Year-End Financial Checklist

School of Financial Wellness

Year End Financial Checklist provided by Meld University – series of checkboxes and a pen with Meld University Logo

Believe it or not, 2020 is finally coming to an end. Although this holiday season may feel very different, some things will not be changing. The end of the year is the last opportunity to make certain financial moves that will count towards the current year. Now is a great time to take stock in your finances and make sure you are prepared for 2021.

Revisit Your Retirement Accounts

Employee 401k contribution limits can increase from year to year, so it is important to revisit your contributions before year-end. Maximizing your contributions for the year, if possible, is important for two reasons: money invested into a 401k reduces your taxable income, and many employers offer matching programs. By maximizing your 401k contributions, you can better prepare yourself for retirement while decreasing your taxable income in 2020.

Other retirement accounts, like IRA’s, can also be maxed out. It is also important to look over how the CARES act may have affected your retirement account requirements. The CARES act waived required minimum distributions for 2020 on all retirement accounts, including IRA’s and 401k’s. Those who may have picked up a side job during the pandemic, or have used the downturn to explore entrepreneurial interests, may be eligible to contribute to self-employed retirement plans, like solo 401k’s and SEP IRA’s.

Manage Your Investments in a Tax-Advantaged Way

Year-end is a great time to rebalance your portfolio to achieve your desired investment mix. When you sell overweight positions, they have likely gained value and will subject you to capital gains tax.

Those who are experiencing high capital gains taxes this year could explore a tax-loss harvesting strategy. This is the process of selling investments that have lost value and realizing those losses for tax purposes. This can offset investments that have made you money and could even decrease your taxable income if executed properly. This strategy is not right for everyone, and like any strategy, it should be discussed with your financial advisor prior to taking action to ensure it is right for your situation.

You also will need to be mindful of capital gains distributions from mutual funds or exchange-traded funds [ETFs]. Mutual funds are required by law to make regular distributions, and this will count as capital gains on your tax bill regardless of whether you elect to take the cash or reinvest. These distributions can be avoided by selling your position before the ex-date, if the sale makes sense for your situation. A CERTIFIED FINANCIAL PLANNER™ can help you make these decisions.

Make Charitable Contributions

Another way to reduce your taxable income could be charitable contributions. Since the 2018 tax reform, more Americans are taking the standard deduction which eliminates the tax benefit for charitable gifts. However, one tax-advantaged donation strategy for those taking the standard deduction is to make a qualified charitable donation [QCD] from an IRA.

QCD’s are not included in your Adjust Gross Income [AGI], which provides a host of benefits. QCD’s are also a popular way to reduce Required Minimum Distributions [RMDs].

Evaluate Your Estate Plan

Now is also a great time to review estate plans. Make sure that your wills and revocable living trusts are up to date with appropriate executors, trustees, and guardians. Consider holding a family meeting (safely!) to review this information and keep everyone informed of estate plans.

If you find that your estate plan needs an update, don’t hesitate to contact our team at Meld Financial. We have a team of financial and legal professionals at our disposal that help you solidify your plan and give you confidence heading into 2021.

Review your Health Insurance and HSA’s

Health insurance is a significant expense for many people, and now is a great time to reevaluate your current plan. If your premiums are increasing significantly or you have not been spending enough on healthcare for your current plan to make sense, consider changing plans. Those with a high deductible plan may also be contributing to a health savings account [HSA], a pre-tax investment that can reduce your taxable income.

HSA’s are not unlike some retirement plans in that they have yearly contribution limits and are pre-tax investments. This means that maximizing contributions to HSA’s are an effective way to save for future medical expenses. Money invested into an HSA does not need to be spent within a certain amount of time and builds over time. At retirement age, currently 65 years old, you may withdraw from an HSA without an additional penalty, even for non-healthcare expenses.

Review Entitlements: Social Security and Medicare

Each year you should take the time to review your Social Security and Medicare options. Planning properly for Social Security can pay huge dividends in your future. On the other hand, starting Social Security at the wrong time could result in significant lost income during yours and your spouse’s retirement. In addition, selecting the proper Medicare options can help keep your overall medical expenses as low as possible. For a breakdown of changes to Medicare Premiums, Deductibles and Coinsurance for 2021, read this article.

If you’re nearing the age to begin receiving your Social Security benefits or if you are about to enroll in Medicare, reach out to Pat Burris, CFP® here at Meld Financial. Pat is our resident Social Security and Medicare specialist, and she is always happy to discuss your options.

Finalize your 2021 Savings Plan

Finally, review your savings performance for 2020. The spring and summer were especially tough for many, but those who were able to stay invested through the downturn have been rewarded with strong stock market performance nearing year-end. For those who have come up short, how can you better prepare for 2021?

Use last year’s performance to shape your goals for 2021. If you met or surpassed your goals, try adding to those goals. If you fell short, evaluate what you can do to make up those shortcomings and create a strong safety net. Before you finalize your plan, speak to a financial advisor about your goals to help ensure they are appropriate for your situation.

Get Your Financial Fingerprint™ at Meld Financial

The financial planners at Meld Financial can leverage their vast experience, in conjunction with a team of financial and legal professionals, to help you develop your Financial Fingerprint™.

Your Financial Fingerprint™ is a unique planning process developed here at Meld through several decades of managing our clients’ wealth. In short, your FINANCIAL FINGERPRINT™ is a plan that is quick to assemble, easy to understand and simple to modify as your circumstances change. If you’re ready to talk, click the “Get Started” button on our home page to schedule a meeting with a member of our team – at your convenience.

Contact Meld Financial today to get your FINANCIAL FINGERPRNT™.

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Meld Financial, Inc. is an independent wealth management firm located in Birmingham, AL.

We specialize in financial planning, investment management, employee benefits and executive benefits for individuals, families, trusts, foundations and institutions.

We provide independent and objective services melded with customer-driven financial goals.

Mark McGarvey - Founder - Meld Financial

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-Mark McGarvey, Founder