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By Allison Videtti
It’s the holiday season, and between all the celebrating and gift giving, I know my first priority hasn’t been my bank account. But according to my financial planner — and financial experts everywhere, apparently I should be paying a little more attention to my finances as we close out the year.
Sure, I pay attention to my checking account balance, my credit card statement and my overall spending (I certainly don’t want to go into debt for a few holiday gifts!), but the bigger-picture stuff is important, too. As it turns out, the end of the year is the perfect time to make some last-minute moves that can have a big impact for the rest of the year.
I know it sounds crazy, what with all the spending we do at this time of year, but it makes sense to give yourself a little gift, too — the gift of security in retirement. Have a big bonus coming? Add a little extra to your 401(k) or IRA. For 2015, you can contribute up to $5,500 ($6,500 if you’re age 50 or older) to all of your traditional or Roth IRAs. You can contribute up to $18,000 to your 401(k), plus an additional $5,500 if you’re 50 or older. And if there’s a raise coming your way in the year ahead, now’s the perfect time to up your retirement contribution by a percent or two.
A lot can happen in a year. Kids are born, couples get married (or divorced), etc. That’s why it’s a great idea to set aside time at the end of each year to review your beneficiaries on things like retirement accounts, life insurance policies and your will, if you have one. If you don’t have a beneficiary, your accounts could get tied up in probate when you pass away, leaving your loved ones in a lurch at the least opportune time. If you have a will, you should review it and your beneficiaries together. If the beneficiaries on your account are different than those named on your will, the account beneficiary trumps whatever the will says, and you could wind up mistakenly disinheriting one of your loved ones.
If you don’t have a will, this is the perfect time to create one. Regardless of how much (or how little) money you have, a will ensures that your assets go to the beneficiaries you choose vs. having your state decide who gets what.
The charity will appreciate it, but there’s an added perk to donating this time of year: tax breaks. If you itemize your deductions, you can reduce your taxable income if you make your donations by December 31. If you make non-cash donations, such as old clothes or furniture, be sure to get (and keep!) a receipt you can refer to when you do your taxes next year.
Note: Keep in mind that if your itemized deductions don’t total more than the standard deduction ($6,300 for singles and married couples filing separately, $12,600 for married couples filing jointly), itemizing may not be for you. Have questions? Ask your tax pro for more details.
Each year, I make it a point to meet with my financial planner to reassess my investments, review my savings plan and look at my budget. This is especially helpful if you’ve experienced life changes in the past year, like the birth of a child, a new job (or job loss), or are planning big things for the coming year. In addition to reviewing your investments and retirement account balances, many financial planners can also review your life and disability insurance policies and help you determine if you’re adequately insured. If you haven’t yet found a financial planner, now’s the time to get started interviewing them.
It always pays to keep an eye on your finances, but taking time each year to assess where you stand can help you start the next year off on the right financial foot.
Sources: Fidelity.com, U.S. News, CNBC, IRS.gov
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