Your 2022 Year-End Financial Checklist

Your 2022 Year-End Financial Checklist

And just like that, we’re on the precipice of a new year. Sometimes, year-end can finger like the final moments of a really important standardized test: you wonder how you can possibly get everything washed-up surpassing time runs out (and end up with a score you’re proud of). 

But financial planning isn’t taking a test — not only are you not stuff timed but you can work on it with others. 

While you’ll unchangingly have a financial to do list, here are our top 12 money tips to prioritize surpassing the end of 2022.

1. Go “All In” on Your Retirement Accounts

Before the new year, take time to review how much money you’ve unsalaried to your retirement accounts. If you still have wiggle room in your contribution limit and mazuma flow, consider maxing out these accounts. 

Not sure where you stand? Here are some finance to alimony your eye on:

  • 401(k)
  • IRA
  • HSA

Let’s start at the top. 

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Really Maxing Out Your 401(k)

In 2022, you can contribute up to $20,500 in a 401(k). If you’re 50 or older, that number jumps to $27,000 thanks to $6,500 in catch-up contributions. 

You fund a traditional 401(k) with pre-tax dollars, so every dollar you funnel into the worth lowers your yearly taxable income. Reducing your taxable income is important considering you could pay fewer taxes in April. 

But your contribution momentum doesn’t necessarily have to stop there. Including your employer contributions (aka a match), the IRS enables you to put up to $61,000 ($67,500 with catch-ups) in your 401(k). If the funds from you and your employer don’t add up to that number, you may be worldly-wise to make spare after-tax contributions to maximize your account.

Keep in mind that after-tax contributions are variegated from typical payroll deductions, so trammels with your employer and financial planner to see if A. they indulge after-tax contributions, and B. if it’s a good idea given your financial situation.  

After-tax contributions can be unique and unshut up various planning opportunities, like converting the funds to a Roth 401(k) or Roth IRA. 

Know Your Options for an IRA

Speaking of IRAs, the maximum value you can put into your IRA in 2022 is $6,000 (or $7,000 if you’re 50 or older). That limit applies to each IRA separately, so you could directly contribute $6,000 into a traditional IRA and $6,000 into a Roth IRA (if you qualify). 

You’ll likely come wideness three types of IRAs:

  • Traditional IRA (pre-tax contributions, tax-deferred growth, taxable withdrawals)
  • Non-deductible Traditional IRA (after-tax contributions, tax-deferred growth, taxable withdrawals). You may have to make non-deductible contributions if you or your spouse has retirement coverage through work and you earn whilom a set threshold. 
  • Roth IRA (after-tax contributions, tax-deferred growth, tax-free withdrawals when you follow the rules). If you earn whilom the income phaseouts, you can use a backstairs Roth IRA, or Roth conversion, to get money into this account. 

If you’re self-employed, there are several other IRAs at your disposal:

  • SEP IRA (For merchantry owners: up to 25% of an employee’s bounty or $61,000)
  • SIMPLE IRA (For merchantry owners; must match up to 3% of an employee’s bounty or a 2% nonelective contribution for each employee)

Keep Investing Funds in Your Health Savings Worth (HSA)

If you’re enrolled in a upper deductible health plan, you can wangle a valuable tax-advantaged account: an HSA. A Health Savings Worth comes with three hair-trigger tax benefits:

  • Pre-tax contributions (i.e. contributing lowers your taxable income)
  • Tax-free growth on earnings within the account
  • Tax-free withdrawals for qualified medical expenses like prescriptions, premiums, and more

You can contribute up to $3,650 for self-coverage and $7,300 for family coverage this year, and those limits will increase in 2023 to $3,850 and $7,750, respectively.

Instead of treating your HSA like a savings account, start leveraging it as flipside long-term investment tool. By investing the funds in your HSA, you can take wholesomeness of compounding returns and create a generous bounty when you likely need it most: retirement.

2. Analyze Your Windfall Typecasting and Rebalance if Necessary

Given the notable market volatility this year, there’s a possibility your investments aren’t in the same position they were last January. 

This ways now could be a good time to review your windfall typecasting (meaning, the type of securities you’re investing in and the weight you requite each category). 

Your “ideal’ windfall typecasting depends on several factors: 

  • Your risk tolerance (willingness to take risks)
  • Risk topics (ability/necessity to take risks)
  • Time horizon (how long until you reach your goal)
  • Investment goals (what you want to achieve)

If you’ve noticed a shift in your allocations, whether to typical market movements or a transpiration in your investment needs, it might be time to “update” or rebalance your investments to uncurl increasingly closely with your goals. 

Whenever you buy and sell investments, it’s essential to alimony the big picture in mind. You don’t want to sell out of fear or buy out of hubris. Your counselor can help determine if you need to rebalance your portfolio and how to alimony your investments working toward your larger goals. 

