Santa isn’t the only one who should be reviewing a list this time of year! I’ve been working thru a year-end financial checklist for myself and my clients the past several weeks and thought it may be helpful to share some of the key items. (Note: as always, be sure to consult your advisors to review your own situation!)

1.) Finalize contributions to employer plans – I wrote about this in detail last week, but contribution to employer plans (like 401ks) follow calendar years. This is the final month to contribute for 2022!

2.) Make (or plan for) contributions to individual retirement accounts – you have until tax filing deadline in April to fund individual retirement accounts (such as IRAs, Roth IRAs, Self-employed IRAs). However, now is a great time to review your eligibility (based on 2022 income) and if you qualify, make plans to have the cash on hand early in the new year.

3.) Process any Required Minimums Distributions (RMDs) – I wrote about RMDs here. In short, they are amounts you must withdraw from pre-tax retirement accounts per tax regulations. Penalties if you fail to do so by 12/31 are very steep so if you are subject to these rules, be sure to get your distributions made

4.) Review realized gains/losses and harvest as needed – Taxable (ie: non retirement) accounts generate taxable items such as dividends, interest, and capital gains/losses (difference between what you paid for an investment and what you sold it for). In a down year such as 2022, it is worth taking a close look at taxable accounts and perhaps realizing some losses (that can be partially used to offset income or future capital gains). See more on tax loss harvesting here. Also pay close attention to the impact of mutual fund distributions (learn more here)

5.) Give back – It is an excellent time of year to give to those in need. But beyond that, there may be tax strategies that give you added motivation to donate! Consult your tax advisor – or proceed with gifting no matter the tax impact.

6.) Fund health savings accounts – If you have a health insurance plan that allows for contributions to a Health Savings Account, review your YTD contributions (be sure to pick up employer portion as well). If you have yet to max out, you may wish to consider adding more. These are very beneficial from a tax perspective – both now and in the future. You have until April 2023 to fund for 2022 – but make a plan now as that will be here before we know it!

7.) Refine your 2022 tax estimate – Now is a great time to check in on your 2022 estimated taxes owed vs. withholdings or payments. There may also be some tax strategies you could employ between now and year end to optimize your situation, so as always, consider reaching out to your tax and financial advisor to review your own situation

8.) Give to family and friends– the current annual gifting exemption is $16,000 per person per calendar year. As a result, if you are feeling generous, now is a great time to make those gifts and take advantage of the annual exemption. And you can give more, a gift tax return will just be required! You can read more here

9.) Business financial review – if you are a business owner, you should have pretty good sightline to 2022 results at this stage. Work with your tax advisor to determine how your 2022 tax picture is looking and make plans to take any actions prior to year-end as apporpriate

10.) Review cash levels – After all of the above are done, you will likely have a better idea on what cash balances are earmarked (for taxes, retirement savings, etc) and which are possibly available for investment, addition to near-term reserves, or other uses. Now more than ever, proper allocation of cash is important as yields on money market funds near 4%. Don’t overlook the power and stability of this asset!

11.) Make a savings plan for 2023 – one of the most powerful inputs to the long term compounding of wealth is your savings rate. Set a plan now for the upcoming year – and see what impact that has on your overall financial plan

12.) Enjoy the holidays! – last but not least, the holidays are here. Be sure to unplug and enjoy the time with family and friends.

Here’s to a successful end to 2022!

Note: All commentary above is as of the date of this post and is for education and informational purposes only. Windermere and its principals do not intend for this to serve as investment advice and are not responsible for any actions taken based on this article. Consult your financial advisor before taking any actions as it relates to your own investment portfolio