Year-end Financial Moves
It’s a good idea to start jotting down goals and action items for 2023. Let’s review this year and look at a few things you may still have time to accomplish. Although 2022 may not have been quite the year we hoped for – a bear market in stocks and the worst ever for bonds – plenty of things are still in our control. Below is a checklist for you to consider:
- Review your portfolio. Year-end rebalancing is optional, but this year is a particularly good time to evaluate your portfolio and consider making changes. How do you feel about risk after such an awful year?
- Tax-Loss harvesting. While you may be rebalancing your portfolio, you may also want to rid yourself of losers. Matching losses with gains is a great way to reduce your tax bill. Also, will you need any money for big purchases next year? Now is a great time to strategize when to sell: before year-end or after.
- Update your beneficiary designations. Did you have a major life event this year? Married? Divorced? Remarried? More children? Deceased beneficiaries? Update now. Remember: beneficiary designations bypass your Last Will & Testament. So make sure your named beneficiaries are the people or organizations you want to receive your money upon death.
- Prepare for higher contribution limits on your 401(k) and 403(k) plans in 2023. The maximum contribution goes up by $2000 to $22,500 next year. If you’re 50 or older, you can add $7500 for a total of $30,000. So adjust your paycheck before year-end.
- Emergency Savings. Emergencies are not “ifs.” They’re “whens.” They will happen. Unfortunately, you don’t know when. Even in retirement, car repairs, home maintenance, and medical bills still occur. To prepare, we recommend keeping three-to-six months of living expenses in a safe account, like a money market fund, CD, or online bank savings account.
- Health Savings Account (HSA). Did you have a high-deductible health plan this year? If yes, fund your HSA. The maximum contribution for singles is $3650; for families, it’s $7300. For those 55 years and older, you can add $1,000. The HSA contribution limit for 2023 is $3,850 for self-only coverage and $7,750 for family coverage. Do you have a Flexible Savings Account (FSA)? Check the deadline to spend the funds. Then, use it or lose it!
- Check your annual credit report. Go to www.annualcreditreport.com. Check for errors and any signs of identity theft.
- Qualified charitable donations (QCDs). If you are 70 ½ and older, you can contribute traditional IRA funds to charity. The limit is $100,000. No donor-advised funds. Important: make sure the contribution goes directly to the charity from your IRA. Don’t withdraw from your IRA, and then write a check to the charity.
- Medicare. Turning 65 next year? You have a seven-month window to apply for Medicare: 3 months before you turn 65, the month of your 65th birthday, and three months after you turn 65. Remember, 3+1+3 =7. However, don’t wait. Apply early. Mistakes and delays happen. You will forever pay premium penalties if your miss this deadline.
- 529 Plans. Many states offer state income tax benefits for contributions to their 529 plans. The deadline for most is December 31. The gift tax exclusion limit is $16,000 per recipient, which rises to $17,000 in 2023. So this year, you can give up to $16,000 worth of money and property to any individual without any estate or gift tax consequences.
Please let me know if you have any questions or concerns.
We thank you and wish you a joyous holiday season!
Henry
Henry Gorecki, CFP®
HG Wealth Management LLC
401 N Michigan Ave, Suite 1200
Chicago, IL 60611
312-723-5116
