Your Financial Pharmacist: Five end of year financial moves to make

JUST LIFE

With the end of the year approaching, now is the perfect time to dig into your financial plan and see what moves to make to ensure you are tracking your progress, avoiding missed deadlines, and entering the new year with momentum. 

So, here are 5 financial moves to consider before wrapping up 2022.

1. Financial recordkeeping. Whether stored securely as a hard copy, in the cloud, or both, it’s important to have one place where you store all of your financial documents and records so that in the event something happens to you, someone else can quickly get access to what they need. This would include things such as birth and marriage certificates, Social Security cards, insurance information (auto, homeowner’s, health, life, disability, etc.), estate planning documents, tax returns, and investment accounts. 
2. End of year retirement contributions. If you were looking to maximize your contributions to retirement accounts this year, keep in mind the deadlines and contribution limits for 2022. The 2022 contribution limits for an employer-sponsored retirement plan (i.e., 401(k)) is $20,500 (this does not include any employer match) and the contribution limit for an IRA is $6,000. These limits are increasing in 2023 ($22,500 for 401(k) plans and $6,500 for IRA), but once the contribution deadline for 2022 has passed—December 31, 2022, for a 401(k) and April 18, 2023, for an IRA—there is no going back. 
3. Getting ready for tax filing. Whether you like it or not, each year, by mid-April, the IRS requires you to file your taxes to report on what happened the previous year and to true up. If you haven’t paid as much tax as you should have throughout the year, Uncle Sam will impatiently ask you for their money, and, if you overpaid, you will receive a refund. Ideally, you want to be employing tax planning throughout the year to avoid large refunds (since this is a 0% interest loan to the government) and large tax bills due (this is not fun for anyone). 
4. Unused FSA funds. If you contributed funds to a Flexible Savings Account (FSA) in 2022, it’s important to remember that unlike a Health Savings Account, these funds are “use it or lose it.” The typical deadline for using the funds is December 31, but due to the pandemic and the CARES Act, some employers may have adopted provisions that will allow for a small amount of carryover. This is a great time of year to check your FSA balance and to see what your employer has in place for any carryover provisions. 
5. Evaluating changes. If you have changes that recently occurred or are anticipated for 2023, start planning for the impact those changes may have on your financial or tax situation. This would include things like change in income, marital status, dependents, and moving to a new area. Often with these changes comes opportunities for optimizing the financial and tax plan. As one example, if you are expecting significant income changes (such as completing a residency and going into a higher paying position), making Roth IRA and/or Roth 401(k) contributions while in a lower tax bracket can be advantageous. 

Have a happy holiday season and a smooth start to your 2023 financial plan!

For more financial tips, resources, and information, read Seven Figure Pharmacist (use coupon code APHA at checkout for 15% off), visit the Your Financial Pharmacist website, and listen to the Your Financial Pharmacist Podcast.

Tim Ulbrich, PharmD, is the co-founder and CEO of Your Financial Pharmacist (YFP). Founded in 2015, Your Financial Pharmacist is on a mission to help pharmacists achieve financial freedom through fee-only, virtual comprehensive financial planning services via YFP Planning, as well as three weekly podcasts, including the Your Financial Pharmacist Podcast, books, webinars, and numerous online resources.

Disclaimer: The information in this article is provided to you for your informational purposes only and is not intended to provide, and should not be relied on for, investment or any other advice. Read our full disclaimer here.