It may seem unbelievable, but the end of the year is quickly approaching. But before we say goodbye to 2015, know that there’s still time to make most of this year — especially in your financial life! You can start by making these money moves before the clock strikes midnight on December 31. The following actions will help you maximize your savings, take advantage of tax breaks, and prepare yourself for 2016. You can start the new year off on a the right financial footing, and give yourself a little boost on any money-related resolutions you might want to keep next year.
Consider Maxing Out Your 401(k)
You can contribute up to $18,000 in your 401(k) plan in 2015, so if you haven’t contributed that max consider doing so before December 31. Some employers offer free money in the form of a 401(k) match, where they match every dollar you contribute to your 401(k) up to a certain amount. Don’t let this money get away! In addition, contributing to your 401(k) also reduces your taxable income, which could put you in a more favorable tax bracket. At the same time, determine if you could contribute additional money to your Traditional or Roth IRA. With these IRAs, you contribute a maximum of $5,500 if you’re under 50, and $6,500 if you’re over 50. A traditional IRA reduces your taxable income immediately, whereas a Roth IRA is money you’ve invested after-taxes.
Spend Down Your Flex Plan
It’s time to use it or lose it. Some employer-offered flexible savings accounts require you to spend all the money you’ve accumulated over the year before December 31. Don’t let this money slip through your fingers simply because you didn’t visit the doctor enough. Not sure what you can spend your flexible savings account on? Check out this list of approved expenses.
Reevaluate Your Company Benefits
Around this time of year, many Human Resources departments are sending out healthcare plan information. Whether or not your healthcare coverage is changing, review your company benefits as whole and see if the plan you have right now works best for your family. For instance, if you’re a single person with few health issues, you may be paying too much for a gold-level plan. Do you really need access to 20,000 doctors throughout the nation? You may if you travel a lot, but you may also be covered just as well by a healthcare plan that offers a Health Savings Account. Review your options now before plan coverage kicks in on January 1.
Evaluate Your Investment Portfolio
As we close out the year, it’s time to check out your portfolio and evaluate its performance. This year had some ups and downs, so you could have either gained or lost money this year. Depending on your situation, discuss with your tax professional or Certified Financial Planner and see if it would benefit you to do tax-loss harvesting. If you do decide to sell some of your investments, the end of the year is also a good time to ensure your portfolio is balanced with a diversified mix of investments. Again, how you balance your portfolio will depend on your situation, and your tax professional or CFP can give you more guidance.
Make Charitable Donations
The end of the year is a great time to review any charitable contributions you’ve made throughout the year and determine if you could (or want to) do more, and consider maxing out other investment plans you have. Many people donate to charity throughout the year, so gather up any receipts you’ve collected, especially the ones Goodwill or other donation centers have provided you. You may realize you still have the capacity to donate more, and get a deduction for your charity.
Review Your Income
If you’ve seen an increase in your income or expect to see an increase the following year, you may want to see if your current traditional IRA is right for you. Depending on your current income and your projected income in the future, a Roth IRA conversion may be a better option. Roth IRAs are particularly good for younger employees, who will likely be in a higher tax bracket in the future. But it’s best to evaluate your future plans before making this decision. The money moves you make before December 31 may differ slightly, depending on your current situation and any anticipated changes in 2016. If you’re expecting an addition to your family, you may want to consider investing in a college savings 529 plan, where you can save money in a tax-advantaged account for college expenses. Or you may anticipate a big medical procedure you’re having done in 2016 and may want to increase your contributions to a Health Savings Account or your Flexible Spending Account. Considering these financial costs will help you set up accounts and plan out your savings throughout 2016. By considering these money moves before December 31, you will put yourself on solid ground for 2016.