15 Dec 2022 The Whirlwind of December

Wesley and I snuck away to London for the first part of December for our delayed pandemic travel and Christmas present to ourselves. We saw the historic sights, enjoyed the city’s plentiful holiday décor, ate delicious food, and generally found ourselves able to relax and unplug. That is, until we boarded the flight home, and my mind started spinning with all the life admin to-dos now jammed into the last half of December.

As much as I wish the end of a calendar year could just be another month turned on the calendar, unfortunately, some tasks are time sensitive to the 12/31 date. We do our best at Beacon to help our clients check things off their financial to-do lists before year-end pressures arrive. Below are a few reminders of financial tasks that are time sensitive to the end of the year. I’ll be the first to admit today’s brief is not the most exciting topic, but I encourage you to skim through the list and see which, if any, of these items are something for you to address before the end of 2022.

Max out retirement plans: Depending on your payroll schedule, it may be too late to make any final adjustments to ensure you max out your contributions for 2022. However, it’s still worth looking at your year-to-date contributions and checking with your payroll department if you find yourself a little short. Plus, checking your account will help you with the next item on the list…

Adjust 2023 contributions: Again, depending on your payroll schedule, the timing of doing this task varies from person to person. The retirement plan contribution limits increased from 2022 to 2023, so if you are someone who maxes out your employee contributions, you’ll want to update contributions accordingly.

Check tax withholdings: Job changes, income adjustments, or surprising tax bills may be reasons to adjust your tax withholdings to have additional amounts withheld each paycheck.

Check Health Savings Account (HSA) contributions: For example, I happened to log into our HSA website this morning and noticed we are slightly short of making the maximum family plan contribution for 2022. It’s too late to make an adjustment via payroll now, but we can contribute directly to the plan. Technically, this can be done up until the tax deadline, but I’m going to handle that now, so I don’t forget. We will also need to increase our contributions for the new 2023 limit.

Spend Flexible Savings Account (FSA) funds: If you have an FSA plan, the money you contribute is pre-tax but the money generally does not roll over from year to year, so you want to use up your funds. Some plans offer a grace period, but not all.

Complete Required Minimum Distributions (RMDs): These rules can be a bit confusing, especially for Inherited IRAs. If you have any questions or are unsure about whether you have satisfied your required amount, please reach out. The tax penalty for not taking out enough is steep, so this one is important!

Ensure Qualified Charitable Donation (QCD) checks are deposited: For a QCD to count toward the current year’s RMD, the funds must come out of your IRA by your RMD deadline (typically 12/31) – which means the charity must receive and deposit the check so that you see the check cashed in your account!

Gift to charities or your Donor Advised Fund: Regular gifts of cash or appreciated securities must be completed before year end to count for 2022.

Complete Roth conversions: This strategy doesn’t apply to everyone, but if it does, the conversion needs to be completed in 2022 to be included on this year’s tax return.

Hit your annual savings goals: There’s nothing magical about a calendar year for non-qualified savings. However, hitting your savings goals within a year does make it easy to keep track of your progress!

Gift to 529s, UTMAs, ESAs, or ABLE accounts: In 2022, the annual exclusion for gifts from one person is $16,000 per recipient. Gifts exceeding that amount must be reported on IRS Form 709.

Spend Continuing Medical Education (CME) funds: Physicians often have an annual benefit to help with education expenses, and much like FSA funds, CME funds typically are use it or lose it!

These next few don’t have an official deadline for year end, but in case you’ve already checked everything else off, here are a few more ideas:

Prepare for January 15 quarterly tax payment deadline: If you pay quarterly tax estimates, check your cash flow to make sure you’re prepared for this upcoming deadline.

Check your free annual credit reports: Make sure that you’re aware of everything that is reported on your credit report. The general recommendation is to check all three reports once a year.

Review annual spending: We may sound like a broken record on this one! Reviewing your annual spending helps you check sufficiency of your emergency fund savings and confirm whether your financial plan spending goals are accurate. Talk to us if you have more questions on how best to go about this task.

Check your savings account interest rate: Not all savings accounts are created equal! Some savings accounts still only offer .01%, while others are up to 3.3%. Earlier this year, I realized that our savings account type was no longer offered by the company, which subsequently meant our rate was not as high as the bank’s new savings account type did! I spent 15 minutes opening a new account and moving our savings within the same institution to make sure we got the best interest rate available.

Part of the benefit of working with us is that we are aware of these various deadlines and try to spread out these conversations and action items throughout the year. If you have any questions about something on this list (or something I left off!), please reach out to us and we’ll see how we can help.