leaf check-circle cross-circle Lifted Logic Web Design in Kansas City clock location phone play chevron-down chevron-left chevron-right chevron-up facebook checkbox checkbox-checked radio radio-selected instagram google_plus pinterest twitter youtube send linkedin plus checkmark minus

2020 Year-End Financial Planning Checklist

Back to Blog

The end of the year is a great time to reflect on your financial goals, the progress you’ve made, and plan ahead for the upcoming year. Read our financial planning checklist below for things you may want to consider:

1. Update wills/trusts and beneficiaries. 

Get married this year? Have kids? Get divorced? Big life events mean it’s time to make sure legal docs like your will or trust, powers of attorney, life insurance policies, and account beneficiaries are all up-to-date. Forgetting to make these updates can be disastrous for families at some of the worst possible moments in their lives. Get in the habit of reviewing these things annually so nothing is missed.

2. Get a handle on your debt and plan ahead for the next holiday shopping season.

Lay it all out there to get ready to tackle debt in the new year. If you’re like most Americans, you probably racked up some credit card debt you aren’t proud of this holiday season. What can you learn from that going into next year? Figure out how much of a holiday spending budget you need to plan for, divide that by 10 or 11 months and automate your savings into a savings account dedicated to holiday spending.

3. Use any potential raise you may receive (and possibly your bonus) to increase your 401k contributions.

Starting this year, get into the habit of taking a portion of any raise you receive and dedicating it to your 401k. For example, if you’re fortunate enough to get a raise this year or early next, consider bumping up your contributions, using a portion of it. Your paycheck still goes up, but your 401k also gets a boost. This habit can help you work toward maximizing your contributions over time while having no real impact on your cash flow or budget. Also, see if your employer will allow you to contribute all or part of any year-end bonus you may receive, toward your 401k. This can help reduce your taxable income come tax season and it also means you avoid the extra tax withholding on bonuses for that money.

401k contribution limits will go unchanged for 2021:

Under age 50: $19,500

Over age 50: $19,500 + $6,500 catch-up contribution 

4. If your employer’s health plan is changing in the coming year, evaluate the potential range of costs for each option, before choosing.

Health-related costs are often hard to plan for, but can cause serious unexpected damage to any financial plan that doesn’t adequately account for them. To get an idea of what your total health care costs might be under any specific plan in the coming year, take the monthly insurance premium and multiply it by 12. This will give you your minimum cost of healthcare for the coming year. Next, look up your insurance plan’s out-of-pocket maximum.

This can help indicate the most you can expect to pay, should you or someone in your family face a serious medical expense, or several, in the coming year. Once you understand the potential costs you could face and select the plan you’re most comfortable with, it’s important to then revisit things like HSA (Health Savings Account) contributions (if you have a high-deductible plan) and exactly how much you may want to maintain in the cash portion of your account for easy access, before investing. For 2021, HSA contribution limits have been increased to $3,600 for individuals and $7,200 for families.

5. Don’t forget about RMDs (for those over 72)

Required minimum distributions (RMDs) can be a nightmare tax situation for those over age 72, if not planned for and handled appropriately. The key thing to be aware of is that once most individuals reach 72 yrs old, there is a specific minimum amount the IRS will require them to withdraw from most retirement accounts, including 401ks and IRAs. Failing to withdraw the required minimum by April 1st, following the year in which you turn 72, may lead to a 50% tax penalty on the amount, which is one of the harshest tax penalties around. However, thanks to the COVID-19 pandemic and the CARES Act, passed by Congress in response, RMDs were suspended for the 2020 tax year. 

Not even close to 72 yrs old just yet? Consider passing this reminder on to any family members that are. They’ll likely thank you later. And if you’re unsure of the new rules about RMDs or the specific impact to you or a friend or family member, consider contacting a tax professional. 

6. Set aside time for a year-end financial review

Look back on the year and take note of what you were able to accomplish financially and what setbacks you may have had. Use this past year as an opportunity to continue making smart financial decisions in the new year and learn from any of the times you may have stumbled. If you have a family, talk about upcoming trips, savings goals, and any other things you need to focus on next year. Set goals and even plan to celebrate financial accomplishments as a family throughout the year. Make money fun and before you know it, you’ll feel the freedom that comes along with financial security and eventually, financial independence!

Automate your long-term investments, like your 401k and IRA management!

Blooom is here to make your life easier in the coming year. Now that you’ve read our financial planning checklist for the end of 2020, link your account with us today for a free analysis to see just how much you could save in hidden fees with a managed 401k via Blooom. Contact us today for further questions!

Published on December 17, 2020