Here Is Your Year-End Financial Checklist
The end of the year is always a time for reflection, and your personal finances are no exception. Even in a year marked by record high inflation , there’s a good chance your finances aren’t as bad as you think . But as 2022 draws to a close, it’s time for the annual review. By using the segments below, you can end 2022 on a good note and head into 2023 with all the necessary adjustments you might need. Here is your year-end financial checklist.
Maximize your retirement contributions
If you have the funds, you should maximize your retirement contributions to maximize savings before the deadline expires at the end of the year. Currently, 401(k) members can contribute up to $20,500 (which is already $1,000 more than in 2021). For IRAs – traditional and Roth – you can receive a maximum amount of $6,000 in 2022.
Good news for big contributors next year: Starting in January 2023, you will be able to deposit $22,500 into your 401(k) plan – that’s almost a 10 percent increase in the limit. In addition, those aged 50 and over will be able to deposit an additional $7,500 with a maximum deposit of $30,000. The IRS is also increasing the contribution limit for both traditional and Roth IRAs to $6,500 in 2023 (a $500 increase from this year).
Don’t Lose Dollars with Flexible Spending
If you have a flexible spending account (FSA), the time required to use the remaining balance expires . Check your employer’s policy for any balance as of December 31st of this year so you don’t lose your hard-earned funds.
If you’re not likely to spend the rest of the year on doctor visits – either because everything is booked months in advance or because that just sounds terrible – fear not. You may use the remaining FSA funds for other eligible healthcare expenses. You can use FSA funds to upgrade your prescription glasses or buy more contact lenses. You can also visit your local pharmacy and stock up on some FSA-compliant OTC products, such as first aid products, popular cold medicines, and even sunscreen. A complete list can be found at the FSA shop here .
The 2023 FSA contribution cap on employee health will be $3,050, up $200 from the 2022 cap.
Check Withholding Tax
Of course, the tax day is not earlier than a few months. However, now is the time to review your tax withholdings and payments. If a major event happened in your life in 2022, such as a wedding, divorce, or a baby, you’ll probably want to adjust your retention. Check out the IRS Withholding Estimator to effectively determine your income tax withholding amount. Here’s How Inflation Could Help Lower Taxes in 2023 .
Update your beneficiaries
As we mentioned above, if you have had major life changes, you will want to update the beneficiaries of your finances accordingly. Write down the names of everyone who is the beneficiary of your bank accounts, retirement accounts, life insurance policies, and annuities. The end of the year is the best time to take stock of everyone who may have entered or exited your life and needs to be covered (or possibly removed).
Review your financial goals
Regardless of the current state of your finances, it’s important to be honest with yourself. Sit down and physically write down where you could improve your personal finances. Consider: Do you have a debt repayment plan ? Do your expenses need to be curbed ? Do you save where you could invest, or vice versa ?
Think about your priorities for the new year. You might consider investing in a financial professional who will use him as a sounding board, as his perspective can be the push you need to create and achieve your short and long term financial goals.