Many of you made new year’s resolutions to eat healthier, lose weight and be better for your family. For those of you reading this newsletter, I bet you at least thought about making some Financial “New Year’s Resolutions”. Your friends at Avidian Wealth Solutions want to help you reach your financial resolutions and goals. With that in mind, as we approached the holidays, we updated our year-end tax and financial planning checklists as a way to finish the year on the right note:
Now that we have begun 2022, it is a great time to get organized to start next year on the right foot with the right plan! Below, I have listed some steps that you can take to get your finances ready by year-end.
First off, read this linked article to see if you are on track given your sage in life: Proper Planning to Avoid Money Worries. Once you see where you are, here are some follow-up steps to help your New Year’s Resolutions become reality!
- Start to get your budget under control
- Review Credit Card Statements and/or Bank/Debit Card Spending
- Start using Quicken or Mint.com to track expenses
- Start giving yourself a weekly “cash budget” vs. going to ATMs (and stop using non-free ATMs)
- Determine Strategy to pay down debt (and work into budget) – Order
- High Interest non-deductible
- High Interest deductible
- Lower interest
- Note: Feel good about yourself…find a way to pay off lowest balances first and DON’T CHARGE WHAT YOU CAN’T PAYOFF GOING FORWARD!
- Review your FICO Score – see if you can get it improved (myfico.com or other services)
- Plan for discretionary spending items like vacations and Christmas spending and work into budget NOW vs. at time of event.
- Plan to save for longer term goals like new house or vacation house
- Consider refinancing your house if not done already (keep eye on interest rates – up almost 0.50% in last several weeks).
- Update your W4 if you are getting to large a refund or had a surprise tax owed.
- Review at the credit cards you are using to consider:
- Lower interest rates if you carry a balance (see FICO comment as well)
- The Rewards offered – based on usage, more rewards/miles?
- 0% Interest on balance transfers – but track and be careful!
- In your budgeting, don’t forget to determine what you can put into employer plan:
- At least do match
- If not maxing, increase by 1%-2% and work into budget
- Medicare (and ObamaCare) Open Enrollment – are you in the right plan for your needs (healthcare utilization, prescription drugs, change in family situation)
- Employer Open Enrollment for Benefits – Have you picked the right plans?
- Enough Life Insurance
- 401k investments and deferral
- Does HSA Plan make sense?
- Review Your Portfolio – Has it performed to your goal “Hurdle Rate” and benchmark (not necessarily S&P 500). Given outlook are you properly allocated to stocks, bonds or cash. A great time to review your Portfolio’s Asset Allocation.
- Determine, if available Roth vs. Traditional IRA/401k (lower the tax bracket, more Roth makes sense)
- If you are in retirement and/or low-income year consider a Roth Conversion. This would need to be done by December 31st.
- Social Security Maximization Strategies (as you approach 62, FRA and age 70) – maxing with spousal and/or survivor’s benefits.
- Meet with a financial planner to see where you are in terms of your retirement (are you on track) – meet with a fiduciary (not just product pusher), fee-based, CFP, CPA/PFS, etc.
- On Track – Change savings, Hurdle Rate, Goals
- Pension/Social Security Maximization
- Risk Management
- Retirement Budget
- Optimized Tax Distribution Plan in Retirement (like Avidian Wealth’s R.I.T.E Plan in the Retirement Survival Guide (just updated to Volume II in 2021)
- Start college savings plan
- UTMA, 529 Plan, Pre-Paid college plans – START EARLY
- Review and assure year-end 529 Plan distributions (match expenses to distributions)
- Review available Tax Credits/Deductions (many have income limitations)
- Student Loan interest
- American Opportunity Credit
- Lifetime Learning Credit
- Research available grants and/or other financial aid.
Other Planning – Tax, Estate, and Risk Management:
- Review your Estate Plan and get a Will done – best if with an attorney, but if you can’t afford an attorney right now, consider online services like LegalZoom (it is better than nothing).
- Sit with your insurance agent:
- Do you have enough life insurance (when considering work)?
- Have you considered or do you have disability and long-term care Insurance?
- Are there in your property-casualty coverages (car, home, umbrella, professional, etc.)?
- Review your 2020 Tax Return and Meet with Tax Team:
- Review the Tax Planning Checklist with your CPA and Financial Advisor
- Consider year-end Charitable Giving – if needed and desired consider Donor Advised Fund (especially if you want to give a lot for tax planning and have not identified charities)
- Review your portfolio’s tax situation and consider Year-end Tax Loss Harvesting and “Tax Placement” changes between your retirement and taxable accounts
- Consider Some Tax-Planning related to offsetting capital gains (or depreciation recapture in real estate through utilizing:
- Qualified Opportunity Zones (any capital gains)
- 1031 Exchanges (real estate only)