Year-End Financial Prep and Planning Tips

Now is a good time to tie up financial loose ends, take advantage of tax laws and set yourself up for a more profitable new year.

Couple planning their budget together on a laptop at home

by NEA Member Benefits

 Key takeaways

  • Contributions to 403(b) plan accounts can reduce your taxable income. The more you contribute, the more you can lower your current taxes.
  • Making an extra mortgage payment every year—13 payments instead of 12—could shorten a 30-year mortgage to about 26 years and save thousands in interest.
  • Once you turn age 70½, you must take annual Required Minimum Distributions from all tax-deferred retirement accounts or face severe penalties.
  • You are entitled to a free copy of your credit report from each of the three credit bureaus every year.

For the same reason that people make resolutions on New Year’s Eve, year-end feels like a logical time to take stock of your financial life and make sure everything is in place for bigger and better things in the coming year. While many of the planning tips below could be done at any time during the year, some are time sensitive and must get done before December 31. Since procrastination is something everyone battles at some point, you may find that you’ve put off a few of these activities. So year-end provides the motivation to get them accomplished.

Do some tax planning

Be sure your tax withholding election is set at the right level to avoid any extra tax liability surprises on April 15. There are also some tactics you can employ that can help lower your tax bill:

  • Increase 403(b) plan contributions. Every dollar you save in your 403(b) reduces taxable income by a dollar. Make a commitment to save even more next year.
  • Contribute to a 529 college plan. Some states will allow you to deduct 529 college savings plan contributions made before December 31. This deduction can be taken for contributions made to your own child’s plan or that of your grandchildren.
  • Make an extra mortgage payment. If you make 13 mortgage payments each year instead of 12, you can deduct an extra month’s interest every year. Doing this regularly will save you a lot of interest over the life of the mortgage and help you pay off your home faster.
  • Donate to charity. For 2023, individuals can gift up to $17,000 to any other individual, which means you and your spouse could give a combined total of $34,000 each calendar year. Other cash and goods donations to charitable organizations can be made up to December 31. Remember to get receipts for your tax records.
  • Nab some green credits. Tax credits may be available to help offset the cost of installing certain alternative energy upgrades to your home, such as solar energy systems. If you’ve been thinking of taking the solar plunge, now might be a good time while these credits are still being offered. See the IRS Residential Energy Credits form for details.

Review and rebalance investment accounts

An annual review of your investment performance will help you determine if you are on track to meet your goals (either long-term growth or retirement income). If your percentage of stock funds to bond funds has gotten skewed, rebalance back to your preferred asset allocation to keep your risk level in check.

Update beneficiary designations

While you’re reviewing your financial accounts, make sure your beneficiary designations on investment accounts and life insurance policies are current, particularly if you’ve had a recent life event such as a marriage, divorce or birth of a child. You wouldn’t want the wrong person to inherit your assets.

Take your Required Minimum Distribution (RMD)

If you turned age 70½ this year, you must take a RMD from your tax-deferred retirement accounts, such as a 403(b) plan or Traditional IRA, before next April 1 and another RMD before next year-end. There are severe tax penalties for not following the RMD rules so it’s best to check with your tax professional to make sure you’re in compliance.

Make open enrollment benefit elections

If your employer offers health and welfare benefits, November and December are usually when you have to make benefit elections for the following year. Carefully review your choices, particularly for health care, as those costs have likely gone up from last year. If you participate in a Flexible Spending Account, you must use up all the funds in your account by year-end or risk losing the money.

Check your credit report

Find out how attractive you are to lenders and spot any potential errors by requesting a free credit report from one of the three primary credit bureaus—TransUnion, Experian and Equifax—at You are entitled to one free report from each of the three companies each year, so consider pulling one around Valentine’s Day, a second during summer vacation and a third after Thanksgiving.

The bottom line

Managing your finances is a hands-on affair that must be tended to on a regular basis. Make it a habit to run through this checklist at the end of every year. It will help you stay on top of your finances and keep everything in order and on track.

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