December sure is a busy month! With all the holiday parties, family events, and career related tasks, it would be easy to forget to check in on your financial plan, but that could be a costly mistake! By taking just a few simple steps, you can save on your tax bill, and take advantage of some great retirement plan opportunities. So, before the year gets away from us, let’s take a look at your Year-End Financial Planning Checklist.
Max out your 401k opportunity
Many companies offer a matching 401(k) contribution plan, but if you aren’t maxing out your company’s matching threshold, you could be losing out on free money! The threshold to qualify for each company may be different so you’ll need to check with your individual HR department. Don’t leave money on the table by missing out on all the benefits your employer has to offer.
Take all your required minimum distributions
If you’re 70½ or older, you’re required by the IRS to take required minimum distributions from certain retirement accounts by December 31—or face a penalty equal to 50% of the sum you failed to withdraw. If you turned 70½ this year, you have until April 1 the following year to take your first required minimum distribution, but there could be additional tax consequences for waiting.
Don’t forget about your Flexible Spending Account
A flexible spending account is a special tax-free account in which you can contribute money that will pay for services that your health care coverage doesn’t cover. Unfortunately, many people get to the end of the year and forget to use the balance, and it may not rollover to the next year. Be sure to check with your HR department to find out the deadline for using the money in this account so that it doesn't go unused.
Contribute to your Health Savings Account
Like the Flexible Spending Account, the Health Savings Account is a tax-free way of saving for medical expenses. For 2018, those in high-deductible health-insurance plans can save as much as $3,450 before taxes. For families, they can save up to $6,900, and those age 55 and older can contribute an additional $1,000. This is a great way to reduce your taxable income and create a safety net for your health expenses. It’s also important to note that unlike Flexible Spending Accounts, the balance of a Health Savings Account can rollover to the following year.
Consider a charitable donation
During the holidays there are many worthwhile organizations that you can consider donating to that will make a difference in your community. One change that is important to note is with the new tax laws came a change to the standard deduction. The standard deduction on 2018 tax returns is $12,000 for individuals, $18,000 for heads of household and $24,000 for married couples filing jointly and surviving spouses. Those amounts are nearly double what they were in 2017. While it’s always a good thing to donate to charity, your tax deduction might not see the same impact, so you will want to plan accordingly.
Plan for next year
A great way to wrap up a year-end financial planning checklist is to schedule a meeting with your financial advisor for the following year! What do you hope to accomplish financially in the coming year? The best way to achieve it is to have a well-designed plan and a partner in seeing it through. It will also make the following year-end checklist easier if you’ve taken steps throughout the year to achieve your goals, rather than waiting until the end of the year.
At Viewpoint Financial, we understand that you are busy and year-end can be a crazy time. That’s why we believe in serving you on your own time. We will work with you to help with your year-end financial planning and get ready for the next year in a convenient way that meets your unique needs. Give us a call today at one of our 7 locations to see how our uncomplicated approach to financial planning and money management can work for you!