As the year comes to a close, financial deadlines start looming—whether you’re saving for retirement, filing taxes, or investing for future growth. Banks, investment firms, and government agencies have set cut-off dates for various financial tasks, from tax-advantaged contributions to strategic rebalancing of portfolios. Missing these deadlines can cost you valuable tax benefits or financial gains. Staying ahead of these timelines helps ensure you make the most of your money without last-minute stress.
Max Out Retirement Account Contributions
If you contribute to tax-advantaged accounts such as a 401(k) or an IRA, keep an eye on contribution deadlines. The cut-off for 401(k) contributions is generally December 31, while the IRA contribution window extends to the tax filing deadline in April of the following year.
However, if you plan to maximize your contributions in both accounts, it’s wise to act by the end of the calendar year to avoid processing delays or missing out on potential growth opportunities.
For Roth IRA contributors, income limits apply, and if your earnings have increased, your eligibility could change. Some individuals opt to make contributions earlier to ensure they stay within annual thresholds. If not sure of your limits, consulting with a financial advisor can help you strategize effectively.
Use Flexible Spending Account (FSA) Balances Before They Expire
If you have a healthcare or dependent-care Flexible Spending Account (FSA), the end of the year is critical. FSAs generally operate under a “use-it-or-lose-it” rule, meaning any unspent money may be forfeited. Some employers offer a grace period that extends into the next year, but the timeline and rollover amount (if allowed) vary by plan.
Make sure to confirm your plan’s rules with your HR department to avoid losing funds. Consider scheduling any remaining healthcare appointments or purchasing eligible items like eyeglasses before the deadline. Even small steps, such as stocking up on over-the-counter medications, could help ensure you use every dollar efficiently.
Review Your Investment Portfolio and Harvest Tax Losses
The year-end is also a strategic time for investors to rebalance their portfolios. This process involves adjusting your asset allocation to maintain your desired risk level and investment goals. Markets fluctuate throughout the year, and rebalancing ensures your portfolio stays aligned with your objectives.
Tax-loss harvesting is another strategy to consider before year-end. This involves selling investments that have decreased in value to offset gains elsewhere in your portfolio. Capital losses can be used to reduce taxable income, with any excess carried forward to future years. However, timing is essential, as trades need to settle by December 31 to count for the current tax year.
Investors need to be mindful of the “wash-sale” rule, which prevents claiming a tax loss if you buy back the same security within 30 days. It’s best to consult with a financial professional when engaging in tax-loss harvesting to avoid any pitfalls.
Make Charitable Contributions and Take Advantage of Deductions
Charitable giving offers a chance to support causes you care about while potentially reducing your tax burden. Donations to qualified organizations made by December 31 are eligible for deductions on your current year’s taxes.
Both cash and non-cash contributions, such as clothing or household items, may be deductible. If donating appreciated assets like stocks, you might also avoid capital gains tax while claiming a deduction for the fair market value.
In some cases, individuals over 70½ may consider a Qualified Charitable Distribution (QCD) from their IRA. QCDs count toward the required minimum distribution (RMD) and can reduce taxable income. As always, keep detailed records of all donations to substantiate your claims when filing taxes.
Take Required Minimum Distributions (RMDs)
If you’re 73 or older (or turned 72 before 2023), the IRS requires you to take Required Minimum Distributions (RMDs) from tax-deferred retirement accounts, such as traditional IRAs or 401(k) plans. Failing to withdraw the minimum amount by December 31 may result in a hefty penalty—up to 50% of the amount not withdrawn, though recent legislation may reduce that percentage in certain cases.
Those who inherited an IRA may also be subject to RMD rules. Keep in mind that withdrawing early to meet the RMD deadline might push you into a higher tax bracket. Splitting distributions throughout the year could help spread out the tax burden and offer more control over your financial situation.
Plan for Tax Payments and Estimated Taxes
If you’re self-employed or have other non-W2 income, making quarterly estimated tax payments may be required. The final quarterly payment for the year is due in mid-January, but it’s often advantageous to pay some of this amount by December 31. Doing so can help you reduce any potential penalties and could lower your Adjusted Gross Income (AGI), which might unlock other tax credits or benefits.
Tax planning is especially important for those who received bonuses, capital gains, or distributions late in the year. Adjusting your withholding or making a catch-up estimated payment before year-end can help prevent an unpleasant surprise during tax season.
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Staying on top of banking and financial deadlines can help you avoid unnecessary penalties, lost opportunities, and last-minute panic. Whether it’s maximizing retirement contributions, spending FSA balances, or rebalancing your portfolio, proactive planning ensures you stay financially on track. Reviewing your tax strategy, including charitable giving and RMDs, can also provide meaningful savings.
While financial planning is complex and deadlines can vary based on your circumstances, taking time to assess your goals and obligations now will set you up for a smoother transition into the new year. When in doubt, consulting with a financial advisor can provide tailored advice, helping you make informed decisions as the clock ticks down on the current tax year.
