Ten Financial Actions to Take Before December 31st

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It seems as though this year just began but we’re already approaching the final weeks and heading into 2017. As celebratory as December can be with the holidays, it can also be an overwhelming time of year. We realize we may not have accomplished all of our goals, or we’re trying to fit in a few last-minute projects before January 1st.

Just as your wallet won’t be gathering dust this season, don’t let your financial strategies fall to the wayside. Here are 10 important financial actions to take before we enter a new year.

1. Max Out Your Retirement Savings

If you can, increase your contribution to your 401(k) by the end of the year to make the most of your retirement savings. For 2016, you can contribute as much as $18,000 (or $24,000 if you are 50 or older). You may also consider contributing to a Roth IRA. For 2016, you can contribute as much as $5,500 (or $6,500 if you are 50 or older). Keep in mind that if your income is over $194,000 and you’re married filing jointly, you won’t be eligible to contribute to a Roth IRA.

2. Use Up Your Medical and Dental Benefits

Have you been meaning to get a root canal, blood work, or other medical or dental procedure? Now’s the time to take advantage of all your health care needs before your deductible resets. Dental plans, in particular, often have a maximum coverage amount. If you haven’t used up the full amount and anticipate any treatments, make an appointment before December 31st.

3. Check Expiring Sick and Vacation Time

Depending on the company for which you work, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If your sick or vacation time does expire, fit in a last-minute vacation, a staycation, or trips to the doctor to use up your time.

4. Use Up Your Flexible Spending Dollars

Like your health insurance benefits, you’ll want to use up your FSA (Flexible Spending Account) dollars by year’s end, if you have one. Your benefits won’t carry over and you’ll lose any unused money in your account at the end of the year. Check the restrictions in your account to see what the money can and cannot be used for.

5. Review Required RMDs

If you’re in retirement, review your retirement accounts; required minimum distributions (RMDs). An RMD is the amount the federal government requires you to withdraw each year from your retirement accounts, including 401(k)s, SIMPLE IRAs, SEP IRAs, and traditional IRAs, usually starting at age 70½. If you don’t, you can be penalized. To calculate your RMD, use one of the IRS worksheets.

6. Keep Track of Charitable Contributions

If you made a charitable contribution in 2016, you may be able to lower your total tax bill when you file early next year. It can be especially advantageous if you donated appreciated securities to avoid paying taxes on the gains. Along with your other tax documents, find and organize all receipts you have from making charitable contributions, whether it was a cash donation, securities contribution, or another type of donation.

7. Consider a Roth Conversion

Roth IRAs are attractive because you don’t pay income tax when you withdraw funds in retirement. However, if you’re a high income earner, you may not be eligible to contribute and instead invest in a Traditional IRA. If you have a Traditional IRA, you may be able to convert to a Roth IRA and save money on taxes in the long run. The deadline to convert to a Roth IRA is December 31st, so if you’ve been considering doing so ”” or wonder if it’s an appropriate option for you ”” talk to your financial advisor ASAP.

8. Talk to Your Advisor About Harvesting Losses

If you invest in bonds, mutual funds, or stocks in accounts other than your 401(k) or IRA, review your realized and unrealized gains and losses. You might be able to offset some of your gains by selling some losses. Tax-loss harvesting can help you save on taxes, but you want to make sure the move also makes financial sense for your situation. Talk with your advisor about potentially harvesting your losses and if it makes sense for you. Should you determine tax-loss harvesting is appropriate, you’ll need to complete it by December 31st.

9. Set a Budget for Holiday Spending

Americans will spend nearly $1,000 this year on holiday gifts alone. During such an expensive time of year, a budget is a must to avoid overspending. Break down your spending allocate a set amount of funds for everything you need this holiday season, including gifts (including an individual budget for each person), food, transportation, postage, and gift wrap. Be realistic about what you can afford to spend.

10. Gift Without Gift Tax Consequences

It’s never too early to start planning the legacy you want to leave for your loved ones without sharing a good portion of it with Uncle Sam. You may want to consider gifting. Each year, you can gift up to $14,000 to as many people as you wish without those gifts counting against your lifetime exemption or $5 million. If you’ve yet to gift this year, or haven’t reached $14,000, consider gifting to your children or grandchildren by December 31st.

Do you have questions on last-minute financial actions you can take before 2016 ends? Do you want to get on the right financial foot for the new year? I’d love the opportunity to offer you support along your financial journey. If you are interested in getting on the right financial foot, I encourage you to reach out to me for a year-end review. Call my office at 770.249.7424 or email me today at beau@richlifeadvisors.com.


About Beau Henderson

Beau Henderson is a financial advisor, author, coach, radio personality, and CEO of RichLife Advisors. He has helped over 3,000 clients to not just improve their relationship with money, but to live the life of their dreams.

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RichLife Advisors, LLC provides investment advisory services through Fiduciary Capital, Inc. Beau Henderson is a licensed life insurance professional in GA, SC, TX, CA, IL, KY, OH, MI, PA, MD, and NY.

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