Every year around this time I get the same feeling. The holidays are coming, the calendar fills up, and then it's January and a bunch of things that could have been handled in November are suddenly April's problem.
A year-end review doesn't need to be a big project. An hour with your statements and a pot of coffee will cover most of it. Some of these items have hard deadlines of December 31, which is the reason to do this in October or November rather than the week before Christmas. This isn't a complete list, and your situation will have things that aren't on it, but it's a good place to start.
Retirement account contributions
Start by looking at what you've put into your 401(k), 403(b), or similar plan this year. Contributions to a workplace plan generally have to come out of your paycheck before the year ends, so if you want to put in more, you may have only a handful of pay periods left. IRAs are more forgiving. You can usually contribute for this tax year up to the filing deadline next spring.
The IRS adjusts the limits most years, and there are extra catch-up amounts for people over a certain age, so check the current figures before you decide anything. If your employer matches contributions, find out whether you're collecting the full match. Leaving it on the table is the most common miss I see.
Required minimum distributions
Once you reach the age when required minimum distributions apply, you have to withdraw a minimum amount from most pre-tax retirement accounts every year, and the deadline is generally December 31. If you miss it or take too little, the penalty on the shortfall is steep.
If you do have to take one, confirm the amount for each account, whether it's been taken, and how much should be withheld for taxes. If you give to charity and you're old enough, ask your tax professional whether sending money directly from an IRA to a qualified charity makes sense. It can count toward the requirement without adding to your taxable income, but the rules are specific.
Your tax picture
Take a look at roughly where your income is landing this year. Did you sell a house, a business, or a large position? Did you have a year with unusually low or high income? Those things can open up options or close them, and many of the options expire at year end.
Charitable giving is part of this too. If you give regularly, it's worth asking your tax professional how and when to do it. A conversation in November can leave you with more choices than a conversation in March. I'm not a tax adviser, so I'll leave the specifics to your CPA, but I'm happy to share what I'm seeing in your accounts to help the two of you get on the same page.
Beneficiary designations
This one takes ten minutes and can matter enormously. Retirement accounts and life insurance generally go to whoever is named on the form, regardless of what your will says. If you've had a marriage, a divorce, a birth, or a death in the family, or if you simply haven't looked in ten years, pull the forms and see who's actually listed. I've seen plenty of situations where the name on the form was a surprise to everyone involved.
Health coverage
Medicare open enrollment runs October 15 through December 7. If you're on a Medicare Advantage or drug plan, plans change their costs and coverage from year to year, and the one that fit you last year may not fit you now. Take a look at your doctors and your prescriptions and see how the plan treats them.
If you're still working, your employer's open enrollment is probably happening around now too. And if you have a flexible spending account, check your balance, because some plans make you use it by a certain date or lose it. A health savings account is different, since the money stays yours, but it's a good time to see how much you've contributed.
Step back and look at the whole picture
The last thing on my list isn't a task. It's a question: did anything change this year? A new job, a retirement date that moved, a kid who graduated, a parent who needs help, a health issue. Any of these can change what your plan should look like.
- Is your emergency savings where you want it to be?
- Are your will, power of attorney, and health care proxy current?
- Is your insurance coverage still right for your family?
- Does the way your accounts are invested still match your goals and how much risk you're comfortable with?
Make it a habit
You don't have to do all of this in one sitting. Pick the items with December 31 deadlines first, and leave the rest for a quieter week. If you'd like some help, or a second set of eyes on how it all fits together, I'm glad to sit down with you. The first conversation is free and carries no obligation.