Year-End Financial Checklist: 4 Money Moves You Should Prioritize

Posted on Dec 08, 2020


The end of the year is a busy time for most people. Unfortunately, it is usually also the last opportunity to make financial moves that will count towards the current year. If you've been slow to tackle your financial to-do list this year, consider completing your checklist before the end of the year. No matter how eager you are to say goodbye to 2020, it doesn't mean you should leave money on the table.

Get started on your year-end financial checklist with four money moves you should prioritize now.

1. Put extra savings to work

Often, investors realize they're holding too much cash, but they're just not sure what else to do with the money. If you're a high earner, you may notice your paycheck increased over the year as you exceed the Social Security taxable wage base, $137,700 in 2020. If you're keeping too much cash in the bank (earning next-to-nothing), here are seven ways to put extra cash to work for you:

Ways to use extra savings

  1. Invest excess cash using a brokerage account
  2. Max out contributions to a 401(k), 403(b), or IRA (see 2020 limits). Turned 50 this year or will by December 31st? You're eligible for an additional $6,500 catch-up contribution to a 401(k), 403(b) or $1,000 to an IRA.
  3. Fully fund your emergency cash account
  4. Using the money to pay the tax on a Roth IRA conversion
  5. Refinance your mortgage, especially given historically low interest rates
  6. Pay off (or down) student loans or high-cost debt
  7. Own a business or have a side job? Consider reducing your taxable income while saving for retirement with a SEP IRA or Solo 401(k)

2. Review your benefit elections and 2021 contributions for open enrollment

Most companies allow workers to adjust their health insurance and other benefit elections at the end of the year. Don't skip it! This is your chance to take advantage of tax-saving opportunities, employer-paid benefits, or save money by opting out of coverage you're not using.

  • Health insurance coverage. Are the 2021 insurance premiums increasing dramatically on your policy? You may want to run the numbers to see if another provider your company offers could provide cost savings. If you're on a high-deductible health plan with a health savings account (HSA), does that still work for your situation?
  • Life insurance. If you have a voluntary term life insurance policy through work, you may want to consider whether getting a private policy would cost less. The general rule of thumb is that an annual renewable term policy will cost more in a few years' time. So if you need coverage beyond that, contact your insurance professional to get quotes. While you won't want to cancel your life insurance before having another policy in force, consider getting a jump for next year.
  • Flexible spending accounts. Are you utilizing a health care or dependent care flexible spending account? Pre-tax contributions can save hundreds depending on your tax rate. Also, check your current balance and find out whether your plan allows rollovers for any unused money; some plans are use-it-or-lose-it.
  • Pre-tax benefits. Not going back to work for the foreseeable future? Consider cancelling any transportation benefits (even if they're pre-tax), parking, etc.

The IRS recently announced 2021 contribution limits, so keep this in mind when making your selections.

3. Look at your 401(k) - both old and new

Investors sometimes take set it and forget it too literally. As part of your year-end financial checklist, give your 401(k) some needed attention. Although there aren't any changes to the 401(k) contribution limit in 2021, you should check your current investment choices, allocations, and scheduled contributions.

  • Are you missing the match? Maxing out your 401(k) too early in the year could mean leaving employer matching dollars on the table. Depending on your situation and asset mix, you may also want to consider using an after-tax Roth 401(k) option.
  • How are you invested? Is your account aligned with the investment mix you picked? You may need to rebalance your 401(k) - more on that below. Or perhaps your account has grown significantly and a target-date fund is no longer your best option. If your plan offers a brokerage window, you might be able to expand your offerings.
  • Do something with old retirement plans. After you leave your job, it's easy to forget about an old 401(k) or 403(b). Retirement plans often limit your investment options and make it harder to know where you stand financially. Consider rolling an old 401(k) over to an IRA or weigh the pros and cons of a Roth IRA conversion.
  • Review beneficiary designations. Make sure your elections are current and consider naming contingent beneficiaries.

4. Diversify or reallocate your investments in a tax-efficient way

The end of the year presents an opportunity for tax-loss harvesting in taxable accounts. In all accounts, rebalancing and diversifying a concentrated position are opportunities. It's usually best to consider these moves together, which is why it's an important part of a year-end financial checklist.

Finding time to accomplish financial tasks or keep up with regular maintenance can be hard for busy professionals. Our knowledgeable Financial Advisors are here to help you on your financial path.


By: Kristin McKennaSenior Contributor, Forbes