Follow This End-of-Year Financial Checklist


Illustration for article titled Follow This End-of-Year Financial Checklist

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While this annus horribilis might not be ending soon enough, you don’t want to let 2020 pass without some year-end personal finance upkeep, as there are deadlines you might not be aware of. Here’s a rundown of what you’ll want to consider.

Top off your 401(k) contributions 

If you haven’t maxed out your 401(k), 403(b), or 457(b) accounts (up to $19,500 for 2020), you have until December 31 to top off your contributions. If your employer offers matching contributions, you’ll want to take advantage of that to the fullest, if you can. In general, putting money away into retirement accounts is always a good idea: The more you save, the more you take advantage of compound interest for your retirement fund. Plus, these contributions are not taxed, which will reduce your taxable income for this year.

Complete tax-loss harvesting 

With tax-loss harvesting, you can write off investment losses by selling assets that are currently worth less than what you paid for them. These losses are then used to offset capital gains recognized during the year, which effectively reduces your taxable income. The deadline to realize investment losses is December 31.

Consider a Roth conversion

If the disruption of 2020 left you in a lower-than-expected income tax bracket for the year, and you have bulging tax-deferred retirement accounts, you might want to consider a Roth conversion. Retirement accounts like 401(k)s defer tax payment until later, when you cash out, but with a Roth IRA you pay taxes upfront and can watch your savings grow over time—perhaps saving you a lot of money in taxes (a tax advisor is useful here). For more on the advantages of Roth IRAs, check out this Lifehacker post. The deadline for Roth conversions is December 31.

Use your credit card credits and perks 

Some credit card perks will expire at the end of the calendar year, so make sure that you’ve taken advantage of any credit statements or threshold spending bonuses, especially if you already intend to make more purchases (e.g., you might have an expiring $250 general travel credit, so you might pay now for a flight you plan on taking in 2021). This is also a good time to look at your bonus spending categories on cash-back cards and reassess whether they’re optimized based on your current spending habits.

Spend your remaining FSA balance

Flexible Spending Accounts through your employer can save you money on medical expenses, but only if you use them. While some FSAs allow for rollovers into 2021, most are “use it or lose it” accounts in which you lose the money forever. Don’t forget to spend out your FSA account before December 31.

Add to your 529 contributions

The beauty of a 529 college saving plan is that savings grow tax-deferred, and withdrawals are tax-free if they’re used for qualified education expenses later. Plus, some states allow you to deduct contributions, although not federally. The contribution limit for 2020 is $15,000, and the deadline is December 31.

Get your free credit report

There isn’t a year-end deadline for free credit reports, per se, but it’s worth adding to your year-end checklist if you haven’t checked in a while. You’re entitled to a free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Order online from annualcreditreport.com.



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