The year is almost over. As 2020 approaches, you have one more chance to get your finances in order. End 2019 on a high note by taking these financial planning steps.
Max Out Your Contributions
Time is running out to make contributions to your retirement plans. If you haven’t reached your max contribution levels yet, see if you can contribute more before the year ends.
Here are the contribution limits for 401(k) and IRA plans in 2019:
- 401(k) plans: $19,000
- IRAs: $6,000
If you have a Health Savings Account (HSA), you can also make contributions up to the annual limit. For 2019, the HSA contribution limits are as follows:
- $3,500 for individual coverage
- $7,000 for family coverage
If you are age 50 or older, you may be able to make additional catch-up contributions for some plans.
Use Your FSA Funds Before They Expire
If you have a Flexible Spending Account (FSA), you may lose some of your funds when you ring in the new year. While your FSA may or may not come with a short grace period or a small carryover amount, any other funds left in your FSA will expire.
Don’t let this money slip through your hands. It’s great that you were healthy enough not to use all of you FSA funds in 2019, but surely you can find a good way to spend your money. Buy a new pair of glasses, go to the dentist or spend your money on the eligible expense of your choosing.
Make Donations to Nonprofits
‘Tis the season for giving – and if you’re giving to a nonprofit, you can also take a nice tax write-off for yourself. This is truly a win-win situation. You get to support a cause you love, and you may decrease your tax bill as a result.
According to the IRS, you may be able to deduct up to 50 percent of your adjusted gross income in charitable donations.
- Keep a written record of your donation. You’ll need this as proof when you file your taxes.
- Itemize your donations on your tax forms. This information goes on Form 1040, Schedule A, Itemized Deductions. Additional forms may be needed for certain types of donations, such as noncash donations worth $500 or more.
- Make sure the charity is eligible for a tax deduction. If you’re not sure, check with a financial advisor and tax expert. Contributions to individuals are NOT eligible for a tax deduction – sorry, but that means you probably can’t get a deduction for your GoFundMe.
Review the Year
Before the year ends, take some time for an annual financial checkup. Here are a few things to look at:
- How are your investments performing? Do you need to adjust your portfolio?
- How much insurance do you have? Do you need to buy a new policy or increase your limits? For example, if you had a child during 2019, this is a good time to buy more life insurance.
- How much debt do you have? Could refinancing improve your situation?
Set a Budget for Next Year
This is a good time to make financial goals and resolutions for the new year.
- Did you stay on budget in 2019? If not, what expenses made you go off budget? Think about the steps you can take to avoid going off budget in 2020.
- Are you earning more than you were a year ago? If so, think about smart ways to spend the extra money in 2020.
- What are your financial goals for 2020? Determine what you must do to achieve these goals.
Need guidance? Access our financial planning resources and contact the financial planning pros at PTT Financial.