Yep. It is time to make a list and check it twice. But this checklist doesn’t having anything to do with gift giving and spending money. This is your year-end financial planning list: 25 things you should do at year’s end to set yourself up for a secure and happy future.
1. Take a Minute to Identify the Financial Good and Bad of 2023
It is a best practice for most endeavors to identify the strengths and weaknesses of performance. Your financial life is no different. So, what did you do well financially this year? Where are the areas you could improve?
This has been a year with some recovered losses, but stubbornly high prices. So, there is probably a lot to assess. (And, new current year estimates in the NewRetirement Planner make it easier to look back.)
2. Establish Financial Goals for the Next Year and Ever After
So. What do you plan to earn, spend and save next year? What other financial goals do you have? Do you have debt? Should you work on paying that down? Can you do a better job with investments or insurance? Have an idea for a side gig to bring in some extra money? What are you going to do about rising inflation and the possibility of lower stock market returns?
What about the amount of time you spend tracking and managing your finances? Can you set a goal of working on your finances an hour every week or month?
3. Optimize Your Finances for Lower Lifetime Taxes
We are not about to try to give you tax advice here. However, now is the time to make some final moves to save yourself money on 2023 taxes.
Check out Year End Tax Advice for Retirees. Effective tax planning could be the most important year-end thing you do.
It is also a good time to strategize to save on future taxes. The ever updating tax planning functionality in the NewRetirement Planner makes this task easier!
4. If Eligible, Consider Opening an HSA
A Health Savings Account (HSA) is an account that gives you triple tax benefits – tax deductible contributions, tax-deferred growth and tax-free withdrawals when you use the money to pay for qualified medical expenses. If you are eligible (you have to have a high deductible health insurance plan), it can be an excellent place to stash your money.
Learn more about why an HSA is a great retirement savings option.
5. Evaluate Your Current Insurance Coverage
Insurance is a significant expense. And, it is important to get it right.
Early Retirement Health Insurance: If you are retiring before age 65, make sure you can find affordable medical coverage to bridge you to Medicare eligibility. Explore 9 ways to cover your health costs for an early retirement.
Medicare: If you already have Medicare, be sure to assess your coverage. Actively shop for the best Medicare supplemental policy each and every year. Your health will change and the policies change. It is worthwhile to rethink your coverage annually. Here are 10 tips for getting great coverage.
Long Term Care: You may also want to look at ways to fund long-term care costs. Long-term care is not covered by Medicare or Medicare supplemental insurance. Use the NewRetirement Planner to assess your options.
Your Home and Other Assets: Review all of the policies covering your home and car and any other assets.
Life Insurance: Your need for life insurance in retirement depends on a number of factors. Explore 7 instances when it is a good idea to have a policy.
Dental and Vision: Make sure you know how you’ll cover these expenses in 2024 and ever more.
Lifetime Annuity: Annuities are often considered investments, but they are actually insurance products. A lifetime annuity guarantees your income and can be a good way to make sure you have money if you live longer than you expect.
6. Don’t Guess: Figure Out Exactly What You Need for Retirement (or the Rest of Your Retirement)
Whether you are already retired, or nearing retirement, you need to know exactly how much money you will need to live comfortably for the rest of your life. According to a Merrill Edge Report, 19 percent of mass affluent Americans – U.S. households with invest-able assets ranging from $50,000 to $250,000 – have no idea how much they will need. And the guesstimates are wide ranging:
- 9 percent think they will need more than $2 million
- 14 percent believe they will need $1 million to $2 million
- 24 percent say $500,000 to $1 million
- 23 percent say $100,000 to $500,000
- 9 percent say $0 to $100,000
- And 19 percent say they just don’t know
So, how do you figure it out? You have options. You can find a high-quality financial advisor or use a respected online calculator — just beware of simple tools.
While planning does not need to be scary, it can be complicated. The NewRetirement Planner makes reliable and personalized planning easy.
7. Think You Already Know What You Need? Check Again. Things Change!
Creating a retirement plan is not something you do once and then never revisit. Experts recommend that updating all aspects of your plan be part of your yearly retirement checklist — doing this quarterly is even better. Lots of things change and evolve. Your plan needs to stay current with these developments. For example:
- Investments might not have performed as you projected. And, you need to update savings balances.
- Your home’s value may have increased.
- Has your income changed? It is great to update this income stream.
- The inflation rate changed.
- Perhaps your children moved back home.
- And much more…
Just make sure your retirement plan reflects your current situation and your best guesses about what will happen in the future.
8. Over 72? Be Sure to Take Your Required Minimum Distributions
A report from Fidelity Investments says 61% of their account holders who are eligible have not yet taken their Required Minimum Distributions (RMDs).
Yikes! Now is the time!
Don’t overlook this important yearly retirement checklist task! In most years, if you are older than 72 (73 if you reach age 72 after Dec. 31, 2022) , you are required to withdraw from your retirement accounts before the end of the year or else you will owe hefty penalties.
