The end of the year is often a busy season when social calendars become full and people’s minds are focused on the holidays — but it is also important to carve out time in December to take an assessment of your financial health.
David Ragland, CEO of IRC Wealth and a certified financial planner, provided FOX Business with an end-of-the-year checklist to knock out this month before ringing in 2023.
401(k) moves
Ragland says a top priority for workers is to max out their 401(k) contributions. The accounts are one of the best tax-saving and long-term investing plans available to employees. Folks under 50 years old can sock away as much as $20,500 in a 401(k) this year, and anyone 50+ is allowed to contribute as much as $27,000.
Next year, the limits increase to $22,500 and $30,000, respectively.
Investors may also want to consider a year-end rebalancing of their 401(k) investment account, making sure they are not over-exposed in any certain areas. “Nothing wins forever,” Ragland explains.
Call the doctor
People who have already reached their out-of-pocket maximum on their health insurance plans should consider making appointments to doctors or other health care providers to try to get in a visit before the end of the year in order to minimize any out-of-pocket expenditures.
Tax matters
Ragland recommends people meet with their CPA or other tax professional before year-end to review their estimated 2022 tax liability and make plans on how to reduce it.
You can file a new Form W-4 with your employer to adjust your withholding. That will not lessen your 2022 tax liability, but it can prevent you from owing tax next year.
To reduce your 2022 tax liability, you can make an estimated tax payment until Jan. 17, 2023. You can either mail a payment or pay online.
Anyone who lives in a state that has “State Tax Credits” should review availability and make such a purchase sooner rather than later, he advises. Some state tax credits have been in short supply, so it is best not to wait until the last minute.
Ragland says some individuals may want to consider selling investments that are currently at a loss and re-buying the same investment back 31 days later. The strategy generates a loss for tax purposes without giving up a favorite stock or exchange-traded fund (ETF) for good.
The wealth expert also pointed to several tried-and-true practices such as making annual cash charitable contributions before year-end, as well as donating clothing or furniture to a favorite charity for a non-cash charitable deduction. Those who make monthly contributions to a charity might also want to consider making their first quarter 2023 donation this month.
Another item on the personal finance to-do list is paying any state income or real estate taxes that are due before the end of the year, as well as any January 15th estimated state income tax payment.
Ragland says just taking the time to assess your personal financial situation, developing goals and acting on a plan is the key. “Becoming wealthy is super simple,” he told FOX Business. “It’s just not easy.”
