly, irrespective of your age. If it has been a while since you last reviewed your existing estate plan, schedule a discussion with your wealth manager and estate planning attorney to revisit your documents. This ensures that they are current and aligned with your current wishes and circumstances.

10. Review your beneficiary designations

Keep in mind that beneficiary designations can override the directives in your will and trust. It is crucial to consistently review all designations to guarantee their continued alignment with your estate planning objectives. If there was a death in the family, check to see if that person is still a beneficiary to your will, retirement plan account, or life insurance policy and make the necessary amendments.

11. Check your credit report

Leverage the annual free credit reports offered by major credit bureaus—Equifax, Experian, and TransUnion—to cross-check your credit score and identify any potential errors. This proactive step aids in maintaining the accuracy of your credit information.