5 Year-End Money Moves to Maximize Benefits

With the holiday season kicking into high gear, looking past the festive lights, joyful music, and fun-filled atmosphere can be challenging. But amidst all the excitement, there are many year-end events and deadlines that can have a significant impact on your finances. 

Set aside some time to review your finances, investments, employer benefits, and insurance options to ensure you set yourself up for success in the coming year. Consider the following five money moves to end this year on a high note.

#1: Contribute to Retirement Accounts

With all the presents you’re giving others this holiday season, don’t forget to give yourself a gift too – the gift of financial security. Every dollar you set aside in a tax-advantaged retirement account will compound over the coming years into a significant nest egg for your future self.

The more you contribute to your retirement, the better. That’s why experts recommend maxing out your annual 401(k) or IRA contributions. If you have not yet met your annual contribution limit, consider investing extra funds in your retirement accounts. 

Bonus Tip: If your employer offers a 401(k)-matching program, ensure you take full advantage by contributing at least the match threshold. It’s basically free money, and you don’t want to miss out! 

#2: Make Charitable Donations

Giving to your favorite charities and causes is a win for everyone – they receive much-needed funding, and you feel good knowing that your dollars are making a difference. However, there is another win on your end – tax benefits. 

That’s right, your charitable giving throughout the year can help you earn tax breaks when filing time rolls around. Making itemized cash deductions could potentially reduce your taxable income. Donating non-cash items, like clothing and furniture, can also help you save on your taxes. 

Bonus Tip: Keep receipts and records when donating to charities or other non-profit causes. If you want to ensure you receive tax benefits for the current year, make donations or contributions by December 31st. 

#3: Update Health Insurance Plans 

Open enrollment is upon us. That means now is the time to review your insurance plan and make any necessary changes. Some common reasons to consider changing insurance include pricing, changes in coverage or new restrictions, adding family members, or preparing to welcome a baby into the family in the coming year.

While health insurance coverage is often the primary concern, don’t forget about additional protections such as dental, vision, life, and disability.

Bonus Tip: If you need to make any changes to your insurance coverages, make sure you enroll or finalize your adjustments by the December 15th deadline. Your new or updated coverage will take effect as of January 1st.

#4: Optimize Tax Strategies 

Assessing your tax strategies can help you maximize your deductions and take advantage of additional tax credits. Getting a head start on your tax planning and maximizing year-end moves may help lower your tax payments when April rolls around. Here are three ways to help optimize your taxes: 

1.     Examine Withholdings:

If your tax withholding selections are too low, you could see a much higher tax bill than you’re anticipating or even receive a penalty for underpayment. Review your withholdings and adjust as needed to avoid surprises when filing season arrives. 

2.     Check for Credits:

Explore the potential deductions and credits you may qualify for, including charitable contributions, medical expenses, education credits, and more. Every little bit helps! The more money you can save on your taxes, the more you have available to put toward other financial goals. 

3.     Retirement Contributions:

Maximizing your retirement contributions for the year in your 401(k) and IRA will also help you maximize your tax benefits. If you’re contributing to a Traditional 401(k) or IRA, those benefits will be realized in the current year. Roth 401(k) or IRA contributions are taxed in the current year, but you’ll receive tax-free withdrawals in retirement.

Bonus Tip: One of the most overlooked components of retirement planning is future taxes. Work with your financial advisor to determine which accounts (Traditional or Roth) and strategies will best meet your current and future financial needs. 

#5: Use Bonuses to Your Benefit 

Are you anticipating an end-of-year bonus? Make your money work for you! There are several things you can do with those extra funds to improve your financial well-being, so take the time to consider which option will bring the biggest benefit for you. 

• Give your emergency fund an immediate boost. 

• Save the funds for your tax payments at the start of next year. Place them in a designated savings account until tax time to ensure you don’t accidentally spend them.

• Make additional payments to your 401(k) or IRA if you have not yet met the annual contribution limits. 

• Pay down outstanding debt, including higher-interest loans and credit cards.

• Invest the extra funds for future goals, such as a down payment on a home or a child’s college savings plan.

You earned your year-end bonus, and treating yourself and your family with it is entirely normal and acceptable. However, you don’t want to lose sight of the financial benefits it can also provide. So, consider splitting your bonus. For example, put 60% toward financial goals or outstanding debt and use 40% however you wish! 

As we prepare to enter the new year, there’s no better time to pave the way for a fresh start and a fruitful year ahead. Making these money moves now helps ensure that you start next year on the right financial footing.  

If you want more tips about managing your finances or are looking for personalized guidance, we’re here to help. Our team of financial advisors is ready to assist you. Please stop by any of our convenient branch locations or call us at 248-322-9800 extension 5. 

 

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