Annual Review and Financial Planning Checklist

As the weather turns colder and the daylight becomes shorter, you may be busy planning for the holiday season. But something else worth focusing your attention on during this season is your finances.

Like your physical health, your financial health needs an annual check-up.

Before the year winds down, take some time to check in on your financial matters.

Review the items listed below to maintain or improve your financial situation for the next year and beyond.

Year-End Financial Review

A great place to begin your end-of-year review process is to look back over the year and assess how well you stuck to your financial plans.

Be sure to include your spouse or partner in these discussions!

Remember, no one, but you is grading how well you did this year, so be honest. Then, you can identify what does and doesn't work so you can keep moving forward.

As you consider the questions below, don't just jot down a yes or no answer; also include reasons for why or why not.

1. Did you stick to your monthly budgets?
2. Was your financial mission statement top of mind when making financial decisions this year?
3. Did you follow your investment policy statement when the markets got crazy?
4. Were you able to meet your financial goals?

• What Type of Budget Method is Best for Me?
• How Can You Make Managing Your Money More Fun?

Next, check your financial health

Perform a check-up on your financial wellness by gathering financial documents and information on all your financial accounts and completing the following tasks:

1. Update net worth. Is it trending in the right direction? Are you nearing your goal of credit card debt freedom or financial independence?

2. Order credit report. Review your credit score and check your credit history for errors, question anything that doesn't look right, and consider freezing your credit.

3. Review emergency fund. 2020-22 has taught many a financial lesson, one being the importance of an emergency fund. Many financial experts who once recommended 3-6 months of expenses saved now say you should consider saving more, such as 9-12 months' worth.

4. Rebalance investment portfolio. The volatility of the stock market may have shifted your mix of stocks and desired asset allocation. Review your IPS and make the moves necessary to stay on track with your investment strategy and get your portfolio in shape.

5. Audit insurance policies. Too little insurance coverage leaves you open to financial devastation, but as life circumstances change, you may not need as much as you previously did. Review all your coverage, including:
   • auto insurance
   • homeowners (or renters) insurance
   • life insurance
   • disability insurance
   • umbrella insurance
   • long term care insurance

Complete important year-end financial tasks

Use this handy year-end financial planning checklist to track the completion of many important tasks.

• Fund tax-advantaged savings accounts, including:
  • 401(k), 403(b), most 457, and the Thrift Savings Plan – contribution limits for employees participating in one of these plans in 2023 are $22,500 and $30,000 for those over age 50.
  • IRA– contribution limits for 2023 are $6,500, or $7,500 if you're age 50 or older.
  • HSA – 2023 contribution limits are $3,850 for an individual/$7,750 for a family; an extra $1k may be contributed by those 55 and older.
  • 529 college savings plan or other college savings

• Rollover old retirement plans

• Convert Traditional IRA to Roth IRA

• Harvest tax losses – reduce up to $3,000 (or $1,500 if married filing separately) of regular income or other non-investment taxable income when you have more investment losses than gains to offset income taxes you may owe (you can carry additional losses over to future years).

• Take any RMDs – Take required RMDs from a defined-contribution retirement plan (i.e., 401(k), 403(b), Traditional IRA) if you have reached the age of 72.

• Start prepping tax returns – Ensure all your financial institutions and current or previous employers have your correct address. Establish a spot to accumulate the documents you'll need to file your taxes and start gathering them now – prior returns, bank and credit card statements, receipts, etc.
  • Make a list of forms you expect to receive and keep track as they come in to ensure you have everything you need to prepare your return – think W-2s, 1099s, a 1099-G if you collected unemployment insurance, 1098-E for student loans, etc.

• Estimate taxes and check current tax withholding amounts – Review last year's return, the current year's tax brackets, and online calculators to estimate this year's taxes and see if you're on track with having enough withheld. If not, make adjustments to your withholding on your W-4.

• Donate – For those who itemize on your federal tax return, remember you can only take deductions for gifts to qualified organizations. More information about these tax deductions can be found here on IRS.gov.

Complete Open Enrollment through employer or healthcare.gov

November and December are typical open enrollment periods for many companies' employee benefit plans and healthcare.gov.

If that's the case for you, it's essential to review your options as plans and premiums may have changed this year.

• Health insurance. When the premiums have risen, prepare your budget for increased healthcare expenses.
  • When you work for one of the many companies moving to a high deductible health care plan, check how your deductible has changed. If it's gone up, plan on adding to your savings to cover the difference in medical expenses.
    • You may be able to do this in a health savings account. If that's unavailable to you, consider establishing a sinking fund or adding to your emergency savings.

• Add coverages. Open enrollment is also the time to add any benefits you may not already be taking advantage of (i.e., dental, optical, disability, medical savings accounts, supplemental plans) or increase coverage amounts (life insurance).

• Review retirement planning. Review your selections in your retirement savings plan. Make sure you are contributing at least enough to get the employer match. If you have a fully-funded emergency savings account and eliminated your non-mortgage high-interest debt, increase your retirement contributions.

• Check beneficiaries. Review the beneficiary designations on your retirement account and life insurance policy. Update them if appropriate. Your beneficiary designation determines who gets your retirement savings and insurance benefits regardless of a will or other documentation you may have.
  • Children younger than eighteen should not be the beneficiary of either as they cannot receive distributions until they become legal adults.

• Spend FSA funds. Flexible spending accounts (FSAs) can save you money — as long as you spend the pre-tax dollars before the end of the year (unless your employer offers a grace period). Otherwise, you run the risk of losing it.

Additional items to review at year-end

• Estate Planning – do you need to make any changes to your will, powers of attorney, or advance health care directives?

• In Case of Emergency Binder – create or update the crucial information others would need to know should the unthinkable happen

• Beneficiaries on additional insurance or retirement accounts and those named on Transfer on Death, or Payable on Death Accounts

• Social Security – visit www.ssa.gov/myaccount/ to review your SS account and preview estimated benefits

Prep for Next Year

With a new financial health baseline and year-end financial tasks checked off your list, it's time to create goals for the coming year.

• Has your risk tolerance changed?
• Do you want to become debt-free?
• Want to increase your emergency fund to one year of expenses?
• Need to create your estate plan or update existing estate planning documents?

Will this be the year you purchase a new vehicle, buy a home, update your kitchen, or get braces for your teen?

Following a spending plan can help you allocate your money to your most important financial goals first. Consider using a budgeting app to help you stay on track.

Planning for anticipated expenses by establishing sinking funds will help you avoid taking on additional debt.

Anticipate change and create goals

Be sure to think ahead to any significant life changes you anticipate in the next year or two to include in your savings goals, such as:

• marriage
• moving in with a significant other
• divorce
• birth or adoption
• college
• career change
• entrepreneurship.

These or other major life events are best done with some financial planning. You might want to speak with a financial advisor or other professional or hire a money coach for guidance.

Once you identify your financial and investment goals, make sure you write them down and create some milestones to help motivate and keep you on track.

Finally, revisit your household's financial mission statement with your family to ensure any new money goals are kept with it – or modify the mission statement to address new circumstances in your financial life.

Final Thoughts

Just like a home, your financial house needs constant upkeep. It can be easy to forget what you must maintain once you've implemented it.

Calendar time annually for a regular review of one year and planning for the next to ensure your financial strategy and essential decisions don't become outdated.

With the change of seasons and the sun going down earlier, the end of the year can be a good time to review your financial security and prepare for a healthy and happy new year.