At the end of the year, there are many tasks that you need to complete to get your finances prepared to start the new year in a strong position. We have put together a simple checklist to help you keep track of these tasks and ensure that they are all completed on time.
Use the form below to download the printable checklist. Then, read on for details about the tasks you need to complete.
Revisit Your Retirement Accounts
At the end of the year, it is wise to review your retirement accounts. You should look for opportunities to maximize your contributions, take final distributions, and ensure that your retirement strategy fits with your overall financial plan.
Maximize Contributions
The IRS typically updates contribution limits for 401(k)s and Individual Retirement Accounts [IRAs] each year to account for inflation. Be sure to understand these limits so you can maximize your contributions and the tax benefits these accounts provide.
You should also consider the timing of contributions. Your 401(k) contributions must be made by the end of the year. On the other hand, you can add money to an IRA until your tax filing deadline.
Process Distributions
If you are already retired, you may need to take final distributions from your retirement accounts – such as Required Minimum Distributions [RMDs]. Money must leave the account by December 31st to count toward your current year taxes and satisfy your RMD. However, it is generally wise to request distributions a few days in advance of this deadline to account for processing and settlement.
Ensure Your Retirement Accounts Align with Your Financial Plan
As you process final transactions, take some time to review your retirement strategy including the types of accounts you use and the tax benefits they provide. An experienced financial advisor can be integral to this process and will help you determine if your retirement strategy is sound.
Manage Your Investments in a Tax-Advantaged Way
The end of the year is a great time to revisit your portfolio and rebalance to achieve your desired investment mix. Your financial advisor should be handling this task for assets under their management, but you may need to adjust non-managed accounts – like 401(k)s – on your own.
When you sell positions in a non-retirement account, you will likely owe capital gains tax on any value they have gained. A tax-loss harvesting strategy can help you avoid these taxes by selling investments that have lost value to offset those that have increased in value. However, this strategy is not right for every situation and should be discussed with an experienced financial advisor before implementation.
You should also be mindful of capital gains distributions from mutual funds or exchange-traded funds [ETFs]. Mutual funds are required by law to make regular distributions. These will count as capital gains on your tax bill – regardless of whether you elect to take the cash or reinvest. You can avoid these taxable distributions by selling the position before the ex-date. An experienced financial advisor can help you determine if a sale makes sense in your situation.
Make Charitable Contributions
Charitable contributions can be another way to reduce your taxable income, but they are most effective if you itemize deductions. On the other hand, there are still charitable gifting strategies available to those who use the standard deduction – like a qualified charitable distribution [QCD] from an IRA.
QCDs are processed as a direct transfer from your IRA to a qualified charity. As such, they are not included in your Adjusted Gross Income [AGI] and can even reduce RMDs without increasing your taxable income.
Evaluate Your Estate Plan
The end of the year is also a great time to review your estate plan. You’ll need to ensure that your wills and revocable living trusts are up to date with appropriate executors, trustees, and guardians. Our simple estate planning checklist will help you remember all the parts of your estate plan that need to be reviewed and updated.
In addition to updating the legal documents in your estate plan, you should ensure that your family and chosen representatives are aware of your plans. Consider holding a family meeting to review this information and remind your loved ones of any responsibilities you have assigned to them.
Review Your Health Insurance and HSAs
Health insurance is a significant expense for many people, and now is a great time to reevaluate your current plan. Consider changing your plan if your premiums are increasing significantly or you have not been spending enough on healthcare for your current plan to make sense.
Those with a high deductible plan may also be contributing to a health savings account [HSA]. HSAs are not unlike some retirement plans in that they are pre-tax investment accounts with yearly contribution limits. Because these accounts are pre-tax, maximizing contributions to an HSA is an effective way to save for future medical expenses while reducing your taxable income.
An HSA can also be a powerful retirement planning tool. 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
If you are nearing retirement, take the time to review your Social Security plan. The right plan will allow you to begin benefits and coordinate with your spouse to maximize your lifetime income.
If you are already receiving Social Security, review your benefits and the annual Cost of Living Adjustment [COLA] – which increases your benefit to account for inflation. Understanding your new benefit amount can be vital to helping you plan an accurate budget for the new year.
For an overview of changes to Social Security benefit amounts next year, read our article 2025 Social Security COLA Announced.
Your year-end review should also include a thorough review of your Medicare coverage. You can make changes to your coverage during open enrollment which runs from October 15th to December 7th each year. Outside of that timeframe, it is wise to understand your current coverage and how it could change in the upcoming year.
For a breakdown of how your Medicare expenses could change next year, read our article Medicare Premiums and Coinsurance in 2025.
Finalize your 2025 Savings Plan
Finally, review the savings goals you set for 2024 and your performance throughout the year. You can use these goals to shape new ones for 2025.
If you met or surpassed your saving goals, try adding to them and saving even more in the new year. If you fell short, evaluate what you can do to make up the shortfall and create a strong safety net.
As with all the tasks on this list, the right financial advisor can make the difference between success and failure. Before you finalize your 2025 savings plan, speak to an experienced financial advisor about your goals to help ensure they are appropriate for your situation.
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The list of financial tasks that you need to complete each year can be overwhelming to tackle alone. Fortunately, Financial Fingerprint® from Meld Financial makes it simple to understand your entire financial picture and the steps you need to take to reach your goals.
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