Essential Year-End Financial Moves for Those 50+
The arrival of the holidays can pull your attention in a dozen directions at once, but deadlines don’t slow down just because the calendar fills up. For adults 50 and older, a few planned moves in December can help protect income, reduce tax liability and prevent other issues that can arise in the beginning months of the year.
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Make Last-Minute Charitable Donations
Charitable gifts only reduce the current year’s taxes if they are completed by Dec. 31. Look at whether donating cash or appreciated assets, like stocks and real estate, make the most sense for your situation. Consult with a tax advisor if you are unsure. Additionally, ensure the associated paperwork for donations is dated by year-end; otherwise, the deductions won’t count.
Adjust Retirement Contributions
Perhaps your income rose late in the year or your earlier contributions fell short. If so, consider adjusting your contribution amount to optimize your retirement savings. Michael Faulwell, Chief Financial Officer, SchoolsFirst Federal Credit Union, recommended ensuring you’re maximizing any employer match that’s available to you because it’s essentially “free money.” Adults 50 and older may also qualify for catch-up contributions through Dec. 31 for the following accounts if their plan permits: 401(k), 403(b), 457(b), IRAs, SIMPLE IRA or SIMPLE 401(k).
Take Required Minimum Distributions
In general, you must take RMDs after you turn 73, according to the IRS. RMDs are the minimum amounts you are required to withdraw annually from retirement accounts, including traditional IRA, SIMPLE IRA and SEP IRA and some workplace retirement accounts. An exception is if you are still working at age 73. In that case, you can delay taking RMDs from your workplace retirement account, such as a 401(k) or profit-sharing plan, until the year you retire. However, owners of traditional IRA, SIMPLE IRA and SEP IRA must take RMDs after turning 73.
Once RMDs begin, you must take one each year by Dec. 31. The only exception is your first year of RMDs, when the IRS gives you a short grace period. When you turn 73 during any point of a given year, you can take your first RMD anytime that year or delay it until April 1 of the following year. If you delay it, you’ll be required to take two RMDs in the following year: the first by April 1 and the second by Dec. 31.
Use Flexible Spending Dollars
Check to see if any unused funds in your FSA will roll over into the new year. Generally, they won’t unless your employer offers a grace period of up to 2.5 months or will allow you to carry over a limited amount to use in the next year — $660 in 2025 — per the IRS. If neither of those are an option, utilize any unused funds before Jan. 1. Eligible expenses often include prescriptions, dental care, vision services and some over-the-counter items.
Schedule Early-Year Appointments
The new year can bring with it a flurry of scheduling appointments due to people putting off these tasks at the end of the year. Scheduling wellness appointments, dental visits, eye exams and dermatologist check-ups now can save you weeks of waiting later. It can also make the first months of the year feel more organized.
Take Steps To Safeguard Your Finances
Consider freezing your credit at all three bureaus. You can initiate a credit freeze for free by visiting each credit bureau’s website or by calling them. While your credit is frozen, the credit bureau will not release your credit reports to any creditor who requests them as part of an application process, which can prevent fraudsters from opening an account in your name.
Also, confirm that you have bank alerts in place to monitor transactions and balances. Password updates may also be a good idea due to the growing number of data breaches in recent years.
Update Beneficiaries If Needed
It’s smart to review your beneficiary selections each year in case something has changed, such as a marriage, a divorce, the arrival of children or the loss of a loved one. In many cases, beneficiary designations override what’s in your will, so not updating them can result in the wrong person gaining access to your assets. Choosing both a primary and a secondary beneficiary is also important. Secondary beneficiaries will receive distributions if the primary beneficiary is no longer living.
Audit Your Subscriptions
You could be paying for subscriptions you no longer use. Doing a subscription audit can free up extra cash that’s otherwise being wasted. Check your credit and debit card statements from the past year, including last December, to identify recurring charges for any subscriptions you may have. These may be monthly subscriptions or annual ones. Cancel those that you no longer have use for.
