2021 Year-End Financial Planning Checklist
With only a few weeks left in the year, let’s make sure that you are taking care of the financial planning tasks you’ve had on your to-do list.
Spring is when everyone makes it a priority to clean out their closet, we wanted to compile a list of financial tasks that may have slipped through the cracks. Some of these must be completed before the end of the calendar year, so let’s get right to it.
#1 Review your Income and Spending
This is a good time to take a moment to review what you’ve made and where that money has gone over the course of the year. Remember that having a high income is going to skew some of the common financial planning numbers. Here are a few worth mentioning:
Higher Savings Rate
Higher Insurance Expense
Higher Student Loan Balances
Less Time in the Workplace
Lower Percentage of Income on Housing
Lower Percentage of Income Towards Retirement Accounts
#2 Roth Conversions
Let’s see how much money you’ve made this year and see if you are still eligible for that Roth IRA Contribution. For a single tax filer in 2021, your Modified Adjusted Gross Income (MAGI) must be under $140,000. If you are married, that number is $208,000.
It is likely that you were over the limit to contribute directly to the Roth IRA and as of this writing, Congress will still let you make a non-deductible IRA Contribution and convert it into a Roth IRA. This strategy is commonly referred to as a back-door Roth IRA.
You may have also been eligible to save after-tax money in your employer-sponsored retirement account (probably a 401k). If you did this, make sure to convert this money to your Roth IRA as well.
#3 Employer-Sponsored Retirement Plans (401k and 403b)
While you’re looking to make those Roth Conversions, let’s make sure you took full advantage of the 401k/403b plan limits. Remember, these savings do not have any income limits, so this is much more straightforward.
For 2021, you as the employee can contribute a tax-advantaged amount of $19,500. This means you can contribute that amount to your Traditional or Roth 401k. Your savings can include any combination of those two buckets as long as it totals $19,500. You can contribute even more if there is an after-tax contribution option available.
Any employer matching or profit-sharing contributions are in addition to your savings. The limit in 2021 is $58,000, or $64,500 if you are over 50.
#4 Health Savings Accounts
The Health Savings Account (HSA) is the most tax-advantaged account on the planet. An individual with coverage under a qualifying high-deductible health plan can contribute up to $3,600. Two spouses with a family have a maximum annual HSA contribution of $7,200 in 2021. This contribution limit applies whether each spouse has their own HSA or if only one member of the family has an HSA.
Some employers may contribute money to your HSA so keep in mind these limits are the total allowed.
#5 Review Your Beneficiary Designations
It is always a good time to review your accounts and their beneficiary designations to make sure that your money is going where you want it to go, including your retirement accounts and any insurance policies.
#6 Review Your Insurance
Everyone loves a good price match and it’s nice to see that people are living longer and healthier lives, at least according to the actuarial tables that drive insurance prices. Here are some things to consider:
Are you properly insured?
Do you have the right insurance?
Do you have enough insurance?
#7 Spending FSA and CME Money
Though flexible spending account funds typically need to be spent by Dec. 31, many workers have an additional 12 months to use their 2021 contributions to cover qualifying medical expenses. Congress amended the rules for 2020 and 2021 during the Covid-19 pandemic because many households weren’t using up their FSA dollars due to canceled or delayed medical appointments.
If you are eligible for any Continuing Medical Education (CME) dollars these usually need to be spent by the end of the year.
#8 Don’t Forget to Enjoy It
You work hard for your money and should get a chance to enjoy it. If there is anything we can do to help or plan for next year, let us know!