3. Decide if You’re Taking the Standard Deduction or Itemizing

One of the biggest tax preparation decisions is whether or not you’ll itemize deductions. But why do you have to worry well-nigh this now? Don’t you decide in April? 

While you’ll make the final visualization when you and your tax professional prepare your taxes in the spring, planning now can help you make informed decisions surpassing the year-end deadline. 

  • $12,950 for single filers and married couples filing separately
  • $19,400 for heads of household
  • $25,900 for married couples filing jointly

While these numbers are relatively high, you may have other deductions that exceed these limits. If so, itemizing them can help you reduce your tax bill. Here are some worldwide deductions to track throughout the year:

  • Interest on loans (mortgage, student loans, home probity line of credit (HELOC), etc.)
  • State and Local Taxes (SALT)
  • Healthcare expenses that exceed 7.5% of your adjusted gross income
  • Charitable contributions 
  • Family credits (child tax credit, adoption credit, etc.)

If you’re right on the line, it might make sense to explore increasing your charitable efforts or springing for an uneaten pair of glasses to push you over the standard deduction. 

4. Get on Your CPA’s Calendar

Come January 1st, your CPA’s timetable will start to fill up and you’ll want to secure a slot surpassing tax time.

Take a minute surpassing year’s end to typesetting a user-friendly time on their calendar. Otherwise, you may be left scrambling to meet next spring’s deadline.

5. Think Through Tax-Loss (and Gain) Harvesting

Watching your investments lose money is a bummer, but that loss could present a strategic tax opportunity. 

Tax-loss harvesting enables you to sell resources at a loss to offset other investment gains. In fact, you can deduct up to $3,000 from your ordinary income, and if your losses exceed that amount, you can roll it over into the pursuit year. 

In conjunction with managing your losses, it’s moreover wise to powerfully track your gains. 

Suppose you visualize a significant liquidity event, like your visitor going public, receiving a sizable inheritance, a lot of stock vesting, selling a vacation home, etc. In that case, it’s crucial to strategically prepare for the tax consequences. 

For example, you might want to squint at realizing losses in the same year as significant gains to help cancel the other out as much as possible. 

6. Consider a Roth Conversion

If you earn over $214,000 married filing jointly and $144,000 filing single in 2022, you can’t directly contribute to a Roth IRA. But a Roth conversion is like a golden ticket for high-income earners to wangle Roth IRAs.

A Roth IRA conversion lets you convert funds from a traditional worth (IRA, 401(k), etc.) into a Roth. You’ll pay taxes on the conversion value in the year you make it, the funds will grow tax-free, and you can enjoy qualified tax-free distributions in retirement. 

Since paying taxes on the money up front increases your taxable income for the year (rather than decreases, which is what we’ve been emphasizing in this article), why should you requite this strategy the time of day? 

Well, with Roth IRAs you can:

  • Accumulate tax-free dollars in retirement, subtracting diversity and flexibility to your spending
  • Take wholesomeness of a lower-income year/down market, lower your present tax bracket, and leverage future tax brackets
  • Give yourself increasingly spending wiggle room in your golden years, as Roth IRAs are one of the only tax-advantaged finance without required minimum distributions
  • Set up a tax-friendly inheritance vehicle for your beneficiaries

But Roth conversions are complex, and there are several tax and other wealth considerations. Working with your financial counselor and tax professional is hair-trigger to see if a conversion makes sense for you this year. 

7. Make the Most of All Visitor Benefits

Be honest with yourself, do you really know all the benefits your visitor offers? 

We get it: rummaging through a unwieldy HR handbook that feels like it was written for computers instead of people is not a fun afternoon. But completely understanding your benefits package can be a financial game-changer. 

Here are some top benefits to watch out for:

  • Medical insurance. Are you on the right plan for your current health needs? Do you need any new medications? Will you require specialist visits? 
  • Health savings options. Do you still have money left over in a Flexible Spending Worth (FSA)? Since there’s a cap on how much you can roll over, most FSA benefits are “use it or lose it.” Are you using other FSAs, like a Healthcare Dependent FSA, to help imbricate daycare or other caregiving expenses? Are you maximizing your HSA if you qualify? 
  • Group insurance policies. Squint into life, disability, casualty, pet, and other affordable group insurance policies to get the weightier deal.
  • Paid time off. Spending quality time yonder from your inbox can modernize productivity and joy at work. Be sure to use all your allotted vacation time to prioritize a strong work/life balance. 

8. Evaluate Your Mazuma Spritz Plan for Next Year

For most people, spending comes in seasons. You might notice increasingly spending during vacation-heavy summer months or stocking up on year-end gifts. 

While the ebbs and flows of spending are entirely normal, it’s vital to alimony tabs on what your spending looks like overall to ensure it’s aligned with your larger financial goals. 

If you find yourself spending on things that aren’t fulfilling, it might be time to make a change. By overspending in one area, you could limit yourself in others. Prioritize your cadre goals and values, and be intentional well-nigh spending in a way that brings your values to life. 

