7 Year End Financial Planning Tips

Year End Financial Planning

Decisions are best made with a little time for reflection, good information and advice from experienced professionals and those with opinions you value. These final weeks of the year are a perfect time to take stock of your financial plan and make adjustments, as necessary, before the rush of the holidays and tax-filing deadlines next year.

Here are some year end financial planning tips you should be looking at sooner rather than later:

1. Review, Review, Review

If you haven’t done so this year, get with your advisor and go through your plan with a critical eye to see where it might need revisions. Let your advisor know of any changes in your family situation, including divorce, deaths, loss of job, new job, children who are no longer dependents, “new” dependents, etc. If you don’t have an advisor, I recommend you start researching now and find one. Make this your new item #1.

This is also a good time to review your will and other estate-related documents. There is a tendency to see these documents as “done and forgotten.” In fact, the third event you can count on in life, other than death and taxes, is change. Sometimes these life changes will require changes in your estate documents.

2. Max Out Retirement Plans

If you have IRAs, take advantage of the maximum contributions allowed by the IRS, including the “make-up” contributions. Those limits are $5,500 annually and $6,500 if you are 50 or older. You can make these contributions up to the filing deadline for your federal income taxes, which is April 17, 2017. If you are in an employer-sponsored plan with matching contributions by your employer, I recommend you contribute at least the amount to qualify for the maximum employer contribution. Even if you have issues with the employer plan, I generally recommend contributing what it takes to receive the employer match. It’s “free” money.

3. Make Your Charitable Gifts

Review your intentions here and catch-up if you are behind. Speak with your advisor and consider making donations with shares of appreciated stocks, or other investments types. Giving in this matter lets you receive credit for the market value of the donated investment on the date of the donation and possibly avoid paying any capital gains taxes on the investment gains. You will want to check with the organization in advance to make sure it can handle this type of gift.

You might also want to consider gifts to family members. Maybe it’s time to start that 529 college savings plan for a child or grandchild, or consider other tax-advantaged gifts to family.

Gifts are exempt from the gift tax for amounts up to $14,000 a year per recipient, but they must be made by December 31. If your 2016 income will be higher than normal for any reason, consider prepaying some of next year’s charitable contributions this year. You can deduct those gifts in the year they are actually paid.

4. Use/Review Your Flexible Spending Account Dollars

In most cases, this is a use-it-or-lose-it proposition. Make sure you have used all of yours. While you are at it, think about what your planned medical costs might be for next year and adjust your Flexible Spending Account dollars accordingly. It is likely open enrollment time for other benefit options, so use this opportunity to make any needed adjustments.

5. Adjust Spending/Saving

For those of you in the “accumulator” stage of life, this is a great time to think about ways to sock more money away for your retirement. If you had a recent raise, or know that one is coming up soon, this is easier. Just allocate most or all of it to more savings. For the rest of you, take a look at ways to either earn more (part-time work?) or spend less so you can boost your retirement savings. I wrote at length about this here.

6. Take Required Minimum Distributions

For individuals who are required to take minimum distributions from retirement accounts, such as IRAs and 401(k)s, you must make sure these are taken by December 31. Otherwise, there are tax penalties on top of the income taxes still due. This also includes people who have inherited IRAs.

7. Take a Hard Look at Your Insurance

The open enrollment period under the Affordable Care Act for 2017 eligibility opened this month (November). Multiple insurers have dropped plans and changed plans, so it is a good idea to shop.

As my regular readers know, I’m a big proponent of taking steps to protect yourself and your wealth. In fact, my financial plans start with that. It never hurts to shop your basic home and auto insurance if you have had a policy more than two or three years. Also, I suggest you review your long term care needs. I wrote about this a few months ago here. By addressing this need early, while you’re younger and presumably healthier, you may avoid higher premiums and difficult underwriting. For those who have others depending on their income, take time to review your level of life and disability insurance.

In conclusion, financial and tax planning are best done when there is time to reflect. Good organization makes it smoother, too, so now is a great time to start gathering documents and establish a system to file them (be it a paper OR digital system). Take advantage of these year end financial planning tips and you might help yourself at least twice – this year and next year.


 Securities offered through LPL Financial, Member FINRA/SIPC.  Financial Planning offered through Lifestyle Planning Solutions, a registered investment advisor. Investment advice offered through Stratos Wealth Partners, a registered investment advisor. Botsford Financial Group, Lifestyle Planning Solutions and Stratos Wealth Partners are separate entities from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.