Your 2023 Year-End Financial Planning Checklist

Year-End Financial Planning Checklist

As the holiday season draws near, financial planning may be the last thing on your mind. However, year-end is often a crucial period for proactively lowering your tax bill and taking steps to set yourself up for financial success in the year ahead. Use this year-end financial planning checklist to end 2023 on a high note and start the new year with confidence.

Here’s Your 2023 Year-End Financial Planning Checklist:

#1: Estimate Your 2023 Earnings

Whether you’re a W-2 employee or self-employed, having a clear picture of your annual income can help you set realistic expectations for the 2023 tax year. As you review this year’s earnings, be sure to include income from all sources, including bonuses, side hustles, and investments.

Placing this first on your year-end financial planning checklist helps identify potential tax planning opportunities based on your income. In addition, you may find untapped sources of cash to put toward to your longer-term financial goals before the end of the year.

#2: Revisit Employee Benefits Selections

The next item on your year-end financial planning checklist is to review your employee benefits and update your selections as necessary. Open enrollment season typically takes place in November and lasts for two to four weeks, so now is the ideal time to cross this task off your to-do list.

Since companies often update their offerings, it’s a good idea to review your options periodically and take advantage of any new perks. Furthermore, if you’ve had any major life changes over the past year—for example, marriage, divorce, or the birth of a child—you may need to adjust your benefits selections to better align with your current needs.

Open enrollment dates vary by employer, so be sure to consult your HR department to avoid missing this critical window for adjustments.

#3: Maximize Tax-Advantaged Account Contributions

Maxing out your tax-deferred account contributions doesn’t just boost your retirement savings; it can also be a valuable year-end tax planning strategy.

In 2023, individuals can contribute up to $22,500 to a 401(k) plan and $6,500 to an individual retirement account. For those 50 or above, the contribution limits are $30,000 and $7,500, respectively. 

If you have a qualifying high-deductible health plan, you may be eligible to contribute to a health savings account (HSA) for additional tax benefits. HSAs offer significant tax savings, as contributions, capital gains, and withdrawals are all tax-free if you use your funds for qualified healthcare expenses. In 2023, individuals can contribute up to $3,850 to an HSA, while families can contribute up to $7,750.

#4: Make Charitable Donations

The next item on your year-end financial planning checklist is to review your charitable giving goals and make donations before December 31st. Charitable giving not only benefits the recipients; it can also be a powerful tax planning opportunity in some cases.

As of 2023, taxpayers who itemize deductions on Schedule A (Form 1040) of their tax return can give up to 60% of their Adjusted Gross Income (AGI) to public charities, including donor-advised funds, and deduct the donation amount on this year’s tax return. For non-cash donations, the deduction limit is 30% of AGI.

To maximize the impact of your charitable contributions, as well as the associated financial benefits, be sure to consult with a trusted financial planner or tax expert. A financial professional can help you identify which methods might accomplish your philanthropic and financial planning goals most efficiently.

#5: Identify Additional Year-End Tax Planning Opportunities

Beyond maxing out retirement account contributions and making charitable donations, there are a variety of strategies you may be able to leverage to lower your tax burden. Examples include:

  • Roth Conversion. If you anticipate being in a higher tax bracket in retirement, you might consider converting a traditional IRA to a Roth IRA. Although you’ll pay ordinary income taxes on the conversion amount now, future withdrawals in retirement will be tax-free.
  • 529 Plan Contributions. Consider contributing to a 529 educational savings plan if you have young children. Your contributions grow tax-free, and any funds you withdraw for qualified education expenses are also tax-free. Some states even offer state tax deductions or credits for contributions.

Keep in mind these strategies may not make sense for everyone, and other tax planning opportunities may be more appropriate. Be sure to consult a financial professional, who can help you proactively identify and implement the right strategies for your individual needs and goals.

#6: Review Your Insurance Needs

Insurance is an important yet often overlooked component of a comprehensive financial plan. Thus, your year-end financial planning checklist includes a comprehensive review of your insurance coverage and needs.

Your financial circumstances and family dynamics can change meaningfully over the course of a year. If this is the case, you may need to add new policies or update your coverage accordingly.

Meanwhile, as your net worth increases, you may need a more sophisticated strategy to protect your assets. Having proper insurance coverage can help protect your wealth from events that might jeopardize your financial future.

#7: Address High-Interest Debt

In the current high-interest rate environment, paying off certain debts before year-end can significantly reduce your total interest expense.

Since credit cards often have variable APRs, carrying a balance can be particularly costly when interest rates are on the rise. The same may be true for student loan debt and mortgages with variable interest rates.

If you have credit card debt or loans with variable interest rates, consider revisiting them as part of your year-end financial planning checklist. You may want to earmark extra cash to pay down these balances, so you can focus on other financial goals.

#8: Update Beneficiary Designations

Finally, don’t forget to review your account beneficiary designations as part of your year-end financial planning checklist. Since these designations override your will, making sure they’re accurate and current is critical to avoid conflict and potential legal disputes.

The following types of accounts typically have beneficiary designations:

  • Retirement accounts, including IRAs, 401(k)s, and other retirement savings plans.
  • Life insurance policies that pay a death benefit.
  • Transfer on Death (TOD) accounts for certain investment accounts.
  • Payable on Death (POD) accounts for bank accounts such as savings or CDs.

Proactively reviewing your designations helps ensure that your estate plan is up to date, and your assets are distributed according to your intentions. Be sure to do so at least annually, especially if you’ve experienced a major life change in the last year.

Customizing Your Financial Planning Checklist

The end of the year can be an ideal time for reflection and strategic planning. By diligently following this year-end financial planning checklist, you can tie up loose ends and set yourself up for financial success in the new year.

Oak Capital Advisors can help you develop a comprehensive financial plan that’s tailored to your unique circumstances and goals. To begin your journey and chart a course toward financial freedom, we invite you to request your complimentary Financial Independence Roadmap™.

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