Secure Your Future: Essential Guide on Wills, Trusts, & IRAs



The article presents six key financial steps to be taken before the end of the year, as advised by financial planners: updating beneficiaries on 401(k) or life insurance policies, reviewing estate plans and insurance coverage, making charitable donations and gifts, maximizing pre-tax retirement savings, taking the required minimum distribution on a retirement account if over 73, and harvesting tax losses. The piece explains that these steps are crucial for smart financial planning and tax optimization. Furthermore, it emphasizes the importance of reviewing and updating financial decisions regularly to reflect changing circumstances and opportunities.

The End of 2023: Essential Financial Steps to Take

As the end of 2023 approaches, what should you do to secure your finances? Financial planners have identified six key steps to take by year-end that span retirement savings, insurance coverage, and tax shelters.

Update Your 401(k) or Life Insurance Policy Beneficiaries

Every investment account or life insurance policy must have named beneficiaries – the family members or loved ones who receive the money upon your demise. For many, these beneficiary designations serve as a binding estate plan that determines the fate of a significant portion of their assets.

Protect your family: Find the best life insurance policies of 2023

Review your beneficiaries periodically, especially following significant life events like births, deaths, or family disagreements. Colin Day, a certified financial planner in St. Louis, recommends checking the status of your beneficiaries at the end of each year.

Review Your Estate Plan and Insurance Coverage

Paul Mendelsohn, a certified public accountant in Livingston, New Jersey, suggests a comprehensive review of your estate plan, powers of attorney, and insurance coverage.

“Do you have life insurance, long-term disability insurance, and long-term care insurance?” Mendelsohn advises. Remember that work insurance policies may not cover both spouses, making it crucial to confer with an estate planning lawyer to update your legal documents.

Plan Charitable Donations and Gifts

The holiday season is an excellent time for charitable giving. The IRS allows you to deduct cash donations to qualifying charities from your income. Ensure your donations are tax-deductible by confirming their recognition as charities.

Charitable giving can also serve as a tax shelter if you choose to itemize deductions rather than claiming the standard deduction. Seth Benjamin Mullikin, a certified financial planner in Charlotte, North Carolina, suggests making these charitable gifts before year-end to qualify for a deduction in 2023.

Maximize Your Pre-Tax Retirement Savings

December is the perfect time to max out your retirement contributions, says Catherine Valega, a Massachusetts-based certified financial planner. Tax-advantaged retirement accounts permit pre-tax income savings. The annual limit for IRA contributions is $6,500 ($7,500 for those aged 50 and older), while 401(k) contribution limits are higher at $22,500 ($30,000 for those aged 50 and older).

Take Required Minimum Distribution on Retirement Account (if over 73)

Once you turn 73, you must take a required minimum distribution (RMD) from your IRA or 401(k). Devin Pope, a Salt Lake City-based certified financial planner, stresses the importance of completing your RMD by Dec 31.

Harvest Tax Losses

Year-end is also an optimal time for tax-loss harvesting, a strategy that turns investment losses into tax gains. This technique involves selling an underperforming investment, replacing it with a similar asset, and leveraging the losses to offset gains made from other investments.

Beside these six steps, there are plenty of strategies to optimize your financial situation. If you’re looking for more tips, check out our latest articles on the best tax moves to make before year-end, the benefits of filing taxes early, and much more.

Read More Health & Wellness News ; US News