As the calendar year draws to a close, individuals are reminded to take action on various financial matters before the new year begins. The White Coat Investor has released an updated end-of-year financial checklist aimed at optimizing personal and retirement finances. While not every point on the list may apply to everyone, completing these tasks could prevent future regrets.
Key items include executing the Backdoor Roth IRA process, which involves both contributions and conversions that should ideally be finalized within the current year. For those with 401(k) plans, the Mega Backdoor Roth IRA option allows after-tax contributions that can be immediately converted to Roth accounts.
Further, as part of broader tax strategies, making Roth conversions of pre-tax money might be beneficial for some, provided that the associated tax bill is manageable for the upcoming tax year. Individuals should also ensure they maximize contributions to 529 college savings plans, Flexible Spending Accounts (FSAs), and other investment accounts before the year’s end.
Another crucial aspect is to consider charitable giving. Donations made before December 31 can provide immediate tax benefits for itemizers. Additionally, it is advisable to prepare for the upcoming year by assessing current savings goals, ensuring tax paperwork is organized, and evaluating any potential tax-loss harvesting opportunities in taxable investment accounts.
This checklist serves to help individuals stay proactive in managing their financial health and prepares them for a financially sound new year.
Why this story matters
- It provides essential year-end financial tasks that could impact tax liabilities and future savings.
Key takeaway
- Completing critical financial actions before the year-end can maximize savings and minimize regrets.
Opposing viewpoint
- Some may argue that a year-round approach to financial management might be more effective than focusing solely on year-end tasks.