(NOTE: The NewRetirement Planner automatically models your RMDs . Log in to see your current or future distributions.)
Are you worried about the taxes you will pay, here are 6 strategies to help you minimize the costs of these RMD withdrawals — especially if you don’t need to use the money now.
9. Still Working? Max Out Your Retirement Savings
If you haven’t reached the contribution limits on retirement savings plans like 401ks and IRAs, then you may want to figure out a way to stash more money into these accounts. Have a year-end bonus? Cash gifts? A little extra money lying around?
Putting money into a retirement saving plan can have multiple benefits: You can:
- Defer paying taxes on the amount contributed
- Build your retirement savings and compound those savings with future investment earnings
- Boost the value of your savings if your employer makes 401(k) matching contributions
The 2023 contribution limits are:
- $22,500 for 401ks, 403bs, 457s as well as Thrift Savings Plans. And, if you are 50 or older, the catch-up contribution is an additional $7,500. So, you can save a total of $30,000!
- $6,500 for IRAs. And, the catch-up contribution for people 50 or older is $1,000. So, you can save up to $7,500 with tax advantages.
And, remember that you can max out both kinds of savings vehicles – and don’t forget to consider putting it in a Roth account!
10. Did You Spend Less This Year? Stick it in Savings!
With inflation, it was hard to spend less, but perhaps your economizing really paid off. Did you perhaps forgo lattes? Eat fewer meals out? No vacation?
If you reduced costs, stash those funds into retirement savings! And, if you have a long enough time horizon, investing your savings in the stock market while it is down could potentially pay off big in the future.
11. Boost Your Monthly Savings Rate
Another important thing to do if you are still working is to try to boost your savings rate. You may have received a bump in income this year. While it may be difficult due to inflation, you should definitely consider using that bump to increase how much you save each month.
12. Save, Don’t Spend, Your Year-End Bonus
According to a survey by Aon Hewitt, 91% of all employees have compensation packages that may include a year-end bonus. Consider the real pros and cons of getting that money into retirement savings.
Thought experiment: Imagine yourself next year (and five years after that) having splurged and spent your bonus. And, also visualize yourself having saved. Really consider how you will feel in the future, it may help you to save at least some of your bonus.
13. If You Haven’t Already, It is Time to Automate Your Savings
Speaking of monthly savings, if you haven’t automated the retirement savings process, you should do that now.
Saving for retirement takes willpower. However, if you automate your savings, you’ll only need one burst of willpower to start the automatic withdrawals, then you won’t have to think about it. Commit – right now — to automating saving for retirement or for boosting the amount you are already saving.
Don’t think about it, don’t consider how you might use that extra money for any non-retirement activities.
14. Create or Assess Your Investment Plan
Investment plan? Yes! You need an investment plan and if you already have one, you need to assess if it is still adequate to serve your current and future needs. An investment plan defines your strategy for how to invest your money and what to do when certain financial events occur.
Arguably the most important part of your plan is defining your asset allocation strategy — how much of your money is held in different kinds of investments: stocks, funds, bonds, CDs, real estate and more….
Here are some resources for investment planning:
Need help knowing how to invest? You can pay someone a percentage of your assets to manage your money, but these costs really add up. You could instead consider a fee-only advisor. For a fixed-fee, a CERTIFIED FINANCIAL PLANNER™ can help you devise a simple and effective asset allocation plan that is easy for you to implement and manage yourself. NewRetirement Advisors are a low-cost option that uses the power of technology to deliver better advice.
- FREE Discovery Session: Interested in learning more about financial advice? Learn more here. And, consider booking a FREE Discovery Session with a CERTIFIED FINANCIAL PLANNER™ to talk about your needs and what you can do to be wealthier and more secure.
15. Re-balance Your Investments
The stock market has (for now anyway) nearly recovered from recent losses. Are you still in your optimal asset allocation positions? If not, it may be time to re-balance to restore your target percentages.
By re-balancing your investments, you can effectively minimize risk. Re-balancing essentially involves buying and selling portions of an investment portfolio to bring the weight of each asset class back to its target state.
16. Review Your Social Security Statement
You don’t have to be in your 60s to check in on your Social Security. In fact, if you have had a job, it is a good idea to check your benefits annually to make sure that your earnings and Social Security contributions are being recorded accurately. It is easy to set up an online My Social Security account.
17. Assess if You Need a Financial Advisor
As you review your retirement finances, you may find that you could benefit from the help of a financial advisor. Here are 5 reasons why you might want to seek help from an advisor:
- Get confidence and peace of mind about your retirement finances
- Reduce tax liabilities and maximize wealth
- Construct and maintain the optimal asset allocation strategy, including a well-defined action plan for using assets for retirement income
- Help with making rational decisions — not emotional ones
- Keeping your finances up to date and making sure you don’t miss opportunities due to indecision or procrastination
NewRetirement is happy to have introduced NewRetirement Advisors. NewRetirement Advisors is a new kind of advisory service, focused on providing very affordable financial planning built upon the NewRetirement Planner. You get a knowledgeable advisor to look over your financial situation and make recommendations.
