Before the Ball Drops: 10 Moves to Get Your Finances in Order
By Allan Kungis
- PUBLISHED December 07
- 5 MINUTE READ
The end of the year is a time of reflection, and change. That’s also true of your financial life. Here are 10 things you can do before the clock strikes midnight on December 31.
Use your medical and dental benefits. If you’ve already met your annual medical or dental insurance deductible, you should plan to have any elective procedures done before 2019, especially if you have money in an FSA account that won’t roll over into the coming year.
Add to your retirement savings. If you haven’t contributed the annual maximum to your workplace retirement savings plan, and you have some spare cash, add to your account by December 31. The IRS contribution limit for 2018 is $18,500 for a 401(k) or similar workplace retirement plan, plus another $6,000 if you’re age 50 or older.
Pay down your debt. Make a plan to pay off any debt or loans with higher interest rates. Paying down or paying off debt will help you pay less over the long run.
Put your savings on autopilot. Competing needs and priorities can make it challenging to find the money to save. Make it easier on yourself by automating your savings. Set up payroll deduction and your regular contributions will be stashed away before you see the money.
Set up automatic bill payment. Automate your bill payments to make your financial life simpler and easier. This way, you won’t have to worry about making sure you write a check and mail it on time. You’ll also eliminate the risk of missing a payment deadline and being charged a hefty late fee.
Review the new tax laws. The Tax Cuts and Jobs Act, which passed in late 2017, introduced some major changes in 2018 that could affect your year-end tax strategies. The standard deduction has doubled, making itemized deductions less attractive. Depending on your situation, you might take itemized deductions every other year and decide to bunch two years of charitable donations together to make best use of itemizing. Consult with your accountant or tax preparer on how to take advantage of opportunities created by the new tax rules.
Increase your retirement savings. Could you save another $25 a week ($1,300 a year) to bolster your future financial security? If you’re 25 years from retirement and that $1,300 a year grows at a hypothetical 6% a year, you’ll accumulate an extra $73,000 or so by the time you retire. One painless way to do save on an ongoing basis is to set up an automatic monthly deduction into a high yield savings or other account.
Consider a Roth conversion. Do you have more money saved in traditional IRAs than Roth IRAs? If so, consider converting some money from a traditional IRA to a Roth account. You’ll pay some taxes now, but your money will grow tax-free going forward and you’ll pay nothing in taxes when you withdraw it down the road. The deadline for 2018 Roth conversions is December 31.
Double-check your required minimum distributions. Roth IRAs are the only retirement account without required minimum distributions (RMDs). For traditional IRAs, 401(k)s, and a host of other retirement accounts, you’ll have to withdraw minimum amounts each year after age 70½. If you don’t take the full RMD in any year, you’ll owe a penalty of half the amount not taken.
Consider tax loss harvesting. If you have taxable capital gains, you can offset those gains by selling investments that have declined in value and would present a capital loss if sold. Even if you have no capital gains, you can use a capital loss to offset general income and lower your income tax obligation.
Allan Kunigis is a financial freelance writer based in Shelburne, VT. He has written about personal finance for more than two decades.