End of Year Financial Checklist

This article will discuss year-end planning techniques that can be utilized before ringing in the new year. These items must be completed BEFORE the new year. Taking the time to cross them off your to-do list will ensure you start 2018 off on the right foot! We hope you find our end of year financial checklist helpful. Cheers to 2017, hello 2018!

With all the holiday cheer, shopping, and entertaining that goes on in December, the month always seems to fly by. The gift of financial wellness could be yours this year, use the following checklist to better your financial situation going into 2018.

1.Tax-Loss Harvest

Tax-loss harvesting lowers your taxable income by up to $3,000 in 2017. If you have losses on any positions in a taxable account, you can sell them before year-end to lock in the loss and reduce your income. For example, let’s say you’re in the 28% tax bracket. Reducing your income by $3,000 would save you $840 in taxes. If the security you sold to capture a loss is something you would still like to own, be sure not to buy it back until after 30 days of selling to avoid the wash-sale rule (the loss will be negated). In the meantime, using an ETF or something similar in its place can ensure you still participate in the market and aren’t sitting on cash.

2. Load 401(k) Contributions

If you still have time to increase your contribution amount before year end, loading a large amount, or maxing out your 401(k) is something to consider. If you don’t need the extra cash and have all your shopping taken care of, it couldn’t hurt to put more away and reduce your income tax liability.

3. Spend FSA Dollars

If you have an FSA (flexible spending account) be sure to spend the money. If you need to schedule a dental appointment, or need new glasses, you might as well spend the money. FSA’s are a use-it-or-lose-it account for medical expenses. You may have a grace period to use the funds into the new year, but be sure to check with your specific plan.

4. Roth IRA Conversions

For some people, due to their high income, they aren’t able to contribute to a Roth IRA. There is a way to workaround this rule, commonly called the “back-door Roth”. Getting money into a Roth IRA can be very advantageous to someone because the money has already been taxed when contributed to the Roth. Meaning distributions from a Roth IRA can be withdrawn tax-free. In order to take advantage of a “back-door Roth”, you must convert pre-tax dollars from a traditional IRA into the Roth. Any money transferred in this way will be included in your income tax for the year. There is also no conversion limit, if you have a substantial amount you like to convert to a Roth, you are eligible to do so. Another strategy is to “max out” your tax bracket. Converting just enough to remain in your current bracket, without jumping to the next level.

Why would I want to increase my tax liability? Having money in an after-tax account gives you more flexibility in retirement, especially if you believe you’ll always be in a high-income tax bracket. Consider consulting with a tax adviser before making any decisions around a Roth IRA conversion.

5. Charitable Contributions

If you donate to charity or would like to consider doing so in the near future, there are also important tax benefits with doing so. Through donor-advised funds, donor’s are able to lock-in charitable donations for the year without having to determine which charity to actually donate it to. The funds allow the donor to invest the donations as well and make grants in the future. A cash donation to the account can provide up to a 50% deduction on your AGI (adjusted gross income), meaning you’ll owe less in taxes. If you donate a security (stock, bond, real estate, etc) with large long-term capital gains, you’re able to avoid paying those taxes and lock in a 30% deduction to your AGI. A win-win situation.

Donor-advised funds are a great way for families to start learning about giving, as the family could participate in contributions and in making decisions about which charities to grant money to. Companies that offer donor-advised funds often have different minimums, investment options, donor services, and fees, so be sure to do your research and find one that fits you and/or your family best.

6. Update Beneficiary/Wills

Updating beneficiary’s of retirement accounts and will, can be done any time of the year. However, while your at it you might as well take care of it. If you’ve gotten married, had kids, or had any changes in family dynamics or property, you’ll want to make the updates. In the unfortunate event, something were to happen, you can avoid complications your family may have to go through if your wishes aren’t properly outlined in a will.

7. Set your Goals for 2018

Goal setting is very powerful. If you take the time to sit down and write/type our your goals you’re much more likely to pursue and achieve them! Whether its financial, health-oriented, or relationship-oriented, setting your goals into the new year will set you up for a successful and happy 2018!




Levi Sanchez

Levi Sanchez is a CERTIFIED FINANCIAL PLANNER™, BEHAVIORAL FINANCIAL ADVISOR and Co-Founder of Millennial Wealth, a fee-only financial planning firm for young professionals and tech industry employees. He is an avid sports fan, personal finance and investing geek, and enjoys a great TV show or movie. His mission is to help educate his generation about better money habits and provide financial planning services to those who want to start planning for their future today!