Five Financial Planning Topics To Review Before Year End

Patrick Andrews |

As the year draws to a close, it's the perfect time for individuals to assess their financial health and prepare for the upcoming year. Whether you're a new employee, in the midst of your career, nearing retirement, or already enjoying your golden years, these five financial topics are crucial for a year-end review. 

1. Retirement Savings and Contributions: 

First and foremost, evaluate your retirement savings. For those contributing to 401(k)s, IRAs, or other retirement accounts, it's vital to ensure you're maximizing your contributions to benefit from any employer match and leverage any tax advantages. Year end is the last chance for you to max out your contributions for 2023 with any company sponsored plans, you have until Tax Time to complete your contributions to your IRAs, but contributing now while you’re thinking about it and funds are available is a great way to ensure it gets done. For those already retired, consider the efficiency of your withdrawal strategy and whether it aligns with your long-term financial goals, this would include reviewing what accounts you’re drawing against and how that fits into your tax situation. 

2. Investment Portfolio Review: 

Market dynamics shift constantly, and what worked at the beginning of the year might not be suitable as the year ends. Review your investment portfolio to ensure it aligns with your risk tolerance and investment goals. As always, diversification is key to mitigating risk and the shifts in the market throughout the year may have moved you out of your diversification plan. This is also an opportune time to rebalance your portfolio, selling and buying assets as necessary to maintain your desired asset allocation. Consult with your financial advisor to ensure that your portfolio is on track. 

3. Tax Planning: 

Taxes can significantly impact your financial health. Review any major changes in your life that could affect your tax situation, such as a change in employment, marital status, or the purchase of a home. Consider strategies like tax-loss harvesting to offset capital gains or making charitable contributions for potential deductions. Consult with a tax advisor to understand any new tax laws, strategies to implement, or changes that could affect your planning. 

4. Emergency Fund and Debt Management: 

An emergency fund is a cornerstone of financial stability. For most clients we like to ensure that they have at least 3 to 6 months of liquid cash on hand to allow for life’s surprises. This amount may be different for you depending on your life situation and risk tolerance. If you've dipped into this fund, plan how to replenish it. Additionally, review your debts – credit cards, loans, mortgages – and consider strategies for paying down high-interest debts. Prioritizing debt reduction can improve your financial health and reduce stress. 

5. Insurance and Estate Planning: 

Finally, review your insurance policies – health, life, home, auto – to ensure adequate coverage. Life changes may necessitate adjustments in your policies. Additionally, if you haven't already, establish or update your estate plan. This includes wills, trusts, and healthcare directives, ensuring your assets are managed and distributed according to your wishes. 

A year-end financial review is an excellent opportunity to reassess your financial situation and prepare for the year ahead. By focusing on these five key areas, you can ensure a more secure and prosperous financial future. Remember, financial planning is a dynamic process, engaging with a professional and staying proactive is a great way to ensure that you plan stays on track.