When you watched the New Year’s Eve countdown and raised your glass to 2017, did you make any resolutions to put your finances first this year? If so, you’re not alone.
Finance-related resolutions are the third most popular New Year’s resolution (following self-improvement and weight loss). (1) Millions of people strive to save enough to purchase a home, retire, pay off debt, or send their kids to college. However, by March, most of those resolutions seem like fleeting thoughts from the past.
Even though we’re in the final month of the year, there’s still time to make progress on your 2017 resolutions. Here are 10 financial actions you have time to take before 2018.
1. Boost Your Retirement Savings
If possible, increase your contribution to your 401(k) by the end of the year to make the most of your retirement savings. For 2017, you can contribute as much as $18,000 (or $24,000 if you are 50 or older). You may also consider contributing to a Roth IRA. For 2017, you can contribute as much as $5,500 (or $6,500 if you are 50 or older). Keep in mind that if your income is over $196,000 and you’re married filing jointly, you won’t be eligible to contribute to a Roth IRA.
2. Consider a Roth Conversion
Speaking of Roth IRAs, these retirement accounts are attractive because you don’t pay income tax when you withdraw funds in retirement. However, if you’re a high-income earner, you may not be eligible to contribute and instead invest in a Traditional IRA. If you have a Traditional IRA, you may have the opportunity to convert to a Roth IRA and save money on taxes in the long run. The deadline to convert to a Roth IRA is December 31st, so if you’ve been considering doing so, or wonder if it’s an appropriate option for you, talk to your financial advisor ASAP.
3. Use Your Medical and Dental Benefits
Did you have good intentions of taking care of some dental work, blood tests, or other medical procedures but no follow-through? I get it. Life gets crazy sometimes and some stuff gets pushed to the side. But you are putting money into your health plan, so make sure you get some value out of it.
Now’s the time to take advantage of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used up the full amount and think you need some treatments, make an appointment before December 31st.
4. Set a Budget for Holiday Spending
Consumers will spend an average of $967.13 this year on holiday shopping alone. (2) During such an expensive time of year, a budget is a must to avoid overspending. Break down your spending allocate a set amount of funds for everything you need this holiday season, including gifts (including an individual budget for each person), food, transportation, postage, and gift wrap. Be realistic about what you can afford to spend.
5. Gift Without Gift Tax Consequences
It’s never too early to start planning the legacy you want to leave for your loved ones without sharing a good portion of it with Uncle Sam. You may want to consider gifting. Each year, you can gift up to $14,000 to as many people as you wish without those gifts counting against your lifetime exemption or $5 million. If you’ve yet to gift this year, or haven’t reached $14,000, consider gifting to your children or grandchildren by December 31st.
6. Review Your Insurance Coverages
A lot can happen in a year. As you experience life changes, from the birth of a child to marriage to a new career, it’s important to regularly review your insurance coverages and your designated beneficiaries. Now is the ideal time to review your current insurance policies and make sure they are up-to-date. You might also want to evaluate your need for other types of insurance you may not currently have, such as long term care insurance.
7. Double Check RMDs
If you’re retired, review your retirement accounts’ required minimum distributions (RMDs). An RMD is the annual payout savers must take from their retirement accounts, including 401(k)s, SIMPLE IRAs, SEP IRAs, and traditional IRAs, when they turn 70½. If you don’t, you could face the steep penalty of 50% of the distribution you should have taken. To calculate your RMD, you can use this handy online calculator.
8. Discuss Loss Harvesting With Your Advisor
If you invest in bonds, mutual funds, or stocks in accounts other than your 401(k) or IRA, review your realized and unrealized gains and losses. You might be able to offset some of your gains by selling some losses. Tax-loss harvesting can help you save on taxes, but you want to make sure the move also makes financial sense for your situation. Talk with your advisor about potentially harvesting your losses and if it makes sense for you. Should you determine tax-loss harvesting is appropriate, you’ll need to complete the process by December 31st.
9. Keep Up On Your Charitable Contributions
If you made a charitable contribution in 2017, you might be able to lower your total tax bill when you file early next year. It can be especially advantageous if you donated appreciated securities to avoid paying taxes on the gains. Along with your other tax documents, find and organize any receipts you have from your donations to charities, whether it was a cash, securities contribution, or another type of gift.
10. Update Your Estate Plan
If you have taken the time and energy to create an estate plan, you’ll want to check in periodically to ensure all the documents are up-to-date and no major details have changed. Any major life event is a good time to think about updating your estate plan documents. If you change any of the beneficiaries in one place, such as a life insurance policy, make sure that they are consistent with the other documents so that there is no confusion.
