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RUEDI: 6 things to put on your year-end financial checklist

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It may be tempting to take your foot off the pedal and just enjoy the holiday season. However, there are several items on this list that need attention prior to year-end. After all, you don't want to lose money, pay penalties, or incur any additional taxes unless it’s absolutely necessary. As the end of the year approaches, here are financial tasks to add to your to-do list.

1. Sit for a Brief Family Report Card

First, conduct a “30-minute family report card” meeting. During this time, you can assess your current financial situation and review the past year.

For example, did you meet your financial goals? Did you pay off the debts that you hoped to? Did you stay within your budget? Answer these questions thoroughly and honestly with your spouse and family. If there are some areas that need improving, commit to making those changes now. There’s no time like the present to get a grip on your finances. 

2. Start Your Debt Diet Today

Collectively, Americans owe a cool $14 trillion in debt. If your household has credit cards, a mortgage, student loans or other debts, it's time to get serious about paying them off.

You are probably telling yourself; “I can’t worry about my debt during the holiday season!” But now is the best time to go on a debt diet. All that credit card debt makes your bottom line look bad and it’s hurting your financial health.

Consider what kind of approach is best for tackling debt. Review your budget to determine how much money you can apply to debt each month, above the minimum payments. Then, set a deadline for paying off your debts one by one.

Consider refinancing or consolidating high-interest debt, or transferring credit card balances to a card with a 0% APR. By reducing the amount of interest, you pay, you can chip away at your debt totals faster.

3. Happy Retirees Spend 5 Hours or More on Financial Planning

The happiest retirees spend at least five hours per year (and usually more) planning for retirement. They’ve figured out the formula, which is unique for every individual, for how much money they need to retire. Just remember that figuring out this formula takes planning, so be sure that you dedicate the time required so you can join the ranks of happy retirees.

If you don't have a financial advisor yet, consider finding someone you can trust for good advice. Some of the key questions to ask when choosing a financial advisor center around how they like to communicate, the types of services they offer, the typical kind of clients they work with, and their overall investment strategy.

Be sure to understand the difference between a fee-only and fee-based advisor. Fee-only advisors base fees on their services while fee-based advisors can earn commissions from selling certain investment products.

4. Contribute the Maximum Amount to Your 401(k)

Your company may offer a matching 401(k) contribution as part of your employee benefits package. This is free money to you, so if possible, contribute the maximum amount to your 401(k). The threshold to qualify for your company’s matching contribution plan may differ from company to company, so it's always best to check with your Human Resources Department to see how much you need to contribute. Try to save at least the amount that your employer will match, otherwise, you are leaving money on the table. 

Consider increasing contributions incrementally each year. If you get a regular pay raise, you won't even miss the extra money from your paychecks.

5. Don't Forget to Take Your Required Minimum Distribution (RMD)

Starting the year that you turn 72, the IRS requires you to withdraw at least a minimum amount from your traditional individual retirement account annually. If you fail to withdraw the required amount by the withdrawal deadline each year, you could face a steep tax penalty.

So, as you plan your retirement budget, consider where RMDs fit in and how much money you'll need to withdraw to avoid a penalty. Remember, you may be able to avoid taking RMDs from a 401(k) plan if you're still working for the employer that owns the plan.

6. Use the Money in Your Flexible Spending Account (FSA)

A flexible spending account is a special tax-free account in which you can contribute money that will pay for services that your health care coverage doesn’t cover. Be sure to check with your benefits office to find out the deadline for using the money in this account so that it doesn't go unused.

Also, consider the benefits of saving money in a Health Savings Account (HSA) instead if you have a high deductible health insurance plan. An HSA offers tax benefits in the form of tax-deductible contributions, tax-deferred growth and tax-free withdrawals when you use the money to pay for qualified medical expenses. And compared to an FSA, you don't have to spend the money in your HSA down each year, meaning you can allow it to grow over time until you need it.

Ruedi is a Regional Marketing Specialist with Savant Wealth Management in Bloomington.


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