We are now well passed the Oct. 15 tax deadline, which means the best time for both tax and retirement planning is now. Accountants have more time for tax-planning meetings, and as 2023 wraps up, you can reflect on the year and still make changes to certain financial matters. Here are some things you may want to consider in your year-end tax and retirement review.
1. Ask your adviser about tax-loss harvesting.
Taking the time to analyze your portfolio toward the end of the year is important to determine if you can offset taxable income by harvesting capital losses. You may also have tax-loss carryforwards that can reduce your 2023 tax bill. Ask your adviser to see if tax-loss harvesting may improve your situation.
2. Contribute to your pre-tax retirement accounts.
Double-check your contributions to accounts such as 401(k)s, 403(b)s and SIMPLE IRAs so that you are on pace to maximize contributions. If you are age 50 or older, you can contribute an extra catch-up amount. While you must do this by Dec. 31 for these accounts, you have until April 15, 2024 (and potentially until Oct. 15, if you file an extension) to make traditional, Roth and SEP IRA contributions.
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3. Convert your traditional IRA to a Roth.
Roth IRAs are generally preferable to traditional IRAs mostly because they are exempt from RMDs (required minimum distributions), and the withdrawals are tax-free. There are many considerations to determine if a Roth conversion makes sense, but if you want to make the conversion for 2023, it needs to be done by Dec. 31.
4. Reassess your risk tolerance.
Year-end is a great time to reflect on life and career changes that may have occurred over the year — those changes can make a difference in your optimal level of risk tolerance. Reassessing your risk tolerance on an annual basis with your adviser may mean adjusting your portfolio to meet that new tolerance.
5. Review your RMDs.
If you turn 73 this year, you must begin taking RMDs. There is a significant tax applied if you fail to take the RMD on time, so this is one of the most important items to make sure gets checked off the list.
6. Make charitable contributions.
There are several strategies that could be applied to maximize charitable impact while minimizing taxes. Here are just a few:
- Eliminate capital gains tax by donating appreciated stock rather than cash.
- Make a qualified charitable distribution (QCD) to satisfy your RMD.
- Consider opening a donor-advised fund — you can take a tax deduction for your contributions, which then grow tax-free.
7. Fund investing accounts for your dependents.
If you plan on making contributions to investment accounts for your kids, now is a great time to make sure those are funded to the desired levels. Here are two options:
- Custodial Roth IRAs. Tax-free growth; contributions can be withdrawn tax-free. Note that parents can make contributions only if their child earned income for the year. The current maximum annual contribution is $6,500, or the total of a child’s earned income for the year — whichever is less.
- 529 college savings plans. High contribution limits; withdrawals for school-related expenses are tax-free. Gifts to 529 plans can total up to $17,000 per individual or as much as $85,000 if the parent chooses the five-year election. This election allows parents to supercharge their savings and treats this large lump sum as if it were spread over five years.
The above checklist is by no means comprehensive. With so many items to check off the list and specific considerations for each one, depending on your unique situation, year-end financial tasks can be daunting. This is the time of the year you will want to rely on your tax accountant and financial adviser to help you navigate these choices.
Related Content
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- Tips on How and When to Donate During a Humanitarian Crisis
- Five Financial Moves to Make as Year's End Approaches
- Considering a Roth IRA Conversion? Six Reasons It Makes Sense
- How to Maximize Your Impact With Strategic Philanthropy Tools
Disclaimer
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
FAQs
It can be useful to perform a financial checkup annually and after any major life event, such as a marriage, divorce, birth, or death. Your checkup should include your retirement accounts and other savings, your debts, your estate plan, and your insurance coverage, among other topics.
What are two examples of important things that financial planning can help you do? ›
A financial plan can help you create an investment portfolio. Your financial plan can give you the full lay of the land: You'll know what your goals are, how much time you have to reach them, and how comfortable you are with risk. Once you have a comprehensive view, you can figure out how to reach each individual goal.
What six things will financial planning help you do? ›
Below are several key benefits that come as a direct result of creating a financial plan.
- The process of financial planning helps you set goals.
- Financial planning is a great source of motivation and commitment.
- Financial plans provide a guide for action and decision-making.
- Financial plans set performance standards.
Financial Planning Process
- 1) Identify your Financial Situation. ...
- 2) Determine Financial Goals. ...
- 3) Identify Alternatives for Investment. ...
- 4) Evaluate Alternatives. ...
- 5) Put Together a Financial Plan and Implement. ...
- 6) Review, Re-evaluate and Monitor The Plan.
A Financial Assessment will determine what level of support you will be able to get towards the cost of your Adult Social Care. We will ask you to complete an initial financial assessment form. This will ask about your income and capital/savings.
What do year-end financials consist of? ›
At the end of the financial or fiscal year, you gather income, expenses, assets, and liabilities and record them in a standard set of financial statements. Once organized and reconciled, these year-end financial statements help you better understand your business's financial position.
What is the 10 year financial plan? ›
What is a 10-year financial plan? A 10-year financial plan is your blueprint to reach your goals over the next decade. It considers your savings, investments, expenditures, and other financial endeavors, providing a structured approach to achieving various long-term financial objectives.
What are examples of well-written financial goals? ›
Some examples of long-term financial goals may include:
- Saving for a down payment on a house.
- Funding your retirement.
- Paying off large debts (e.g., credit cards, student loans, mortgage, etc.)
- Saving for a child's college education.
- Paying for a major vacation.
3 S of financial planning are Systematic Investment Plan (SIP), Systematic Transfer Plan (STP) and Systematic Withdrawal Plan (SWP).
What are three basic financial decisions? ›
There are three types of financial decisions- investment, financing, and dividend. Managers take investment decisions regarding various securities, instruments, and assets. They take financing decisions to ensure regular and continuous financing of the organisations.
Setting Financial Goals: 6 Simple Tips to Setting Financial Goals for your future
- Work on a budget. ...
- Know what is important to you. ...
- Categorise and break down the objectives. ...
- Create a separate Savings Account. ...
- Invest smartly. ...
- Track your progress. ...
- Financial goals done right.
Your annual financial review should revisit each of your priorities and your saving and investing strategies for reaching them. If your situation has changed, make adjustments as necessary.
What is end of financial year report? ›
This is a time when all businesses are required to finalise their books for a 12-month period and report all income and claim any deductions available to the business. This helps to determine how much tax the business must pay to the government or how much tax the government owes the business.
What is a financial check-up? ›
A financial checkup, or a financial review, is an examination of your personal finances—everything from your current budget, debts, retirement contributions and more—and can be done yourself or by meeting with a financial expert at your local Centier Bank branch.
What is a financial health check? ›
A financial health check is one which takes a holistic review of your personal finances and financial situation. The idea is to help you better understand how you are managing your money and whether you are on track to achieve any financial goals that you have set – and if not, where changes need to be made.
