The Digerati Life

I’ve barely blinked and it’s the end of the year already. I feel like I’m once more cramming to get things done before we step into 2008. Last year, I did a post about some smart year end reminders which we’ve tacked on to our current “to do” list, but since then, I’ve added a few more things to it. Here are some suggestions for your own checklist:

Money Moves For The End Of The Year

#1 Check your credit report.

Once a year, we can get a free credit report through the big three nationwide consumer reporting companies – Equifax, Experian, and TransUnion. You can do this check anytime during the year, but if you haven’t done so already, now is a good time to request your reports before time’s up. Here’s everything you need to know about how to order your free report right now.

#2 Get you family’s medical, vision and dental checkups done before the end of the year.

Just because you’re feeling sprightly doesn’t mean you should skip out on your annual physical, especially since you’re allowed coverage on it on an annual basis. Also, if you’ve maxed out on your medical deductibles and you’re needing to see the doctor sometime soon, you may want to do it this month instead of waiting till next month to do it when deductibles typically reset. Insurance deductibles usually reset by end of the year.

#3 Spend what’s in your Flexible Spending Plan (FSA).

If you’ve set up an FSA, then you’ll need to spend what’s in it before the end of the year (or if your plan allows it, before the 2 1/2 month grace period you’re given) since an FSA is a “use it or lose it” benefit offered by employers. Here’s where you can find out more how to make best use of this benefit.

#4 Get your insurance claims in.

Just to keep myself organized, I’m trying to get all my health insurance claims filed by end of the year. I’ve got a few that I need to send out before they slip through the cracks!

#5 Boost your retirement savings.

Before the year is over, consider applying some tax reducing strategies such as contributing further to your IRA or other retirement accounts. We still have a few weeks to fund those retirement accounts and possibly maxing them out, using this handy table that displays IRA contribution limits:

Here’s the table for 401K contribution limits:

Do visit this very helpful page to see more charts detailing retirement contribution limits for the last few years and beyond.

#6 Contribute to your 529 plans.

You can still contribute without tax consequences to a 529 account; the maximum contribution you can make without incurring a federal gift tax is $12,000 annually (or $24,000 per married couple). Or you can contribute a $60,000 lump sum (or $120,000 sum per married couple) that covers five years worth of contributions. More details on 529 accounts here.

#7 Prepay those deductible expenses.

See if you can accelerate payments you were planning to make in the next year by paying these expenses before the end of the year. In so doing, you can hike up your deductible expenses and shave a bit more off your taxes by April. One such example is to prepay your mortgage bill for the month of January by December instead. In so doing, you will make 13 payments this year thereby increasing your mortgage interest deduction. Take note that this is a good move if you anticipate being in the same or lower tax bracket next year. By the same token, you can prepay your property taxes to increase your deductions.

#8 Review your investment portfolio.

Just like the mutual fund companies and financial institutions out there, you may want to check how your investments have done this year. Part of any investment program is to do regular check ups and evaluations of your investments’ progress. It’s also a good idea to perform a general financial checkup on an annual basis.

#9 Sell positions in your investment portfolio for tax purposes.

Check out your portfolio’s taxable gains and see if you can offset them by selling your underperformers. A smart tax move would be to get rid of your poor performers to incur losses that can neutralize any realized capital gains you have this year, plus up to $3,000 in ordinary income. Any extra losses can be carried over to the following year. Instead of hanging on to your unsuccessful investments, hoping that they would break even, just sell them and take a tax break. Moving on and getting that tax break would be a much better money strategy.

#10 Defer buying mutual funds till the next year.

Contrary to what you may think, there is such a thing as buying into a mutual fund at the wrong time. If you can, avoid lump sum investments into a mutual fund during the latter part of the year, particularly in December (unless you are in an automatic investment program, in which case you’re excused). Why? Because by the end of the year, mutual fund companies and financial institutions are required by law to pass on any fund capital gains to their investors. By making this timing mistake, you could owe taxes on a fund you’ve only owned for a short period of time and be subject to the same tax as those investors who’ve held the fund all year long. An exception to this rule is if you’re dollar cost averaging and you’ve automated your contributions to your funds.

#11 Make your charitable contributions and donations.

Remember that you can deduct whatever it is you give to charity: stock, cash, goods. This year, we gave away $750 which my employer matched dollar for dollar. I had more to say about the subject of giving during an interview I had with the Washington Post last year, as well as in past blog posts in my archives.

#12 Take a minimum distribution from your IRA account.

Lastly, if you’ve turned 70 1/2 by the end of 2007, you’ll need to take a minimum distribution from your IRA account by the end of December. Please consult with your financial adviser or accountant regarding the amount you need withdrawn to fulfill the required minimum distribution.

Other Resources:
New Retirement Plan Limits For 2007
Year End Money Must-Dos

 
Image Credit: Lithosphere.info