Year-End Financial Checklist
5 Tips to Consider As We Say Goodbye to 2023
As we head into the home stretch of 2023, here are 5 tips for you to consider to end the year strong:
Maximize/Review your Retirement Accounts: Review your retirement plans - this can be your 401(k) or 403(b). Make sure you are contributing enough to secure the employer match, if there is one. It’s free money! For 2023, you're allowed to contribute up to $22,500. For those over 50, you can make a catch-up contribution of $7,500 to get your total retirement contributions to $30,000 for the year. Looking to lower your tax bill today? Pre-tax contributions are deducted from your taxable income.
Do you typically get a tax refund? Consider a Roth 401k or 403b and start to create a tax-free bucket within your plan.
If you are someone who maxes out their 401k early in the year, check to make sure that you didn't leave any match dollars from your employer on the table. You no longer get the match in those pay periods where you're not contributing. Avoid this by spreading your contributions out throughout the entire year.
Roth IRAs: Chances are if you maxed out your 401k, you probably make too much money to contribute to a Roth IRA, but it’s worth exploring. The deadline for 2023 contributions is April 15, 2024. Check your income once you receive your W-2’s to assess if you are eligible to make contributions.
Inherited IRAs: Did you inherit an IRA during 2023? You may need to take required minimum distributions (RMDs) prior to 12/31/23. The rules around these can be very confusing. If you find yourself in this position, and aren’t sure what to do, please reach out to us. You don’t want to pay penalties for missed RMDs.
Taxes: There is nothing worse than an unexpected tax bill. Evaluate your current situation to see if you can reduce your tax liability. Review your investment accounts (not retirement accounts), is there anything that you can sell to take a loss? This doesn't mean you're getting out of the investment. You might buy something similar immediately, but you're taking a loss to offset some other gains in your portfolio. It's worth asking your accountant, am I carrying forward losses? If you are, those losses can be used to offset gains or up to $3,000 of your ordinary income.
Did you exercise ISO’s during the year? You may have triggered alternative minimum tax (AMT). This could mean a larger tax bill than you are accustomed to. Start to plan for this now.
If you're planning to work with a new CPA, now is the time to reach out to them.
Location of Cash: According to Barron’s:
Money-market funds have received $632 billion in net inflows this year, putting net assets at $5.5 trillion, according to LSEG Lipper. That’s up $1 trillion from 2022’s year-end data and nearly double 2018’s levels.
These flows can be attributed to the strong yields you can earn on these investments, most of them north of 5%. But many plowed money into these funds because they were concerned about the stock market, Ukraine/Russia, the ongoing conflict in Israel/Gaza, and a potential recession.
I’ve had numerous conversations with people this year who scoffed at the idea of buying stocks because they could earn a nice “safe” return of 5% in a CD or a money market. But successful investing typically does not reward what is comfortable. The Nasdaq is currently up 30% and the S&P 500 is up over 14%, year-to-date.
Cash investments are great for funds you expect to need over the next 6-12 months. If you have a longer investing timeline, consider stocks and bonds.
Build Momentum: My goal is to help you take action. What are you trying to accomplish? Where are you making progress? Are you tracking your savings? When you don't have a plan, you're a lot more reactionary. Invest with a mindset of reaching a particular goal or becoming financially independent. Invest towards your objectives. We tend to only think about, “how are things performing in today's market?” But what really matters to you are your goals and your objectives. Focus on that, and not the daily swings of the stock market.
Chart of the Week:
I’ve talked about changing your mindset from timing the market to time IN the market:
Finish the year strong!
Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
All indices are unmanaged and may not be invested into directly.
All investing includes risks, including fluctuating prices and loss of principal.