Prepare for a wealthier new year with professional advice.
18. Do You Have an Emergency Fund?
According to Bankrate, only 39% of people can cover a $1,000 setback using their savings. Where does the money come from when the unexpected happens? More than likely, it comes from the retirement fund. And that’s a risky game to play.
Most financial experts recommend saving no less than 3 to 6 months’ worth of living expenses available in an easy to access checking account, with 6 to 9 months being a safer amount to work toward. The rest of your money should be working for you and earning interest.
19. Consider a Roth Conversion
Roth conversions and figuring out the best time to use them can be complicated. With traditional retirement savings accounts, you pay taxes when you withdraw money from the account. Roth accounts on the other hand are taxed when you invest the money. Converting traditional funds into a Roth account can be a smart move in years when you are reporting a low income or have a lot of deductions.
Learn more about a Roth Conversion.
See What If! The NewRetirement Planner lets you model a conversion to see how it impacts your finances in both the short and long term. You can find this feature on the money flows page in the Planner.
You can also use the Roth Conversion Explorer, part of the Planner, to get a personalized strategy for how much to convert and when to optimize your net worth.
If you want to see the tax implications of a last minute Roth Conversion for 2023, use this 2023 Roth Conversion Calculator.
20. Review Expenses
As the year nears a close, now is as good a time as ever to look over your expenses from the past 12 months in order to get an idea of how much you’ve spent. This will help you plan for the future. You may also want to make sure that your retirement plans take into consideration the different phases of spending you will likely experience throughout retirement.
It is widely accepted that there are three stages of retirement — each with fairly predictable spending needs and levels.
Phase 1 – Early Retirement:
The first stage of retirement is characterized as a time of adventure and experiences. With more free time and relative health, there are a lot of opportunities for spending money. Some experts recommend that retirees budget for spending 20 percent more in this phase.
Phase 2 – Middle Retirement:
While you may still be enjoying adventures in middle retirement, many people find that they simply spend more time with friends and family and stay a little closer to home. In this phase, your retirement spending may be at its lowest levels.
Phase 3 – Later Retirement:
No matter how healthy you are and how well you age, there is no denying that health care expenses ramp as you get older. In fact, healthcare costs grow so much that this last phase of retirement is usually the most expensive phase of life. Out of pocket medical spending and long-term care costs absolutely sky rocket.
After an initial assessment, the NewRetirement Planner lets you set time periods with different spending and different expense levels. This will give you a much more accurate retirement plan.
Get Even More Detailed: PlannerPlus, the premium version of the FREE Retirement Planner lets you create a highly detailed budget for retirement. The Detailed Budgeter has over 13 categories and 70 subcategories to help you envision your future.
- You can also set must spend and nice to spend levels which can help with income and investment planning.
- Plus, there are features for better tax handling.
21. Review Where You Live and Your Housing Situation
Where you live plays a huge part in your satisfaction with retirement. And, your home is also probably your biggest expense and most significant asset. Now is a good time to assess whether you are satisfied with where you live and whether or not it is a good fit for your finances and desired lifestyle.
The NewRetirement retirement planner lets you model downsizing, refinancing or getting a reverse mortgage to help you see the impact of a housing change on your overall retirement finances.
22. Assess Your Mortgage
Interest rates have trended upward over 2023.
Refinancing is unlikely to be a good idea, but year end is a good time to assess where you stand with your home and make plans for where you live and your home equity. You may want to:
- Set a goal of paying off your mortgage
- Tap home equity for retirement
- Relocate to a place better suited to your interests
23. Review Estate Plans
An estate plan can insure that your loved ones are cared for. A good estate planner or financial advisor will also help you maximize your wealth.
Check Beneficiary Designations: Ensure that all beneficiary designations on life insurance policies, annuities and retirement accounts like IRAs and 401(k)s are up-to-date. Beneficiary designations govern how these assets pass to heirs and they supersede any other directives like a will.
Make Sure Wills and Trusts Are Updated: It is sadly common for people to neglect estate planning. Prince, Aretha Franklin and Michael Jackson all died without a will. And thousands die every year with an estate plan that was not recently updated.
24. Medical Check Ups and Health Goals
Getting medical appointments can be difficult at the end of the year – especially this year – but it is important to make sure you are having regular check ups.
You should also use this time to set goals for your physical (and mental) health.
25. Last, but NOT Least: Assess and Set Goals for Your Time
When it comes to retirement planning, everyone’s goal is pretty much the same: create a plan so that you may live happily and comfortably in your non-working days. However, to have success with this goal, you need to make it much more specific, set priorities and visualize exactly the future you want.
You can set retirement goals for the near term — this year — or for the rest of your life.
But, the most important goals you have are related to your lifestyle. What are your beliefs? What do you most care about? What do you want to be remembered for? How do you want to spend your time in retirement and with whom?
Plan for what really matters to you.