The New Year offers an opportunity to take care of financial housekeeping and making slight adjustments can be necessary given IRS-driven changes. Here is a financial planning checklist to walk through at the beginning of a new year:
- Update your withholding - if you anticipate having to write a large check or getting a big refund, consider changing your withholding in the calendar year. Ideally, you want to withhold roughly what you owe, and you definitely want to avoid an underpayment penalty.
- Adjust your 401k contribution - if possible, every year you should increase your 401k or 403b contribution by a bit. If you are already making the maximum contribution, check to see if the IRS has raised the limit. For 2019, the maximum 401k contribution increased from $18,500 to $19,000. Additionally, if you’re over 50, the additional catch-up contribution you can make increased to $6,000, so you can contribute up to $25,000 to a 401k.
- Increase HSA and FSA contributions - HSA and FSA limits often increase as well. For 2019, FSA contribution limits moved to $2700, while HSA limits moved to $3500 and $7000 respectively for individuals and families.
- Review your credit cards - check your credit card accounts and consider canceling those you don’t need. Even if those cards don’t charge a fee, canceling an unused card reduces the chance of fraud. One caveat - if your credit score is important to you, before proceeding with a cancellation, check to see if canceling a card might lower your score.
- Consider freezing your credit - if you don’t expect to need access to your credit report, consider freezing your credit. Doing so will make it highly unlikely that anyone can take out new credit in your name. Here is a list of other actions you can take to avoid being the victim of fraud.
- Revisit your plan - if you haven’t done so in a while, revisit your financial plan. Make sure it still reflects your financial goals, and see if you’re still on track for retirement and any other financial goals you might have. The recent market downturn may have taken a bit of a toll, but focus on what’s within your control. If you had a robust, stress-tested financial plan before the downturn and you’ve met your savings and debt-paydown targets, you’re likely still on course to achieve your goals.
- Check your portfolio - make sure your portfolio allocation is in line with the target portfolio you identified in your plan. Additionally, review your investments to ensure there are no red flags like manager changes, increases in fees or changes in strategy. Make any adjustments needed to your portfolio after completing your review.
- Start your tax file - April 15th will be here before you know it, so go ahead and start a file with any information you’ll need to file your taxes.
Ticking off the items on the list above shouldn’t take too long, particularly if you work with a financial advisor, and doing so will provide benefits for the rest of the year.