Your year-end financial checklist

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Performing a personal financial review every few months is a helpful way to maintain your financial situation and alleviate stress related to money.

Performing a personal financial review every few months is a helpful way to maintain your financial situation and alleviate stress related to money. While financial happiness often tops the list of New Year’s resolutions, planning for financial goals may become challenging if economic conditions deteriorate in 2023.

As inflation persists and a recession looms, it may be wise to save more money, despite the rising costs of goods and services. According to a survey, 54% of working adults who contributed equally or less to retirement savings in 2022 cited inflation and high living costs as reasons for not saving more.

The uncertainty of an unstable financial environment can lead to confusion regarding financial priorities, where to allocate funds, and what to anticipate. To ensure a favorable financial outlook for 2023, Greg McBride, Chief Financial Analyst at Bankrate, offers the most up-to-date information on what the CFA should do.

Financial Checklist. Here’s what to consider:

Maximize your retirement contributions

In 2022, the maximum contribution to a 401(k) or other employer-sponsored retirement plan is $20,500 ($22,500 in 2023), with an additional catch-up contribution of $6,500 ($7,500 in 2023) available for those over 50 years old. Even if you don’t have access to a work plan, you can still contribute up to $6,500 ($7,500 if you’re over 50) to your existing IRA by 2023, and your non-working spouse can also contribute.

For freelancers and self-employed individuals, the contribution limit is significantly higher, with up to $61,000 in 2022 ($66,000 in 2023), or up to 25% of eligible income, if utilizing the new Windows IRA plan with a simplified employee pension (SEP). Even if you don’t currently have a SEP plan, you still have time to prepare and take advantage of the associated tax benefits.

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This is also an opportune time to review your investment portfolio and ensure that your retirement investments align with your strategy and expectations. If market performance has caused your asset allocation (the portion of your portfolio dedicated to specific types of investments) to deviate from your targets, it may be necessary to rebalance your portfolio to stay on course.

Review employee benefits

Although it may be tempting to overlook your employee benefits, reviewing them annually can have a significant impact on your financial situation. Take a look at your employer-sponsored 401(k) or IRA contributions for the current year. Have you maximized your contributions up to the limit? If not, have you contributed at least as much as your employer’s matching contribution?

For the 2022 tax year, the maximum 401(k) contribution is $20,500, with an additional $6,500 for those aged 50 or older. The maximum contribution to an IRA is $6,000, with an additional $1,000 for those aged 50 or older. Even if you can’t contribute the maximum amount, consider increasing your annual contribution to avoid missing out on potential tax benefits.

Additionally, pay attention to your investment allocation. Are you comfortable with the proportion of stocks, bonds, and other assets in your portfolio, or do you need to rebalance it?

Other employee benefits that may warrant review and adjustment with the guidance of a financial expert include company stock options and other incentive plans (such as restricted stock or compensation units), health insurance, life and disability insurance, and flexible spending accounts (FSAs).

Also, don’t forget to review your health care expense account. For the 2022 tax year, the maximum HSA contributions are $3,650 for individuals, $7,300 for families, and an additional $1,000 for those over the age of 55.

Finally, ensure that your beneficiaries are up-to-date, and consider designating a successor beneficiary as well. You work hard to earn your benefits, so make sure they go where you want them to go.

Review or update your payee designation

It is crucial to gather all necessary information about the beneficiaries’ bank accounts, retirement accounts, life insurance policies, and annuities. When choosing a life insurance beneficiary, it is important to consider the decision carefully, especially if you have been married or had children within the last 12 months or if a loved one has left your life through divorce or death.

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Ensure that you write down the beneficiary’s name, with an updated date, and include the name of a temporary beneficiary in case your primary beneficiary dies. Beneficiaries can be individuals, charities, or nonprofit organizations. Keep this document in an accessible place and review it annually.

In a 401(k), you can choose more than one default beneficiary and assign a percentage of the asset. It is important to familiarize yourself with the beneficiaries if you have worked at the same location for a long time.

Being well organized is another way to make sure your beneficiaries receive their due. Keep at least two life insurance records, preferably in and out of your home, in case of fire or flooding. These records should have detailed information, including the date, insurance number, amount of coverage for death, and name of the agent who sold the policy. A good place to keep records is in your financial or legal documents. A second record should be kept in a safe place with a trusted relative or professional. Ensure that your beneficiaries know where to find the records after you’re gone.

Track the process of moving toward your goal

Additionally, consider reviewing your budget to see if there are any areas where you can cut back on expenses and redirect those funds towards your savings goals.

If you have debt, take a look at your repayment plan and make sure you’re on track to pay it off in a reasonable time frame. Consider reaching out to a financial advisor or credit counselor for help if needed.

For retirement planning, review your retirement accounts and contributions. Are you contributing the maximum amount allowed? If not, consider increasing your contributions. Also, consider reviewing your investment strategy to make sure it aligns with your retirement goals and risk tolerance.

If you have dependents, review your life insurance policy to ensure it provides adequate coverage for their needs. Also, consider updating your beneficiaries and estate planning documents if necessary.

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Overall, regularly reviewing your financial goals and progress can help you stay on track and make adjustments as needed. Consider working with a financial advisor to develop a comprehensive financial plan and receive guidance on achieving your goals.

Check your progress on paying off debt

In addition to finding additional sources of income and transferring high-interest debt to a low-interest rate balance transfer card, there are other strategies that can help you pay off debt.

These include creating a budget and cutting back on unnecessary expenses, negotiating with creditors for lower interest rates or payment plans, and consolidating debt with a personal loan or home equity loan. It’s important to develop a plan that works for your individual financial situation and to stick to it consistently over time.

Make sure you have adequate insurance

Additionally, if you have a new business or have changed jobs, make sure to review your health insurance options and consider factors such as coverage, deductibles, copays, and out-of-pocket expenses. Depending on your situation, you may also need to consider other insurance options such as professional liability insurance or business interruption insurance.

It’s always a good idea to review your insurance coverage annually, and make any necessary updates or changes based on your current circumstances. Don’t hesitate to speak with a financial advisor or insurance agent to ensure that you have the right coverage for your needs.

Review your credit/debt

That’s great advice! Consolidating high-interest debt can be an effective way to lower your overall interest payments and simplify your debt management. Consider transferring high-interest credit card balances to a lower-interest card or consolidating your debt with a personal loan. However, be aware of any fees or penalties associated with these options and make sure you have a plan to pay off the consolidated debt within a reasonable timeframe.

It’s also important to prioritize paying off high-interest debt first to minimize the amount of interest you pay over time. And remember, while debt can have a place in your financial strategy, it’s important to not let it become a burden on your overall financial health.

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