For example, quality time with your family may be a cadre value. If so, spending money on a flight to see your family would uncurl with those values, whereas ownership an uneaten knick-knack might not. 

When you start spending money with your values in mind, cash spritz planning becomes far less burdensome. 

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9. Make a Debt Plan

Debt can finger overwhelming, but here are some ideas to stay in tenancy of your debt heading into 2023. 

First, evaluate the progress you’ve made toward your present debt goals:

  • Did you qualify for any student loan forgiveness?
  • Can you refinance any loans to a lower interest rate?
  • Would consolidating your debt make repayment increasingly streamlined?
  • Are there any resources you can reallocate to pare lanugo the debt balance?

Next, consider what “new” debt might be coming your way next year:

  • Is your child starting higher or pursuing a graduate degree? Are you planning to help them out financially, like giving them money or cosigning on a loan?
  • Are you ready to buy or renovate your “forever” home?
  • Do you need to secure a merchantry loan for an important expansion? 

Planning for significant expenses that require taking on debt helps you shop virtually for the weightier loans and create room in your mazuma spritz plan to take on those uneaten payments.

10. Create an Ongoing Charitable Giving Strategy 

We can’t talk well-nigh year-end planning without reviewing charitable giving. While there are many ways to get involved in an organization or rationalization you superintendency about, here are some key areas:

  • Contribute to a donor-advised fund (DAF). Like a charitable investment account, a DAF lets you donate appreciated resources and other property, take a tax deduction, and recommend grants to the charities of your nomination over time. 
  • If you’re at least 70 ½, consider a qualified charitable distribution (QCD). QCDs let you donate money directly from your IRA to a qualified charity. Many retirees will donate all or a portion of their required minimum distributions (RMDs) for the year to mitigate their tax liability and uplift the total value of their gift. 
  • Bunch several years’ worth of contributions into one. “Bunching” several years’ worth of donations into one year is a unconfined strategy for years when you want to itemize instead of taking the standard deduction. If you’re using a DAF, you can then spread your donations wideness multiple years while taking the total tax deduction up front. 

There are other ways to remain involved in philanthropic efforts, like regularly volunteering, sitting on a board, spearheading foundations, and encouraging family participation. The marrow line is charitable giving can have the widow goody of helping your financial planning in the long run. 

11. Intentionally Update Your Manor Plan

It’s far too easy for your manor plan to sit untouched in the preliminaries but keeping your documents up to stage is perhaps the most selfless souvenir you can requite to your loved ones. Clearly documenting your wishes and a plan for your resources establishes some helpful order in a time often wrought with emotion. 

Here are some worldwide manor planning tasks to review:

  • Amend your will. If anything significant has reverted regarding your end-of-life wishes, update them in your will. 
  • Update your primary and secondary beneficiaries. Since your beneficiaries are the people or institutions who receive your resources without you pass, it’s important to alimony them updated. This is expressly true if you’ve experienced a significant life transpiration like a death, divorce, remarriage, had flipside child, moved, or had a job change. 
  • Name a Financial Power of Attorney. Should you wilt incapacitated, this person makes financial decisions on your behalf (pays bills, handles taxes, etc.).
  • List a Healthcare Directive. If you wilt incapacitated, this person makes health-related decisions  such as do not resuscitate (DNR) provisions, surgeries, and the like. 
  • Select a Guardian and Trustee for your minor child. A guardian has legal responsibility for your children should you pass away. Given the significance, segregate someone like-minded who will honor your intent and wishes. A trustee will handle your finances without you pass (meaning, they will manage the trust, handle finances for children, divide up assets, and more).

If you don’t have an manor plan, it’s not too late to create one. You can get started by reading our manor planning checklist.

12. Trammels if You’re On Track to Reach Your Financial Goals

Think well-nigh making goal-setting an essential year-end tradition. It can be a fantastic opportunity to slow lanugo and employ introspection, contemplation, and reflection on how far you’ve come this year and where you want to go in the future. 

Give yourself the proper time and space to wordplay these questions:

  • What are you most proud of implementation in this past year, financial or otherwise? Perhaps you finally asked for and got a raise, successfully reverted careers, moved closer to family, or set a retirement date. 
  • Were there any goals you didn’t accomplish? If so, what roadblocks stood in your way? How can you overcome these in the future?
  • Have your priorities or goals shifted in the last year, and how can you uncurl your finances to support that new vision? For example, you might finger burned out and want to make a career change. You might consider how a career transpiration could impact your present and future financial goals. What tradeoffs are on the table? 
  • What goals are you most excited to pursue in 2023?

Your goals are the centerpiece of your financial plan. When you understand what’s most important to you, it becomes much easier to retread behaviors, habits, and practices that help you find success. Are you ready to make 2023 your weightier financial year yet?

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