The week between Christmas and New Year’s is a good time to not only take down the decorations but also plan for the coming year. David Ragland, CEO of IRC Wealth and a certified financial planner, provided Fox Business with an end-of-the-year checklist to knock out this month before ringing in 2023.
A top priority for workers is to max out their 401(k) contributions. The accounts are one of the best tax-saving and long-term investing plans available to employees. Folks under 50 years old can sock away as much as $20,500 in a 401(k) this year, and anyone 50+ is allowed to contribute as much as $27,000.Next year, the limits increase to $22,500 and $30,000, respectively.
Investors also may want to consider a year-end rebalancing of their 401(k) investment account, making sure they are not overexposed in any certain areas. “Nothing wins forever,” Ragland said.
Among his other advice:
Call the doctor. People who already had reached their out-of-pocket maximum on their health insurance plans should consider making appointments to doctors or other healthcare providers to try to get in a visit before the end of the year to minimize any out-of-pocket expenditures.
Tax matters. Ragland recommends that people meet with their CPA or other tax professional before year-end to review their estimated 2022 tax liability and make plans on how to reduce it. You can file a new Form W-4 with your employer to adjust your withholding. That will not lessen your 2022 tax liability, but it can prevent you from owing tax next year. To reduce your 2022 tax liability, you can make an estimated tax payment until Jan. 17, 2023. You can either mail a payment or pay online.
Anyone who lives in a state that has state tax credits should review availability and make such a purchase sooner rather than later, he advises. Some state tax credits have been in short supply, so it is best not to wait until the last minute.
Ragland said some individuals may want to consider selling investments that currently are at a loss and rebuying the same investment back 31 days later. The strategy generates a loss for tax purposes without giving up a favorite stock or exchange-traded fund for good.
He also pointed to several tried-and-true practices such as making annual cash charitable contributions before year end, as well as donating clothing or furniture to a favorite charity for a non-cash charitable deduction. Those who make monthly contributions to a charity also might want to consider making their first quarter 2023 donation this month.
Another item on the personal finance to-do list is paying any state income or real estate taxes that are due before the end of the year, as well as any January 15 estimated state income tax payment.
Ragland said just taking the time to assess your personal financial situation, developing goals and acting on a plan is the key. “Becoming wealthy is super simple,” he said “It’s just not easy.”
–Alan Goforth | Metro Voice