Year-End Financial Planning Moves to Make

November 6, 2019
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It’s hard to believe we’re already in November. If you haven’t already started making moves, now is definitely the time to get all your year-end financial planning in order. The more prepared and on top of things you can be, the better. That’s true of any financial planning tasks, but it is especially important this time of year.

When December 31 (or January 15 or any other key deadlines) come around, you don’t want to be left scrambling. Poor year-end planning is a great way to leave money on the table and potentially face fines if certain deadlines aren’t met.

Here are a few year-end planning tips from Illumination Wealth:

Review Your Tax Withholding

The end of the year is a great time to review your tax withholding to make sure you have paid enough income taxes this year. You can also prepare for next year by resetting your withholding amount based on projected earnings. You can use the IRS withholding calculator to help avoid any surprise tax bills or underpayment penalties in April.

Likewise, anyone who pays estimated quarterly tax payments should use this final quarter to balance their tax ledger. Total up your earnings for the year and make sure you have paid enough estimated taxes. If not, make up for it with the quarterly payment due in January.

Think About Refinancing Loans

If you have a mortgage loan, a student loan or both, the end of the year is a good time to look at your refinancing options and see if you can get a lower interest rate and/or reduce the length of the loan(s). Mortgage rates are especially favorable right now, so it is worth seeing what’s available. With student loans, refinancing a federal loan with a private lender may mean sacrificing some benefits, but it could also mean lower rates and a quicker final payoff.

Check on Your 401(k)

If you have a 401(k), Roth IRA, Health Savings Account (HSA) or any other type of retirement account, use the year-end time to check on its health. Maybe you need to switch up your investment allocations or you can afford to up your contributions. Periodic rebalancing is also a smart way to manage your retirement account(s).

Revisit Your Charitable Contributions

The Tax Cuts and Jobs Act that went into effect in 2018 dramatically changed the tax-deductibility of charitable contributions. People are now discouraged to itemize their deductions, but there are other ways to ensure that your charitable donations can still benefit you come tax season. If you are a charitable person, talk with your tax advisor or financial advisor to make sure you are getting the most out of your eligible tax deductions.

Don’t Forget About Your Flexible Spending Accounts

If you have a flexible spending account (FSA) for medical care or dependent care, you have to use it before the end of the year. It is very common for people to over-contribute to their FSAs and then forfeit money that wasn’t used. You can roll over up to $500 into next year. Anything more will be forfeited. Use what you have and use the amount you spent this year to help determine the proper amount of contributions for next year.

The end of the year is here. It is not a time to procrastinate or put off important financial planning tasks like these. If you have a financial planner, carve out time to consult with them as soon as possible to get your year-end finances in order. If you don’t have a financial planner, contact Illumination Wealth today. Let us show you the advantages of working with an experienced financial advisor who can provide the expertise and personalized service you need to achieve your wealth management goals.