With high inflation, rising interest rates, a falling stock market and the threat of a deeper recession, it’s never been more important to focus on what you can control and play a role. active in managing your finances. As the end of the year approaches, there are many opportunities for you to maximize your financial security. Below is a checklist of some steps to take before the end of the year.
• Review progress toward your goals, budget, and financial plan for 2022 and make adjustments for 2023.
• Maximize contributions to your retirement plans. In 2022, you can contribute up to $20,500 to your 401(k) plus a catch-up provision of $6,500 if you’re 50 or older. If you are unable to maximize your contribution, strive to contribute at least enough to qualify for your employer’s match. If you qualify, you should also consider a Roth IRA. Your ability to contribute in 2022 begins to disappear if you are single and earn more than $129,000 or if you are married and earn more than $204,000. The Roth IRA contribution limits for 2022 are $6,000 plus a $1,000 catch-up if you’re over 49.
• If you are over 72, be sure to take your required minimum distribution before December 31st. Do not be too long ; custodians may need documents by early December.
• Consider consolidating charitable donations that would normally be made over several years into one year. This can make extensive itemized deductions higher than your standard deduction, allowing you to deduct a portion of your charitable contribution. A donor-advised fund can be used if you need time to select specific charities. Additionally, if you are over age 70.5, you can make a tax-free qualified charitable deduction from your IRA. Finally, consider donating highly valued stocks or mutual funds rather than cash to minimize capital gains.
• Review your investment portfolio. Reassess your risk profile to ensure that your target asset allocation still meets your financial goals. Rebalance your portfolio to keep your investments in line with your desired asset allocation. Consider reducing positions into concentrated stocks. Review and adjust how your portfolio is positioned for tax efficiency.
• If you have high-deductible health insurance, contribute to a Health Savings Account (HSA). The 2022 HSA contribution limit is $3,650 for individuals and $7,300 for families, plus a $1,000 catch-up contribution for those 55 and older. If you have a flexible savings account with your employer, be sure to spend any funds that are due for use in 2022.
• Consider reaping tax losses by selling stocks or mutual funds with a tax loss before the end of the year. This can help offset gains on other investments that need to be sold to rebalance your portfolio.
• Review your credit reports. You should check your credit reports annually; any fraudulent activity tends to increase during the holidays. Go to annualcreditreport.com to access your free credit reports.
In times of uncertainty, it’s crucial to review your finances and make the changes that will improve your long-term financial success.
Jane Young is a certified paid business columnist and financial planner. She can be reached at [email protected].