Invest Financial Planning

The Best Year-End Financial Planning Tips No Matter Your Employment Situation

Kara Duckworth  |  December 10, 2021

Everything you need to do before EOY to prepare your financials for 2022, whether you’re working or you’re retired.

I know what you’re thinking – who has time during the holiday season to think about financial planning when you already have a long list of “to dos” like gifts to buy, cookies to bake, elaborate meals to cook, travel plans, and on and on?  But year-end is one of the most important times to carve out just a few hours to make sure you’re set up for the best financial outcome possible, and you’re ready for the New Year. 

Depending on your employment situation, the steps you take will vary. Here’s a look at how to get ready for the New Year no matter your income, age or career goals. 

If you’re currently employed full time…

Check Your Flexible Spending Account (FSA) 

If you have contributed to an FSA and you can’t rollover your FSA funds per your company’s rules, make sure you spend all the funds that you have contributed – don’t leave that money on the table. You can use funds to pay for prescriptions, deductibles, glasses or contact lenses, over-the-counter medications like pain relievers or allergy medications, feminine hygiene products and even sunscreen!1 For a complete list of FSA eligible items, check here. 

Update your 2022 retirement savings amounts 

The maximum amount you can contribute to your company 401k account has increased for 2022, so make sure you contact your payroll department to change your deferral amount if you are able to make the maximum contribution possible.  The limit for 2022 contributions is $20,500 plus an additional $6,500 catch up contribution if you are over age 50.  If you are self-employed, the maximum amount you can contribute to an Individual Retirement Account (IRA), subject to income limitations, is $6,500.  Self-employed individuals should work with their financial advisor to see if it makes sense to contribute to other kinds of self-employed retirement accounts like Simplified Employee Pension (SEP) or Savings Incentive Match Plan for Employees (SIMPLE IRA).2

Review your employee benefits for 2022

Many employers change health insurance providers from year to year, so make sure you review your health insurance options for 2022.  You may want to consider a high-deductible health insurance plan so that you can participate in a Health Savings Account (HSA). HSAs are different from Flexible Spending Accounts (FSA) in that you can roll HSA funds over from year to year, making them a good additional savings vehicle for retirement healthcare costs.  Additionally, some employers will make contributions on behalf of their employees, usually in addition to the funds that the employee contributes.  The savings limit for HSA contributions in 2022 is $3,650 for self-only covered participants and $7,300 for those with family health insurance coverage, plus an additional $1,000 contribution allowed for those over age 55.

Document your big wins (before you forget them in the holiday bustle!)

If you have an annual review coming up or if you want to ask for a raise or a promotion in 2022, take the time to document your accomplishments with supporting detail so that you have it easily accessible when making your case to your boss that you don’t deserve a raise “just because” but that you earned it!  A recent study by the United States Government Accountability Office on Women and Retirement Security reveals that more than half of the women surveyed said they experienced pay inequality during their careers and discussed that being paid less than their male counterparts caused them to have lower raises, which were based off a percentage of their base salary, lower retirement savings and lower Social Security benefits.4  Asking for that raise or promotion won’t just benefit you now – it will also benefit future retired you, so make sure you document your big wins so you feel confident in compensation discussions next year.

If you are already retired… 

Withdraw your entire Required Minimum Distribution (RMD) amount from your IRA. 

At age 72 (or 70.5 if you have already started taking distributions), you must withdraw a specified distribution each year by December 31.  Your financial advisor can help you determine the correct amount you need to withdraw.  It is important not to overlook your RMD, as the penalty for failing to take the distribution by year-end is steep, 50% of the amount that should have been withdrawn.

Look into a Qualified Charitable Distribution (QCD)

If you are considering a year-end donation to a charity, and you are subject to an RMD, consider using a Qualified Charitable Distribution (QCD) to make your donation.  If you are age 70.5 or older, you can donate up to $100,000 to any 501c3 qualified charity from your IRA and it will count as part of your RMD. This means you will not have to pay any income tax on the amount distributed to the charity.  Even if you don’t itemize your tax deductions, you will still receive the benefit of reduced income tax when you make a QCD to your favorite charity.  It is important to note that only 501c3 charities are eligible to receive funds as a QCD – you can’t donate to a donor-advised fund or a private foundation. 

And no matter what your employment situation is… 

Review your taxable brokerage accounts for opportunities for tax-loss harvesting

This is a powerful tool for reducing taxes for many investors.  With tax-loss harvesting, you can sell an investment that has an unrealized loss and take a credit against any realized gains that occurred in the portfolio in the calendar year.  The asset you sell is then replaced with a similar (but not identical) asset to maintain the portfolio’s asset allocation and expected risk and return levels.  Your financial advisor can help you determine the best tax-loss harvesting strategy for your portfolio.

Think about your big financial goals for 2022

 If you are planning to buy a home, purchase a new car, take a dream vacation, pay for children or grandchildren’s college expenses, or celebrate a life milestone like a wedding or an anniversary, set up a savings plan for those items now.  When you get to those moments, you feel prepared that you have sufficient funds to enjoy it.

The best gift you can give yourself (both now and in the future) is to take a few moments to ensure you have considered some key financial planning and tax tips to benefit you long after the holiday decorations are put away.  Your financial advisor can assist you in making smart money moves that need to be done by year-end off your holiday to do list and help set you up for success in the New Year.  


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