Between all the busy holiday festivities, it’s easy to overlook the boring “practical” stuff, but spending just a few hours on some year end financial planning could save you thousands in the long run. Here are a few that should definitely be on your To Do list:
401(k) contributions – Hopefully, you’ve been contributing to your plan all year long, but there is still time max it out. Workers age 49 and younger can contribute up to $17,500 in 2014. Since taxes aren’t due on this money until it’s withdrawn, this can be a very good year-end move for the highest tax bracket earners. Contributions are due by December 31, but since this is typically deducted by an employer, you need to give them a little lead time on making the contribution. Bottomline, you can’t make the request onDecember 30th!
IRAs – The deadline for 2014 IRA contributions isApril 15, 2015, but people often rush to make these before the end of the year. It’s easy to forget that there are two types of IRAs – traditional and Roth – and depending on how your 2014 taxes work out, one may be better for your bottomline than the other. Get with your financial advisor before rushing to cross this one off your list to make sure you’re contributing to the one that most works in your favor!
Cut Your Losses – Now is the time to make sure you’ve maxed out your tax deductions. Consult your accountant about how to structure losses in order to offset gains. For instance, if you own rental property, it might make sense to make deductible repairs or upgrades before year end. If you’re self-employed, there are a number of business expenses that can be deducted or amortized to lower taxable income. Harvest your investments for losses as well. Sometimes it’s better to just take the hit and replace it with something that has better prospects in the year ahead.
Review and Rebalance – While you’re cutting those losses, now’s as good a time as any to assess all your investment allocations. With some of the wild moves the markets have seen this year, your portfolio might be weighted much differently than you thought.
Pay For College – Pay for your kids’ or grandkids’ college by contributing to a 529 plan. The deadline is December 31 for most plans and many states will give you a tax deduction on those contributions.
Charitable Contributions – Charitable contributions can not only help lower your tax bill, they will make you feel good! If you don’t already have your preferred charities picked out, it’s worth it to take some time to do some research into organizations doing good work in areas that really matter to you personally.
Healthcare Accounts – If you have an FSA – a flexible spending account for health care expenses – that still has funds in it, you need to use up all but the last $500 before year end, otherwise it’s gone for good.