Here are some important financial things to do before year end to help make sure your financial plan is on track.
Increase contributions to tax-advantaged savings accounts.
Even if you contribute regularly to your traditional 401(k) or similar workplace retirement plan, see whether you can contribute more and up to the max by December 31. You may be able to reduce your earned income by $18,000, the maximum you can contribute to a 401(k) for 2016. And if you’re age 50 or older, you can contribute an extra $6,000, for a maximum contribution of $24,000.
Donate to charity.
If you itemize deductions on your tax return, donating to a charity before the end of the year may help you lower your 2016 tax bill.
Reduce taxes on investment gains.
If you invest in stocks, bonds, or mutual funds in taxable accounts (those other than an IRA or 401(k) you may be able to reduce taxes on any investment gains for distributions from mutual funds. Tax-loss harvesting is simple. Offset your realized taxable gains on your investments (capital gains) with realized losses (capital losses).
Check your beneficiaries.
Life can come at you fast. Births, changes in marital status, and other life events make it necessary to stay on top of the beneficiaries named on your investment accounts. Out of date beneficiaries could cause your assets to be distributed in ways that you didn’t intend.
Review your estate plan.
No matter your age, there are important things you can do to your estate plan. A basic plan includes a will, as well as instructions for what happens if you become incapacitated. Naming a health care proxy, establishing a “living will” regarding end-of-life medical care, and naming a power of attorney can help your loved ones understand your wishes and make it easier for them to cope in the event of an unexpected event.
Revisit your life insurance coverage.
For most families, life insurance is fundamental to financial security. In addition to protecting family members from a sudden loss of income, it may be a useful investment vehicle and estate planning tool, depending on your situation.