2022 Year-End Financial Planning Checklist

With 2023 quickly approaching, here are some valuable to-do’s you can check off your year-end financial planning checklist before January 1st.

#1: Evaluate your current financial plan.

Reviewing and updating your financial plan allows you to head into the new year on solid financial ground with a clear blueprint for decision-making.

This is an opportunity to take stock of how things are going and evaluate whether you’re on track to achieve your financial goals. In addition, this can be a great time to reevaluate your goals altogether.

First, check in with yourself and determine whether your financial goals still align with how you want to use your money. If not, consider updating your goals to match your new preferences. If so, determine whether there are any new tactics or strategies you can use to achieve your financial goals more effectively.

#2: Review and update your employee benefits.

Although timing can vary, many employers offer benefit “open enrollment” near the end of the year. Open enrollment can be a great opportunity to make strategic financial decisions while maximizing your compensation package.

Start by reviewing any new changes to your benefits package. Then, consider how your financial situation has changed this year—or how you expect it to change next year—and select your benefits accordingly.

Here are a few key benefits to consider adding or updating as you work through your year-end financial planning checklist:

  • Insurance: Life, disability, and health insurance are some of the most valuable benefits.
  • Retirement: Be sure to take advantage of the benefits of your plan, whether it’s a 401(k) with matching contributions, an employee stock purchase plan, or a deferred compensation plan.
  • Legal: Some employers offer legal services at a discounted rate. If you have access to this benefit, you may want to consider using it to create or update essential estate planning documents.

#3: Conduct a year-end tax review as part of your year-end financial planning checklist.

For most taxpayers, December 31st marks the end of the current tax year. That means year-end may be your last opportunity to proactively lower your 2022 tax bill.

As you review your tax situation, here are seven key tax-planning tips to consider:

  1. First, identify any changes to your tax situation.
  2. Harvest capital gains or losses.
  3. Review your charitable giving plan.
  4. Look for ways to reduce taxable income.
  5. Consider Roth conversions in low-income years.
  6. Strategically transfer wealth.
  7. Donate your RMD for an above-the-line deduction.

#4: Review your investment portfolio and rebalance if necessary.

Year-end can also be a great time to review your investments and make updates or contributions as needed.

First, review your desired asset allocation—that’s your ideal mix of stocks, bonds, and other assets in your portfolio. This mix should reflect your financial goals, as well as the amount of risk you’re willing to take with your investments.

Then, cross-check your desired asset allocation with your current investment portfolio and consider rebalancing your accounts if necessary. Just remember, if you’re rebalancing within a taxable account, you may trigger capital gains or losses.

#5: Maximize your retirement plan contributions at year-end.

If you haven’t maxed out your retirement plan contributions for 2022, now may be a good time to do so. In 2022, the contribution limit for employees who participate in 401(k), 403(b), most 457 plans is $20,500 (plus a $6,500 catch-up contribution if you’re age 50 or older). In 2023, this limit will increase to $22,500, plus a $7,500 catch-up contribution.

For individual retirement accounts (IRAs), you can contribute up to $6,000 in 2022, plus a $1,000 catch-up contribution for those age 50 and older. In 2023, this limit increases to $6,500, with the $1,000 catch-up contribution staying the same.

#6: Consider making end-of-year charitable donations.

As you review your charitable donations for the year, remember that you can only take a charitable deduction on your tax return if you itemize deductions. If you don’t typically itemize, consider “bunching” your donations if you have extra cash on hand. Bunching means making two or more years’ worth of donations in the current year to maximize the amount you can deduct from your taxes.

You may also want to consider donating to a donor-advised fund (DAF). A DAF allows you to make a charitable donation and take the deduction in the current year. However, unlike bunching, you don’t have to decide where your donation goes right away.

#7: Don’t forget to take RMDs.

Don’t forget the deadline to take required minimum distributions (RMDs) is December 31. The IRS requires anyone age 72 or older to take RMDs from their traditional IRA(s). There are no RMDs for Roth IRAs unless they are inherited.

If you don’t need the extra income this year, you can donate your RMD to charity by making a qualified charitable distribution (QCD). A QCD allows IRA owners to transfer up to $100,000 directly to charity each year.

It’s important to note that the IRS considers the first dollars out of an IRA to be your RMD until you meet your requirement. If you take advantage of this strategy, be sure to make the QCD before making any other withdrawals from your account.

#8: Consider working with a trusted financial advisor.

Lastly, as you review your year-end financial planning checklist, consider whether working with a financial advisor may help you reach your goals more effectively.

At Milestone Asset Management Group, we offer our clients the peace of mind that comes from working with a trusted and experienced financial advisor. We specialize in helping our clients plan for a healthy and secure retirement while handling all of their tax planning, preparation, and estate planning needs in-house.

If you’d like to speak with a member of our team about your financial planning needs, please schedule a complimentary phone call.