5 End of Year Financial Planning Tips That Will Give You Peace of Mind Come Tax Time

With the end of the year nearing and the holidays just around the corner, financial planning is probably the last thing on your mind. Still, closing the year with a solid grasp of your finances can mean a smoother tax season and a better financial setup come 2023.

Here we’re sharing our best end-of-year financial planning tips to help maximize your benefits, investments and savings so you can set yourself up for greater financial wellness in the new year.

Max Out Your FSA/HSA Benefits

If you contribute towards a flexible spending account and your FSA funds don’t roll over into the new year, be sure to use the available funds in your account before they expire. Otherwise, you risk leaving money on the table. FSA funds can be spent on a variety of health and wellness items such as prescriptions, contact solutions, allergy medications and skin care products, to name a few. A complete list of FSA-eligible items is available here.

If you participate in a Health Savings Accounts (HSA), this rolls over year to year, which can be a great way to save for healthcare costs, especially come retirement. The maximum savings contributions for 2022 is $3,650 for individual plans, plus an additional $1,000 contribution for those over 55. If you haven’t met the maximum yet, now is an excellent time to contribute a little extra.

Review Your Retirement Contributions

As you get closer to retirement age, you’ll want to maximize your pre-tax retirement savings contributions. For those over 50, the maximum 401(k) contribution is $20,500 plus $6,500. In 2023, the maximum contribution will increase to $22,500, so plan to contribute more next year. If you have an employer-matched 401(k), it’s a good idea to contribute at least how much they offer to match. For those who are self-employed, the maximum you can contribute to an IRA in 2022 is $7,000. If you didn’t max out your retirement savings this year, see what you can contribute before the year ends.

Rebalance Your Investment Portfolio

Check your portfolio to see how your investments are performing and whether it may be worth reallocating some before entering the new year. If any of your assets are under or over-performing, this could leave your portfolio unbalanced. 

The market has been incredibly volatile over the last year, so this is also an excellent time to consider whether there are new investments you’d like to make or ones you’d like to move on from.

You can schedule an appointment with a financial advisor for the best support and advice on balancing your portfolio and assessing your financial goals.

Assess Charitable Contributions

The end of the year is a season for giving, and not only does donating to a worthy cause feel good, but it can also save you money. Charitable contributions are tax-deductible, meaning you could end up owing less or see a more significant return once you’ve filed. If you’ve made contributions throughout the year, it may be a good time to organize receipts and create an itemized record of your contributions.

Review Your Taxes

Although you have until April to file, getting an early start on taxes is never a bad idea. Start gathering documents such as previous returns, receipts, and statements you’ll need during filing, and don’t forget to check for tax-loss harvesting opportunities. For example, if any of your investments lost money this year, you could reduce your tax liability through tax loss harvesting. However, the rules surrounding this are strict, and it would be best to work with a tax professional or financial advisor if you’d like to explore this.